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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12.
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AETNA INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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2000 Aetna Proxy Statement
Notice of Annual Meeting
[AETNA LOGO]
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TABLE OF CONTENTS
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General Information............................................... 1
I. Election of Directors....................................... 3
Nominees for Directorships.................................. 4
Director Compensation in 1999............................... 8
Other Information Regarding Directors....................... 9
Committees of the Board..................................... 10
Certain Transactions and Relationships...................... 11
Section 16(a) Beneficial Ownership Reporting Compliance..... 11
Security Ownership of Certain Beneficial Owners, Directors,
Nominees and Executive Officers............................ 12
Executive Compensation...................................... 15
Summary Compensation Table................................. 15
Stock Option Grants Table.................................. 17
Stock Option Exercises and December 31, 1999 Stock Option
Value Table............................................... 18
Long-Term Incentive Awards Table........................... 19
Pension Plan............................................... 19
Other Agreements........................................... 20
Report of the Committee on Compensation and Organization.... 22
Corporate Performance Graph................................. 27
II. Appointment of Auditors..................................... 28
III. Shareholder Proposal to Implement Cumulative Voting in
Election of Directors....................................... 28
IV. Shareholder Proposal Relating to Endorsement of the CERES
Principles.................................................. 29
Voting of Other Matters........................................... 30
Other Information................................................. 31
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[AETNA LOGO]
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AETNA INC. WILLIAM H. DONALDSON
151 Farmington Avenue Chairman, President and
Hartford, Connecticut 06156 Chief Executive Officer
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To Our Shareholders:
The 2000 Annual Meeting of Shareholders will be held on Friday, April 28, 2000,
at 9:30 a.m. at our Company Headquarters in Hartford, Connecticut, and I hope
you will attend.
The matters expected to be acted on at the meeting are described in detail in
the attached Notice of Annual Meeting of Shareholders and Proxy Statement. In
addition to specific agenda items, we will discuss generally the operations of
Aetna. We welcome any questions you have concerning Aetna and will provide time
during the meeting for questions from shareholders.
If you are unable to attend the Annual Meeting, it is still important that your
shares be represented. Please vote your shares promptly.
/s/William H. Donaldson
William H. Donaldson
Chairman, President and Chief Executive Officer
March 22, 2000
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[AETNA LOGO]
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AETNA INC. WILLIAM J. CASAZZA
151 Farmington Avenue Vice President and
Hartford, Connecticut 06156 Corporate Secretary
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of Aetna Inc.
will be held at the Company's Headquarters, 151 Farmington Avenue, Hartford,
Connecticut, on Friday, April 28, 2000 at 9:30 a.m. for the following purposes:
1. To elect a Board of Directors for the coming year;
2. To approve the appointment of KPMG LLP as independent auditors for the
current calendar year;
3. To consider and act on two shareholder proposals, if properly presented at
the meeting; and
4. To transact any other business that may properly come before the meeting or
any adjournment thereof.
The Board of Directors has fixed the close of business on February 25, 2000 as
the record date for determination of the shareholders entitled to vote at the
Annual Meeting or any adjournment thereof.
The Annual Meeting is open to all shareholders or their authorized
representatives. In order to attend the Annual Meeting, you must present an
admission ticket. You may request a ticket in advance by following the
instructions below. Shareholders who do not have admission tickets will be
admitted only following proof of share ownership. If you hold shares of Aetna
Common Stock in your own name, please signify your intention to attend when you
vote over the Internet or by telephone or check the appropriate box on your
proxy card. If you hold your shares through the Aetna Incentive Savings Plan,
please indicate your intention to attend when you access the telephone voting
system or check the appropriate box on your voting instruction card. If you hold
shares through the U.S. Healthcare Savings Plan, please indicate your intention
to attend when you access the telephone voting system or complete and return the
enclosed postage-paid reservation card directly to the Company. If you hold your
shares through a broker, bank or other holder of record and plan to attend, you
must send a written request to attend along with proof that you own the shares
(such as a copy of your brokerage or bank account statement) to the Corporate
Secretary at the above address.
It is important that your shares be represented and voted at the Annual Meeting.
You can vote your shares by one of the following methods: vote over the Internet
or by telephone using the instructions on the enclosed proxy card (if these
options are available to you), or mark, sign, date and promptly return the
enclosed proxy card in the postage-paid envelope furnished for that purpose. If
you attend the Annual Meeting, you may vote in person if you wish, even if you
have previously voted.
This Proxy Statement and the Company's 1999 Annual Report to Shareholders are
available on Aetna's Internet site at http://www.aetna.com/investor/proxy.htm
and http://www.aetna.com/99annualrpt, respectively.
By order of the Board of Directors,
/s/ William J. Casazza
William J. Casazza
Vice President and Corporate Secretary
March 22, 2000
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GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Aetna Inc. (the Company) of proxies to be voted at the
Annual Meeting of Shareholders to be held at the Company's Headquarters on April
28, 2000. This Proxy Statement and the enclosed proxy card are being mailed to
shareholders on or about March 22, 2000.
Shareholders Entitled to Vote; Votes Entitled to be Cast
Shareholders of record of the Company's Common Stock, par value $.01 per share
(Common Stock), at the close of business on February 25, 2000 will be entitled
to vote at the Annual Meeting. On that date, 140,912,352 shares of Common Stock
were outstanding. Each share of Common Stock is entitled to cast one vote.
Any full shares of Common Stock held for you under the DirectSERVICE Investment
Program have been included on the enclosed proxy card. Only full shares are
entitled to vote because the Company does not issue fractional shares.
Voting by Internet, by Telephone or by Mail
YOUR VOTE IS IMPORTANT. Because many shareholders cannot attend the Annual
Meeting in person, it is necessary that a large number be represented by proxy.
Most shareholders have a choice of voting over the Internet, by using a
toll-free telephone number or by completing a proxy card and mailing it in the
postage-paid envelope provided. Proxies granted by any of these methods are
valid under Connecticut corporation law. Check your proxy card or the
information forwarded by your broker, bank or other holder of record to see
which options are available to you. Please be aware that if you vote over the
Internet, you may incur costs such as telecommunication and Internet access
charges for which you will be responsible. The Internet and telephone voting
procedures are designed to authenticate shareholders by use of a Control Number
and to allow shareholders to confirm that their instructions have been properly
recorded. In order to provide shareholders of record with additional time to
vote their shares while still permitting an orderly tabulation of votes,
Internet voting for those shareholders will be available until midnight, Eastern
time, on April 27, 2000, and telephone voting for those shareholders will be
available until 8:00 a.m., Eastern time, on the morning of the Annual Meeting.
You may revoke your proxy at any time before it is exercised by writing to the
Corporate Secretary, by timely delivery of a properly executed, later-dated
proxy (including a proxy card or an Internet or telephone vote) or by voting by
ballot at the Annual Meeting. By providing your voting instructions promptly,
you may save the Company the expense of a second mailing.
Voting at the Annual Meeting
The method by which you vote will in no way limit your right to vote at the
Annual Meeting if you later decide to attend in person. If your shares are held
in the name of a broker, bank or other holder of record, you must obtain a
proxy, executed in your favor, from the holder of record, to be able to vote at
the Annual Meeting.
All shares entitled to vote and represented by properly completed proxy cards or
by properly recorded Internet or telephone votes received prior to the Annual
Meeting and not revoked will be voted at the Annual Meeting in accordance with
your instructions. IF NO INSTRUCTIONS ARE INDICATED ON A PROPERLY COMPLETED
PROXY, THE SHARES REPRESENTED BY THAT PROXY WILL BE VOTED AS RECOMMENDED BY THE
BOARD OF DIRECTORS.
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Voting by Participants in the Company's Incentive Savings Plans
Participants in the Aetna Incentive Savings Plan and the U.S. Healthcare Savings
Plan who receive this Proxy Statement in their capacity as participants in
either plan will receive voting instruction cards in lieu of proxy cards. The
voting instruction cards direct the trustees of those plans how to vote the
shares. Shares held in either plan may be voted by using a toll-free telephone
number or by marking, signing and dating the voting instruction card and mailing
it in the postage-paid envelope provided. Shares held in the Aetna Incentive
Savings Plan for which no directions are received are voted by the trustee in
the same percentage as the shares for which directions are received. For shares
held in the U.S. Healthcare Savings Plan, the trustee votes only those shares
for which instructions are received.
Quorum; Required Vote
The presence at the Annual Meeting, in person or by proxy, of at least a
majority of the votes entitled to be cast at the meeting constitutes a quorum.
Under Connecticut corporation law, the approval of any corporate action taken at
a shareholder meeting is based on votes cast. "Votes cast" means votes actually
cast "for" or "against" a particular proposal, whether by proxy or in person.
Abstentions and broker nonvotes are not considered "votes cast." Broker nonvotes
occur when a broker nominee (that has voted on one or more matters at the
meeting) does not vote on one or more other matters at the meeting because it
has not received instructions from the beneficial owner to so vote and does not
have discretionary authority to do so. Directors are elected by a plurality of
votes cast. Shareholder approval of each other proposal to be considered at the
Annual Meeting occurs if the votes cast in favor of the proposal exceed the
votes cast against the proposal.
Tabulation of Votes
Votes are counted by tellers of the Company's Transfer Agent who have been
appointed as inspectors for purposes of the Annual Meeting. The inspectors will
determine the number of shares outstanding and the voting power of each share,
determine the shares represented at the Annual Meeting, determine the validity
of proxies and ballots, count all votes and determine the results of the actions
taken at the Annual Meeting.
Cost and Method of Proxy Solicitation
The Company will bear the cost of soliciting proxies. In addition to the use of
the mails, solicitations may be made by personal interview, telegram or
telephone by Directors, officers and employees of the Company and its
subsidiaries. Arrangements also will be made with brokerage houses and other
custodians, nominees and fiduciaries to forward solicitation material to
beneficial owners, and the Company will reimburse them for reasonable
out-of-pocket expenses incurred in doing so. To assist in the solicitation of
proxies, the Company has engaged Georgeson Shareholder Communications Inc., New
York, New York, for a fee of $16,000 plus reasonable out-of-pocket expenses.
Annual Meeting Business -- Advance Notice Procedures
The Company's By-Laws require that notice of nominations of persons for election
to the Board of Directors, other than those made by or at the direction of the
Board of Directors, must be received no later than 90 days before the Annual
Meeting, or January 29, 2000 for purposes of this Annual Meeting. The notice
must present certain information concerning the nominee and the shareholder
making the nomination. The notice also must include the nominee's written
consent to being a nominee and to serving if elected. Notices must be sent to
the Corporate Secretary, Aetna Inc., 151 Farmington Avenue, Hartford,
Connecticut 06156.
The Company's By-Laws also provide that no business may be brought before an
annual meeting except as specified in the notice of meeting or as otherwise
brought before the meeting by or at the direction of the Board of Directors or
by a shareholder entitled to vote who has delivered written notice to the
Company within the time limits described above for delivery of notice of a
nomination for the election of a Director. The notice must set forth: (a) a
brief description of the issue to be considered at the meeting and the reasons
for
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bringing it before the meeting; (b) the shareholder's name and address as it
appears on the Company's books; (c) the class and number of shares owned by the
shareholder; and (d) any material interest of the shareholder in the issue.
These requirements apply to any matter that a shareholder wishes to raise at an
annual meeting other than pursuant to the procedures specified in Securities and
Exchange Commission (SEC) Rule 14a-8. Notices must be sent to the Corporate
Secretary, Aetna Inc., 151 Farmington Avenue, Hartford, Connecticut 06156.
I. ELECTION OF DIRECTORS
Twelve individuals will be nominated for election as Directors at the Annual
Meeting. However, if any Nominee becomes unavailable for election, the Board of
Directors will reduce the number of Nominees prior to the meeting. The terms of
office for all elected Directors will run until the next Annual Meeting and
until their successors are duly elected and qualified. The 12 individuals (or
such lesser number if the Board has reduced the number of Nominees as provided
above) receiving the greatest number of votes cast at the meeting will be
elected Directors. UNLESS YOU DIRECT TO THE CONTRARY ON THE PROXY YOU COMPLETE,
THE SHARES REPRESENTED BY THAT PROXY WILL BE VOTED FOR THE ELECTION OF THE 12
NOMINEES LISTED ON THE FOLLOWING PAGES (the Nominees). If the number of Nominees
is reduced as provided above and you return a properly completed proxy, the
shares represented by your proxy will be voted FOR the remaining Nominees unless
you direct to the contrary.
All Nominees are currently Directors of the Company and were elected Directors
at the 1999 Annual Meeting, except Mr. Garten, who joined the Board in January
2000. The following pages list the names and ages of the Nominees as of the date
of the Annual Meeting, the year each first became a Director of the Company, the
principal occupation and publicly traded company directorships of each as of
February 25, 2000 and a brief description of the business experience of each for
at least the last five years.
In accordance with the Company's Director retirement policy, Frank R. O'Keefe,
Jr. is not standing for re-election at the Annual Meeting. Mr. O'Keefe was a
Director of Aetna Life and Casualty Company (AL&C) from 1989 to 1998, and has
been a Director of the Company since 1996.
On July 19, 1996, AL&C and U.S. Healthcare, Inc. (USHC) consummated a
transaction pursuant to which each became a wholly-owned subsidiary of the
Company (the Merger). The information presented includes a Director's prior
service with AL&C or USHC, as appropriate.
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NOMINEES FOR DIRECTORSHIPS
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[Abramson photo] [Cohen photo] [Donaldson photo]
LEONARD ABRAMSON BETSY Z. COHEN WILLIAM H. DONALDSON
(Director since 1996) (Director since 1996) (Director since 1996)
(Director of USHC (Director of USHC (Director of AL&C
from 1982 to 1996) from 1994 to 1996) from 1977 to 1998)
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MR. ABRAMSON, age 67, retired on July 19, 1996 as a director, Chairman and Chief
Executive Officer of U.S. Healthcare, Inc. (managed health care company),
positions he had held since 1982. Mr. Abramson is the founder of U.S.
Healthcare, Inc., which became a wholly-owned subsidiary of the Company on July
19, 1996 and is now known as Aetna U.S. Healthcare Inc. Mr. Abramson currently
is self-employed as a consultant and private investor and is Chairman and Chief
Executive Officer of The Maine Merchant Bank, LLC. He also is a trustee of the
Brookings Institution, the Children's Hospital of Philadelphia and Johns Hopkins
University. Mr. Abramson is the author of Healing Our Health Care System.
MRS. COHEN, age 58, is Chairman of the Jefferson Bank division of Hudson United
Bancorp, a bank holding company, a position she assumed following the merger of
JeffBanks, Inc. and Hudson in December 1999. Prior to the merger, Mrs. Cohen had
served as Chairman and Chief Executive Officer of JeffBanks, Inc. (bank holding
company) since its inception in 1981 and also as Chairman and Chief Executive
Officer of its subsidiaries Jefferson Bank, which she founded in 1974, and
Jefferson Bank New Jersey, which she founded in 1987. On September 15, 1999,
Dime Bancorp Inc. and Hudson announced an agreement to merge. The merger is not
yet completed. Since 1997, Mrs. Cohen also serves as Chairman, Chief Executive
Officer and trustee of Resource Asset Investment Trust (real estate investment
trust). From 1985 until 1993, Mrs. Cohen was a director of First Union Corp. of
Virginia (bank holding company) and its predecessor, Dominion Bankshares, Inc.
In 1969, Mrs. Cohen co-founded a commercial law firm and served as a Senior
Partner until 1984. Mrs. Cohen also is a director of Hudson United Bancorp and
The Maine Merchant Bank, LLC and is a trustee of Corporate Office Properties
Trust.
MR. DONALDSON, age 68, became Chairman, President and Chief Executive Officer of
Aetna on February 25, 2000. In 1959, Mr. Donaldson co-founded Donaldson, Lufkin
& Jenrette, Inc. (investment banking) and more recently served as Co-Founder and
Senior Advisor of that firm from September 1995 until he joined Aetna. He served
as Chairman and Chief Executive Officer and a director of the New York Stock
Exchange, Inc. from 1991 to 1995, was formerly Chairman and Chief Executive
Officer of Donaldson, Lufkin & Jenrette, Inc. and is a co-founder of its former
subsidiary, Alliance Capital Management Corp. (investment management). Mr.
Donaldson is Chairman of the Carnegie Endowment for International Peace and a
director of Bright Horizons Family Solutions, Inc. (family support services) and
Mail.com, Inc. (Internet service provider). The founding Dean and Professor of
Management at the Yale School of Management, he also served as U.S. Under
Secretary of State and Counsel to the Vice President of the United States. Mr.
Donaldson is a director of the Lincoln Center for the Performing Arts and the
Foreign Policy Association, is a trustee of the Aspen Institute, the Marine
Corps University Foundation and The New York City Police Foundation, Inc., and
is the Chairman of the Yale School of Management Advisory Board.
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[Franklin photo] [Garten photo] [Goodman photo]
BARBARA HACKMAN FRANKLIN JEFFREY E. GARTEN JEROME S. GOODMAN
(Director since 1996) (Director since January 2000) (Director since 1996)
(Director of AL&C from 1979 to (Director of USHC
1992, and from 1993 to 1998) from 1988 to 1996)
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MISS FRANKLIN, age 60, is President and Chief Executive Officer of Barbara
Franklin Enterprises (private investment and international trade consulting
firm). From 1992 to 1993, she served as the 29th U.S. Secretary of Commerce.
Before her appointment, Miss Franklin was President and Chief Executive Officer
of Franklin Associates (management consulting firm), which she founded in 1984.
Miss Franklin also served four terms on the Advisory Committee for Trade Policy
and Negotiations, as Alternate Representative to the 44th Session of the United
Nations General Assembly, and as a public member of the Board of the American
Institute of Certified Public Accountants and of the Auditing Standards Board
and is the only non-CPA to receive the John J. McCloy award for contributions to
audit excellence. Miss Franklin has also been a Senior Fellow of The Wharton
School of the University of Pennsylvania, an original Commissioner of the U.S.
Consumer Product Safety Commission and a Staff Assistant to the President of the
United States. Miss Franklin is a Distinguished Visiting Fellow at the Heritage
Foundation; is active in numerous international organizations; and is a trustee
of the Economic Club of New York. She is a director of The Dow Chemical Company
(chemicals, plastics and agricultural products), MedImmune, Inc. (biotechnology
company) and Milacron Inc. (plastics processing technologies and industrial
products for metalworking).
MR. GARTEN, age 53, is the Dean of the Yale School of Management, a position he
assumed in 1995. Mr. Garten held senior posts on the White House Staff and at
the U.S. State Department from 1973 to 1979. He joined Shearson Lehman Brothers
(investment banking) in 1979 and served as Managing Director from 1984 to 1987.
In 1987, Mr. Garten founded Eliot Group, Inc. (investment banking) and served as
President until 1990, when he became Managing Director of The Blackstone Group
(private merchant bank). From 1992 to 1993, Mr. Garten was Professor of Finance
and Economics at Columbia University's Graduate School of Business. He was
appointed U.S. Under Secretary of Commerce for International Trade in 1993 and
served in that position until 1995. Mr. Garten is a director of Calpine
Corporation (power company) and a director of 37 Warburg Pincus mutual funds. He
is the author of A Cold Peace: America, Japan, Germany and the Struggle for
Supremacy and The Big Ten: Big Emerging Markets and How They Will Change Our
Lives, and he writes a monthly column for Business Week magazine. He also serves
on the Board of Directors of Aetna Foundation, Inc.
MR. GOODMAN, age 65, retired as Chairman of Travel One (the nation's
eighth-largest travel management company) upon the sale of that firm to American
Express Company on November 15, 1998. He had served as Chairman of Travel One
since 1971 and was the sole stockholder from 1971 to 1994. Mr. Goodman was a
member of the New Jersey Sports and Exposition Authority from 1991 to 1994 and
its Chairman from 1992 to 1994. He also served as Chairman, President and Chief
Executive Officer of First Peoples Financial Corporation (bank holding company)
from 1987 to 1992 and President and Chief Executive Officer of First Peoples
Bank of NJ from 1983 to 1987. He was a member of the Board of Directors of GBC
Technologies, Inc. from 1992 to 1995 and a trustee of Resource Asset Investment
Trust (real estate investment trust) from 1997 to 1999. Mr. Goodman is a
director of The Maine Merchant Bank, LLC, and he also is a member of the Board
of Trustees of the Philadelphia College of Pharmacy and Science and served as
Chairman of the College from 1988 to 1991.
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[Graves photo] [Greenwald photo] [Hancock photo]
EARL G. GRAVES GERALD GREENWALD ELLEN M. HANCOCK
(Director since 1996) (Director since 1996) (Director since 1996)
(Director of AL&C (Director of AL&C (Director of AL&C
from 1994 to 1998) from 1993 to 1998) from 1995 to 1998)
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MR. GRAVES, age 65, is Chairman and Chief Executive Officer of Earl G. Graves,
Ltd. (a multifaceted communications company) and is the Publisher of Black
Enterprise magazine, which he founded in 1970. Additionally, since 1998, Mr.
Graves is Managing Director of Black Enterprise/Greenwich Street Corporate
Growth Partners, L.P. Mr. Graves is a director of AMR Corporation and its
subsidiary, American Airlines, Inc., Federated Department Stores Inc. (retailer)
and Rohm and Haas Company (specialty chemicals and plastics) and serves as a
member of the Shareholders' Committee of DaimlerChrysler AG (transportation
products and financial and other services). Mr. Graves also is a trustee of
Howard University and is a member of the Executive Board and Executive Committee
of the National Office of the Boy Scouts of America, serving as Vice President
of Relationships and Marketing. He also serves on the Board of Directors of
Aetna Foundation, Inc.
MR. GREENWALD, age 64, retired in July 1999 as Chairman and Chief Executive
Officer of UAL Corporation, the parent company of United Airlines (UAL), having
served in that position since July 1994. From 1979 to 1990, Mr. Greenwald held
various executive positions with Chrysler Corporation (automotive manufacturer),
serving as Vice Chairman of the Board from 1989 to May 1990 and as Chairman of
Chrysler Motors from 1985 to 1988. In 1990, Mr. Greenwald was selected to serve
as Chief Executive Officer of United Employee Acquisition Corporation in
connection with the proposed 1990 employee acquisition of UAL. From 1991 to
1992, he was a Managing Director of Dillon Read & Co., Inc. (investment banking)
and, from 1992 to 1993, he was President and Deputy Chief Executive Officer of
Olympia & York Developments Ltd. (Canadian real estate company). Mr. Greenwald
then served as Chairman and Managing Director of Tatra Truck Company (truck
manufacturer in the Czech Republic) from 1993 to 1994. Mr. Greenwald is a
director of Time Warner Inc. (media company). He also is a trustee of the Aspen
Institute.
MRS. HANCOCK, age 57, is President and Chief Executive Officer of Exodus
Communications, Inc. (Internet system and network management services). Mrs.
Hancock joined Exodus on March 10, 1998 as President and a director and was
named Chief Executive Officer on September 10, 1998. Mrs. Hancock held various
staff, managerial and executive positions at International Business Machines
Corporation (information-handling systems, equipment and services) from 1966 to
1995. She became a Vice President of IBM in 1985 and served as President,
Communication Products Division, from 1986 to 1988, when she was named General
Manager, Networking Systems. Mrs. Hancock was elected an IBM Senior Vice
President in November 1992, and in 1993 was appointed Senior Vice President and
Group Executive, which position she held until February 1995. Mrs. Hancock
served as an Executive Vice President and Chief Operating Officer of National
Semiconductor Corporation (semiconductors) from September 1995 to May 1996 and
served as Executive Vice President for Research and Development and Chief
Technology Officer of Apple Computer, Inc. (personal computers) from July 1996
to July 1997. Mrs. Hancock is a director of Colgate-Palmolive Company (consumer
products).
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[Jordan photo] [Kuehler photo] [Rodin photo]
MICHAEL H. JORDAN JACK D. KUEHLER JUDITH RODIN
(Director since 1996) (Director since 1996) (Director since 1996)
(Director of AL&C (Director of AL&C (Director of AL&C
from 1992 to 1998) from 1990 to 1998) from 1995 to 1998)
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MR. JORDAN, age 63, retired on December 31, 1998 as Chairman and Chief Executive
Officer of CBS Corporation (media company), having assumed that position with
CBS (then Westinghouse Electric Corporation) in 1993. Currently, Mr. Jordan is
serving as Co-Vice Chairman of Clariti Telecommunications International Ltd.
(international telecommunications), as Chairman of Luminant Worldwide
Corporation (Internet and electronic commerce services) and as Chairman of the
Board of eOriginal, Inc. (electronic document services), positions he assumed
during 1999. From 1992 to 1993, he was a partner with Clayton, Dubilier & Rice,
Inc. (private investing firm). Mr. Jordan retired in July 1992 as Chairman and
Chief Executive Officer of the PepsiCo International Foods and Beverages
Division of PepsiCo, Inc. (snack foods and beverages), having held various
positions with PepsiCo since 1974. Mr. Jordan also is a director of Dell
Computer Corporation (personal computers), MarketWatch.com, Inc. (Web-based
provider of business news, financial programming and analytical tools) and Young
& Rubicam Inc. (global marketing and communications).
MR. KUEHLER, age 67, retired in August 1993 as Vice Chairman and a director of
International Business Machines Corporation (information-handling systems,
equipment and services), having held various positions with IBM since joining
that company in 1958. Prior to his appointment as Vice Chairman of IBM in
January 1993, Mr. Kuehler served as President from 1989 to 1993, as Vice
Chairman from 1988 to 1989 and as Executive Vice President from 1987 to 1988.
Mr. Kuehler is a director of Arch Chemicals Inc. (specialty chemicals),
Mail.com, Inc. (Internet service provider) and The Parsons Corporation (heavy
construction and engineering services). He also is a member of the National
Academy of Engineering and a fellow of the Institute of Electrical and
Electronics Engineers, Inc.
DR. RODIN, age 55, became President of the University of Pennsylvania in July
1994. Prior to assuming her current position, Dr. Rodin had served as Provost of
Yale University since 1992. Dr. Rodin joined the Yale faculty in 1972, and held
teaching and research positions of increasing responsibility in the Department
of Psychology. She became a Professor of Psychology in 1979 and a Professor of
Medicine and Psychiatry in 1985, and served as Chair of the Department of
Psychology from 1989 to 1991 and Dean of the Graduate School of Arts and
Sciences from 1991 to 1992 when she became Provost. Dr. Rodin is a director of
AMR Corporation and its subsidiary, American Airlines, Inc., Electronic Data
Systems Corporation (information technology services) and Young & Rubicam Inc.
(global marketing and communications). She also is a trustee of the Brookings
Institution.
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DIRECTOR COMPENSATION IN 1999
Compensation for outside Directors is reviewed annually by the Nominating and
Corporate Governance Committee (the Nominating Committee). The Nominating
Committee's goal of attracting and retaining qualified Directors is supported
through a competitive compensation program that provides remuneration for
Directors' contributions, while offering stock-based compensation alternatives
that strengthen the Directors' mutuality of interests with other shareholders.
Directors who are officers of the Company (including Mr. Donaldson as of
February 25, 2000) receive no additional compensation for membership on the
Board or any of its Committees. The following table sets forth the cash and
stock-based compensation paid to each Nominee who was an outside Director of the
Company in 1999.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CASH
COMPENSATION(1) STOCK UNITS
------------------ -----------
ANNUAL NUMBER
RETAINER MEETING OF UNITS
NAME FEES(2) FEES(3) GRANTED(4)
- ---- -------- ------- -----------
<S> <C> <C> <C>
Leonard Abramson............................................ $32,000 $12,000 350
Betsy Z. Cohen.............................................. 33,000 21,000 350
William H. Donaldson........................................ 40,333 21,000 350
Barbara Hackman Franklin.................................... 37,000 17,000 350
Jerome S. Goodman........................................... 34,000 17,000 350
Earl G. Graves.............................................. 41,000 22,000 350
Gerald Greenwald............................................ 34,000 13,000 350
Ellen M. Hancock............................................ 33,000 16,000 350
Michael H. Jordan........................................... 35,500 19,000 350
Jack D. Kuehler............................................. 37,000 22,000 350
Judith Rodin................................................ 33,000 16,000 350
</TABLE>
- --------------------------------------------------------------------------------
(1) Under the Aetna Inc. Nonemployee Director Deferred Stock and Deferred
Compensation Plan (the Director Plan), nonemployee Directors may defer
payment of some or all of their annual retainer, meeting fees and dividend
equivalents paid on stock units to a stock unit or interest account until
after they have resigned or retired (as defined in the Director Plan) from
the Board. During the period of deferral, amounts deferred to the stock unit
account track the value of the Company's Common Stock and earn dividend
equivalents. Amounts deferred to the interest account accrue interest
pursuant to a formula equal to the rate of interest paid from time to time
under a fixed interest rate fund option of the Company's Incentive Savings
Plan for employees (currently yielding 6.70% a year). In 1999, ten Directors
deferred all or a portion of their Director cash compensation to a stock
unit account. The table above includes cash compensation that was deferred
by Directors during 1999.
(2) The Company currently pays a retainer fee of $25,000 a year to outside
Directors for Board membership. The Company also pays a $4,000 retainer to
such Directors for membership on Committees of the Board ($7,000 in the case
of each Committee chair).
(3) The Company currently pays $1,000 to outside Directors for attendance at
each Board or Committee meeting.
(4) Pursuant to the Director Plan, nonemployee Directors, upon their initial
election to the Board, receive a one-time grant of units convertible upon
retirement from Board service into 1,500 shares of Common Stock (Initial
Units). Additionally, on the date of each Annual Meeting during the term of
the Director Plan, each nonemployee Director will receive units convertible
upon retirement from Board service into 350 shares of Common Stock (Annual
Units). Generally, to become fully vested in the units, a Director must
complete, in the case of the Initial Units, three years of service and, in
the case of the Annual Units, one year of service following the grant of the
units. If service is sooner terminated by reason of death, disability,
retirement or acceptance of a position in government service, a Director is
entitled to receive the full grant if the Director has completed a minimum
of six consecutive months of service as a Director since such grant. A
Director's right with respect to unvested units also will vest
8
<PAGE> 14
upon a change-in-control of the Company (as defined in the Director Plan).
Otherwise, if a Director terminates Board service prior to completion of
three years or one year of service, as applicable, from the grant date of
any units, the Director will be entitled to receive a pro rata portion of
the award. Although Directors receive dividend equivalents, they have no
voting rights with respect to the shares that are subject to any grant. The
units granted are not transferable.
OTHER INFORMATION REGARDING DIRECTORS
As part of its overall program of support for charitable institutions and in
order to attract and retain qualified Directors, the Company established the
Director Charitable Award Program in 1999. Only outside Directors are eligible
to participate in the program. The program may be funded by life insurance on
the lives of the participating Directors. Participating Directors will be fully
vested in the program upon completion of five years of service as a Director
(including years of service prior to adoption of the program) or upon death or
disability. At this date all outside Nominees except Mr. Garten are participants
in the program, and all participants except Mrs. Hancock and Dr. Rodin are fully
vested. Under the program, the Company intends to make a charitable contribution
of $1 million in ten equal annual installments, with the first installment made
following each participating Director's retirement from the Board, allocated
among up to five charitable organizations recommended by the Director.
Beneficiary organizations recommended by Directors must be, among other things,
tax exempt under Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended (the Code). Donations the Company ultimately pays are expected to be
deductible from taxable income for purposes of U.S. federal and other income
taxes payable by the Company. Directors derive no personal financial or tax
benefit from the program since all insurance proceeds and charitable deductions
accrue solely to the Company. The program will not result in a material cost to
the Company.
The Company provides $150,000 of group life insurance for its outside Directors.
Optional medical, dental and long-term care coverage for outside Directors and
their eligible dependents is available to Directors at a cost similar to that
charged to Company employees.
In connection with the Merger, the Company entered into an agreement with Mr.
Abramson (the Agreement), the former Chairman and Chief Executive Officer of
USHC. Pursuant to the Agreement, the term of which expires July 18, 2001, Mr.
Abramson has agreed to advise the Chairman of the Company on strategic business
activities, marketing strategies and public relations efforts of the Company and
its health operations and has agreed generally not to compete with the Company's
health operations. In return, the Company paid Mr. Abramson $10 million on July
19, 1996 (75% in cash and 25% in shares of Common Stock), and will pay him $3
million per year during the term of the Agreement. A final lump sum payment of
$10 million (payable in shares of Common Stock) will be paid on the later of Mr.
Abramson's resignation as a Director of the Company or the termination or
expiration of the Agreement. In addition, pursuant to the Agreement, the Company
has agreed to provide Mr. Abramson with life, disability, accident and health
insurance benefits substantially similar to those that he received from USHC and
transferred to Mr. Abramson ownership of a certain aircraft owned by a
subsidiary of USHC. During the term of the Agreement, the Company has agreed to
pay the operating costs of such aircraft, on an after-tax basis, up to a maximum
aggregate amount of $2 million. The Agreement provides for a payment, if
necessary, intended to make Mr. Abramson whole for any excise tax imposed under
Section 4999 of the Code with respect to any payment or benefits that he may
receive under the Agreement.
The Board of the Company met eight times in 1999. During 1999, each Director of
the Company attended 75% or more of the combined aggregate meetings of the Board
and the Committees of the Board on which he or she served, except Mr. Greenwald,
who attended 72% of such meetings. The average attendance by all Directors was
over 96 percent.
9
<PAGE> 15
COMMITTEES OF THE BOARD
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
COMMITTEE
----------------------------------------------------------
NOMINATING
COMPENSATION AND
AND CORPORATE
NOMINEE/DIRECTOR AUDIT ORGANIZATION EXECUTIVE INVESTMENT GOVERNANCE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Leonard Abramson X X
Betsy Z. Cohen X X
William H. Donaldson X*
Barbara Hackman Franklin X* X
Jeffrey E. Garten X
Jerome S. Goodman X X
Earl G. Graves X X X
Gerald Greenwald X X
Ellen M. Hancock X X
Michael H. Jordan X* X
Jack D. Kuehler X X*
Frank R. O'Keefe, Jr. X X X
Judith Rodin X X
- ----------------------------------------------------------------------------------------------
Number of Meetings in 1999: 5 8 2 5 4
- ----------------------------------------------------------------------------------------------
</TABLE>
* Committee Chair
The functions and responsibilities of the standing Committees of the Company's
Board are described below.
- - Audit Committee. This Committee is composed entirely of nonemployee
Directors. The Committee recommends the independent auditors that the full
Board nominates for shareholder approval at the Annual Meeting, reviews with
the internal and independent auditors the scope and results of their audits,
reviews the Company's financial statements and other financial disclosures,
and monitors developments in accounting principles and methods used in
presenting financial results. The Committee also regularly meets privately
with the director of the Company's internal audit staff and with the Company's
independent accountants, and regularly discusses with management the Company's
internal accounting control procedures and other internal compliance programs.
- - Committee on Compensation and Organization. This Committee is composed
entirely of nonemployee Directors. The Committee administers the Company's
Stock Incentive Plans and the Annual Incentive Plan, and reviews and makes
recommendations to the Board with respect to the compensation of certain
senior executives. The Committee also reviews the Company's overall
compensation policy and makes recommendations with respect thereto.
Periodically, the Committee reviews senior management succession plans and
related matters.
- - Executive Committee. This Committee is authorized to act on behalf of the
full Board between regular Board meetings, usually when timing is critical.
- - Investment Committee. This Committee is composed entirely of nonemployee
Directors. The Committee oversees the management of the Company's investment
portfolios and reviews investment policy and strategy.
- - Nominating and Corporate Governance Committee. The Nominating Committee is
composed entirely of nonemployee Directors. The Nominating Committee reviews
the qualifications of all candidates for membership on the Board and Board
Committees. It makes recommendations to the full Board on Director nominees,
on the structure, composition and function of Board Committees, on Director
compensation, on the independence of nonemployee Directors and on the Director
retirement policy. It reviews conflicts of interest that may affect Directors,
as well as substantial changes in any Director's circumstances (e.g.,
10
<PAGE> 16
change of employment), and advises the Board on procedures for assessing the
performance of the Board. The Nominating Committee also advises the Board on all
other matters concerning corporate governance to the extent specific matters are
not the responsibility of other Committees.
In recommending Director nominees to the Board, the Nominating Committee
solicits candidate recommendations from its own members, other Directors of the
Company and management. Although the Nominating Committee does not specifically
solicit suggestions for possible candidates from shareholders, the Nominating
Committee will consider candidates meeting the criteria described below.
(Suggestions, together with a description of the proposed nominee's
qualifications, other relevant biographical information and an indication of the
willingness of the proposed nominee to serve, should be sent to the Nominating
Committee Chairman, in care of the Corporate Secretary, Aetna Inc., 151
Farmington Avenue, Hartford, Connecticut 06156.)
Nominees are selected through a process based on criteria set with the
concurrence of the full Board and reevaluated periodically. The criteria
include: the relevance of the candidate's experience to the business of the
Company and its affiliates, enhancing diversity, independence from conflict or
direct economic relationship with the Company, and the ability of the candidate
to attend meetings regularly and devote an appropriate amount of effort in
preparation for those meetings.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Subsidiaries of the Company have entered into reinsurance arrangements with
Lloyd's of London. Richard L. Huber is an investor in several Lloyd's
syndicates. As an investor in a Lloyd's syndicate, he does not exercise control
over the syndicate. Mr. Huber resigned from all of his positions with the
Company effective February 25, 2000.
A subsidiary of the Company paid Richard Wolfson, a son-in-law of Mr. Abramson,
$150,469 under an independent contractor agreement for services rendered in
1999.
During 1999, the Company and its subsidiaries paid $7,068,958 to Criterion
Communications, Inc. pursuant to a service agreement. Marcy Shoemaker (a
daughter of Mr. Abramson) owns 100% of the outstanding voting securities of
Criterion.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our Directors and
executive officers to file reports of holdings and transactions in Aetna stock
with the SEC and New York Stock Exchange. Based on our records and other
information, we believe that during our fiscal year ended December 31, 1999 our
Directors and executive officers met all applicable SEC filing requirements.
11
<PAGE> 17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS, NOMINEES AND
EXECUTIVE OFFICERS
The following table presents, as of December 31, 1999, the name of the only
person known to the Company to be the beneficial owner of more than 5% of the
outstanding shares of its Common Stock. The information set forth in the table
below and in the related footnote was furnished by that person.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL
BENEFICIAL OWNER OWNERSHIP PERCENT
- ---------------------------------------------------------------
<S> <C> <C> <C>
Sanford C. Bernstein & Co., 12,523,694 shares(1) 8.78%
Inc.
767 Fifth Avenue
New York, New York 10153
- ---------------------------------------------------------------
</TABLE>
(1) Of the reported shares, Sanford C. Bernstein & Co., Inc. reports that it has
sole voting power with respect to 6,554,526 shares, that it shares voting
power with respect to 1,394,863 shares and that it has sole dispositive
power with respect to all of the reported shares.
On March 8, 2000, Southeastern Asset Management, Inc. (Southeastern) filed with
the SEC a report on Schedule 13D. That report states that Southeastern
beneficially owned 8,469,800 shares of Common Stock as of March 3, 2000, or
approximately 6.01% of the Common Stock outstanding on that date. Of the
reported shares, Southeastern reports that it has sole voting power with respect
to 5,577,100 shares, that it shares voting power with respect to 1,768,400
shares, that it has sole dispositive power with respect to 6,701,400 shares and
that it shares dispositive power with respect to 1,768,400 shares. Southeastern
reports that its address is 6410 Poplar Avenue, Suite 900, Memphis, Tennessee
38119.
12
<PAGE> 18
Beneficial Ownership Table
The following table presents, as of January 31, 2000, the beneficial ownership
of, and other interests in, shares of Common Stock of each current Director and
Nominee, each executive officer named in the Summary Compensation Table on page
15, and the Directors and executive officers of the Company, as a group. The
information set forth below and in the related footnotes on the following page
has been furnished by the respective persons.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
------------------------------------------
COMMON
NAME OF BENEFICIAL COMMON STOCK
OWNER AND POSITION SHARES PERCENT EQUIVALENTS(1)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Leonard Abramson 1,021,469(2) * 4,059
(current Director and Nominee)
Betsy Z. Cohen 1,571 * 2,967
(current Director and Nominee)
William H. Donaldson 750 * 3,300
(Chairman, President, Chief
Executive Officer, current
Director and Nominee)
Barbara Hackman Franklin 3,426 * 3,300
(current Director and Nominee)
Jeffrey E. Garten * 1,500
(current Director and Nominee)
Jerome S. Goodman 23,708(3) * 4,754
(current Director and Nominee)
Earl G. Graves 500 * 5,193
(current Director and Nominee)
Gerald Greenwald 3,000(4) * 7,153
(current Director and Nominee)
Ellen M. Hancock 2,000(5) * 5,775
(current Director and Nominee)
Michael H. Jordan 3,000 * 6,082
(current Director and Nominee)
Jack D. Kuehler 12,000(6) * 8,422
(current Director and Nominee)
Frank R. O'Keefe, Jr. 850(7) * 8,422
(current Director)
Judith Rodin 100 * 6,626
(current Director and Nominee)
Richard L. Huber 571,185(8) *
(named executive)
Michael J. Cardillo 206,307(9) *
(named executive)
Frederick C. Copeland, Jr. 145,695(10) * 5,303(11)
(named executive)
Thomas J. McInerney 216,038(12) * 5,156(11)
(named executive)
Alan J. Weber 194,452(13) *
(named executive)
Directors and executive 2,494,248(14) 1.75% 78,012
officers as a group
(20 persons)
- ------------------------------------------------------------------------------
</TABLE>
* Less than 1%
Unless otherwise noted in the footnotes, each person currently has sole voting
and investment powers over the shares set forth above.
13
<PAGE> 19
Notes to Beneficial Ownership Table
- --------------------------------------------------------------------------------
(1) Except as set forth in Note 11, represents stock units issued under the
Director Plan or its predecessor plan, accrued stock units resulting from
deferral of retainer and attendance fees and stock units credited to
certain Directors in 1996 in connection with the elimination of the
Director retirement plan. Stock units, which do not have voting rights,
track the value of the Company's Common Stock and earn dividend equivalents
that may be reinvested.
(2) Includes 868,287 shares held by LEMA Associates, L.P., of which LEMA
Corporation is the sole general partner with a 1% partnership interest. Mr.
Abramson is the sole shareholder of LEMA Corporation and also is a Class A
limited partner in LEMA Associates, L.P. with a 50% partnership interest.
Mrs. Abramson is a Class B limited partner in LEMA Associates, L.P. with a
49% partnership interest. Also includes 3,417 shares held jointly with Mrs.
Abramson and 149,765 shares that Mr. Abramson has the right to acquire
within 60 days of January 31, 2000 upon exercise of stock options. Excludes
3,361 shares held in a grandchild's trust, of which Mr. Abramson is
co-trustee, and 30,828 shares held by children's and grandchildren's
trusts, of which Mrs. Abramson is a trustee or co-trustee. Mr. Abramson
disclaims beneficial ownership of the trust shares.
(3) Includes 18,734 shares held by Wellington Limited Partnership, of which Mr.
Goodman is a general partner. Excludes 50 shares held by his spouse, as to
which Mr. Goodman disclaims beneficial ownership.
(4) Represents shares held by his spouse, as to which Mr. Greenwald has no
voting or investment power.
(5) Held jointly with her spouse, as to which Mrs. Hancock shares voting and
investment powers.
(6) Held jointly with his spouse, as to which Mr. Kuehler shares voting and
investment powers.
(7) Includes 750 shares held by a revocable living trust, of which Mr. O'Keefe
is trustee and beneficiary. Excludes 150 shares held by a revocable living
trust of which his spouse is trustee and beneficiary, and as to which Mr.
O'Keefe disclaims beneficial ownership.
(8) Includes 1,000 shares held jointly with his spouse and 15,000 shares held
by a revocable living trust, of which Mr. Huber is trustee and beneficiary.
Also includes 42,218 shares held by Huber Associates Limited Partnership, a
family limited partnership (HALP). Mr. Huber and his spouse are the sole
general partners of HALP and hold a 1% limited partnership interest, and
each of three other family members is a 33% limited partner. Also includes
344,226 shares that Mr. Huber has the right to acquire upon exercise of
stock options and 85,501 shares that HALP has the right to acquire upon
exercise of stock options, in each case within 60 days of January 31, 2000.
Mr. Huber disclaims beneficial ownership of all shares and stock options
held by HALP, except as to his pecuniary interest in HALP.
(9) Includes 333 shares of restricted stock that vest February 28, 2000. Also
includes 161,543 shares that Mr. Cardillo has the right to acquire within
60 days of January 31, 2000 upon exercise of stock options.
(10) Includes 141,175 shares that Mr. Copeland has the right to acquire within
60 days of January 31, 2000 upon exercise of stock options. Also includes
59 shares held by his spouse, as to which Mr. Copeland has no voting or
investment power.
(11) Represents stock units resulting from deferral of payment of Incentive Unit
Awards under the Company's 1996 Stock Incentive Plan. The stock units are
payable in shares of Common Stock at the expiration of the applicable
deferral period. Stock units, which do not have voting rights, track the
value of the Company's Common Stock and earn dividend equivalents that are
reinvested.
(12) Includes 206,512 shares that Mr. McInerney has the right to acquire within
60 days of January 31, 2000 upon exercise of stock options.
(13) Includes 10,000 shares of restricted stock that vest in equal installments
on August 1, 2000 and August 1, 2001. Also includes 166,920 shares that Mr.
Weber has the right to acquire within 60 days of January 31, 2000 upon
exercise of stock options.
(14) Directors and executive officers as a group have sole voting and investment
powers over 216,545 shares and share voting and investment powers with
respect to 939,256 shares. Included in the
14
<PAGE> 20
number of shares shown in the table are 3,926 shares held under the
Company's Incentive Savings Plan (ISP) or the USHC Savings Plan and
beneficially owned by executive officers, and 1,331,462 shares that
Directors and executive officers have the right to acquire within 60 days
of January 31, 2000 upon the exercise of stock options.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth for the periods indicated certain compensation of
the Chairman, Chief Executive Officer and President (CEO) and each of the four
other most highly compensated executive officers of the Company (other than the
CEO) in 1999.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------------
AWARDS PAYOUTS
----------------------------- ---------
SECURITIES
ANNUAL COMPENSATION UNDERLYING LONG-TERM
NAME AND PRINCIPAL --------------------- RESTRICTED STOCK INCENTIVE ALL OTHER
POSITION IN 1999 YEAR SALARY BONUS(3) STOCK AWARDS(5) OPTIONS(6) PLAN COMPENSATION
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Richard L. Huber 1999 $1,000,000 $680,800 $ 0 300,000(7) $ 0 $73,513(10)
Chairman, Chief 1998 888,846 470,250 0 200,000(8) 837,262 44,442
Executive Officer 1997 631,731 0 0 157,225(9) 0 31,587
and President(1)
Michael J. Cardillo 1999 $ 700,000 $401,052 $ 0 133,058(7) $ 0 $58,029(10)
Executive Vice President, 1998 693,592 487,500 0 58,472(8) 508,924 21,392
Aetna U.S. Healthcare 1997 668,506 270,000(4) 83,125 28,752(9) 0 20,143
Frederick C. Copeland, Jr. 1999 $ 443,269 $450,000 $ 0 60,000 $ 0 $30,664(10)
Executive Vice President, 1998 418,269 340,000 0 31,821(8) 837,262 20,913
Aetna International 1997 386,538 260,000 0 33,353(9) 0 19,327
Thomas J. McInerney 1999 $ 536,539 $486,797 $ 0 112,652(7) $ 0 $40,577(10)
Executive Vice President, 1998 486,538 275,000 0 61,259(8) 410,423 24,327
Aetna Financial Services 1997 450,000 180,000 0 35,752(9) 0 22,500
Alan J. Weber 1999 $ 750,000 $750,000 $ 0 85,000 $ 0 $36,058(10)
Vice Chairman for 1998 302,885 0 1,039,688 285,252(8) 0 0
Strategy and Finance(2)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Huber was named Chairman on March 1, 1998 and Chief Executive Officer
and President on July 28, 1997. Mr. Huber resigned from all of his
positions with the Company effective February 25, 2000.
(2) Mr. Weber was not an executive officer at any time in 1997.
(3) Except as set forth in Note 4, represents amounts earned under the
Company's Annual Incentive Plan. Annual incentive bonuses are intended to
reward executive officers for achieving financial and strategic results.
The Committee on Compensation and Organization administers the Annual
Incentive Plan and determines the amount of each award to be granted.
Amounts shown do not include the amount of bonus forgone at the election of
the executive in exchange for a stock option grant (see Notes 7, 8 and 9).
(4) Represents the bonus amount paid pursuant to Mr. Cardillo's employment
agreement.
(5) At December 31, 1999, Mr. Cardillo and Mr. Weber held 333 shares and 10,000
shares, respectively, of restricted Common Stock with a value of $18,586
and $558,125, respectively. The Company pays dividends on such shares of
restricted stock.
(6) Represents stock options granted under the Company's 1996 Stock Incentive
Plan.
(7) Includes a stock option grant on February 8, 2000 for 100,000, 53,058 and
32,652 shares to Messrs. Huber, Cardillo and McInerney, respectively, in
lieu of payment of a portion of the named executive's 1999 bonus award at
the election of such named executive. Executives were not permitted to
acquire options on more than 100,000 shares under this program.
15
<PAGE> 21
(8) Includes a stock option grant on February 1, 1999 for 100,000, 18,472,
6,821, 31,259 and 85,252 shares to Messrs. Huber, Cardillo, Copeland,
McInerney and Weber, respectively, in lieu of payment of all or a portion
of the named executive's 1998 bonus award at the election of such named
executive. Executives were not permitted to acquire options on more than
100,000 shares under this program.
(9) Includes a stock option grant on February 27, 1998 for 57,225, 25,752,
13,353 and 25,752 shares to Messrs. Huber, Cardillo, Copeland and
McInerney, respectively, in lieu of payment of all or a portion of the
named executive's 1997 bonus award at the election of such named executive.
(10) Matching contribution made by the Company under ISP and the Supplemental
ISP. ISP is a profit-sharing thrift plan qualified under the Code. The
Company matches, dollar-for-dollar, amounts deferred by employees under ISP
up to 5% of annual salary. In 1999, 25% of the matching contributions made
under ISP on behalf of certain employees of the Company automatically was
invested in Common Stock. The Company has established the Supplemental ISP
to provide the deferred and matching benefits that would have been credited
to ISP but for limits imposed by the Employee Retirement Income Security
Act (ERISA) and the Code. The Supplemental ISP also is used to provide
other benefits not otherwise payable under ISP, as provided from time to
time by the Company's Board.
16
<PAGE> 22
Stock Option Grants Table
The following table sets forth certain information concerning stock options
granted during 1999 by the Company to the persons listed in the Summary
Compensation Table on page 15. The hypothetical grant date present values of
stock options granted in 1999 shown below are presented pursuant to SEC rules
and are calculated under the modified Black-Scholes Model for pricing options.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
- ----------------------------------------------------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL STOCK
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
STOCK OPTIONS EMPLOYEES IN PRICE PER EXPIRATION PRESENT
NAME GRANTED 1999 SHARE DATE VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Richard L. Huber............. 100,000(2) 1.20% $90.125 January 29, 2009 $2,628,000(5)
100,000(3) 1.20% 86.250 February 1, 2004 2,524,000(6)
100,000(4) 1.20% 50.250 October 29, 2009 1,622,000(7)
Michael J. Cardillo.......... 40,000(2) 0.48% 90.125 January 29, 2009 1,051,200(5)
18,472(3) 0.22% 86.250 February 1, 2004 466,233(6)
40,000(4) 0.48% 50.250 October 29, 2009 648,800(7)
Frederick C. Copeland, Jr.... 30,000(2) 0.36% 90.125 January 29, 2009 788,400(5)
6,821(3) 0.08% 86.250 February 1, 2004 172,162(6)
30,000(4) 0.36% 50.250 October 29, 2009 486,600(7)
Thomas J. McInerney.......... 40,000(2) 0.48% 90.125 January 29, 2009 1,051,200(5)
31,259(3) 0.37% 86.250 February 1, 2004 788,977(6)
40,000(4) 0.48% 50.250 October 29, 2009 648,800(7)
Alan J. Weber................ 45,000(2) 0.54% 90.125 January 29, 2009 1,182,600(5)
85,252(3) 1.01% 86.250 February 1, 2004 2,151,760(6)
40,000(4) 0.48% 50.250 October 29, 2009 648,800(7)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Granted under the Company's 1996 Stock Incentive Plan (the Plan). The Plan
permits participants to use shares of the Company's Common Stock to exercise
options. The Plan provides that the option price shall not be less than 100%
of the fair market value of the Common Stock on the date the option is
granted. Under the Plan, options may be granted until April 30, 2006. The
table does not include stock options granted in February 2000 to certain
executive officers in lieu of 1999 bonus awards (see Note 7 to the Summary
Compensation Table).
(2) Date of grant was January 29, 1999; initial exercise date was January 29,
2000; option vests in equal installments over a period of three years.
(3) Represents options granted in lieu of all or a portion of the named
executive's 1998 bonus award at the election of such named executive. Date
of grant was February 1, 1999; option vests immediately.
(4) Date of grant was October 29, 1999. One-third of the option vests if and
when the market price of the Common Stock equals or exceeds $70.00 on or
after October 29, 2000. One-third of the option vests if and when the market
price of the Common Stock equals or exceeds $70.00 on or after October 29,
2001. One-third of the option vests if and when the market price of the
Common Stock equals or exceeds $70.00 on or after October 29, 2002. Unless
it is sooner terminated or forfeited, the entire option will vest on October
29, 2006 regardless of the market price of the Common Stock.
(5) The assumptions made and factors used by the Company in the Black-Scholes
Model calculation for the options granted January 29, 1999 were as follows:
(i) a volatility factor of 31.4%, representing the three-year historical
volatility of the Common Stock as of the date of the option grant; (ii) a
risk-free rate of return of 4.55%, representing the five-year U.S. Treasury
bond rate in effect on the date of the option grant; (iii) a dividend yield
of 0.9%, representing the Company's then current annual dividend, divided by
the Common Stock price on the date of the option grant; and (iv) a four-year
option term, representing the historical average life of the options
granted. No further discount to the option value calculated was taken to
give effect to the fact that the options are not freely transferable or to
the exercise or lapse of the options after the vesting period but prior to
the end of the option period.
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<PAGE> 23
(6) The assumptions made and factors used by the Company in the Black-Scholes
Model calculation for the options granted February 1, 1999 were as follows:
(i) a volatility factor of 31.5%, representing the three-year historical
volatility of the Common Stock as of the date of the option grant; (ii) a
risk-free rate of return of 4.65%, representing the five-year U.S. Treasury
bond rate in effect on the date of the option grant; (iii) a dividend yield
of 0.9%, representing the Company's then current annual dividend, divided by
the Common Stock price on the date of the option grant; and (iv) a four-year
option term, representing the historical average life of the options
granted. No further discount to the option value calculated was taken to
give effect to the fact that the options are not freely transferable or to
the exercise or lapse of the options after the vesting period but prior to
the end of the option period.
(7) The assumptions made and factors used by the Company in the Black-Scholes
Model calculation for the options granted October 29, 1999 were as follows:
(i) a volatility factor of 36.0%, representing the three-year historical
volatility of the Common Stock as of the date of the option grant; (ii) a
risk-free rate of return of 5.97%, representing the five-year U.S. Treasury
bond rate in effect on the date of the option grant; (iii) a dividend yield
of 1.6%, representing the Company's then current annual dividend, divided by
the Common Stock price on the date of the option grant; and (iv) a four-year
option term, representing the historical average life of the options
granted. No further discount to the option value calculated was taken to
give effect to the fact that the options are not freely transferable or to
the exercise or lapse of the options after the vesting period but prior to
the end of the option period.
There is no assurance that the hypothetical present values of stock options
presented in the preceding table represent the actual values of such options.
The hypothetical values shown should not be construed as predictions by the
Company as to the future value of its Common Stock.
Stock Option Exercises and December 31, 1999 Stock Option Value Table
The following table sets forth certain information concerning stock options
exercised during 1999 by the persons listed in the Summary Compensation Table on
page 15 and the number and value of specified options held by those persons at
December 31, 1999. The values of unexercised in-the-money stock options at
December 31, 1999 shown below are presented pursuant to SEC rules. There is no
assurance that the values of unexercised in-the-money stock options reflected in
this table will be realized.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
SHARES VALUE UNEXERCISED OPTIONS AT OPTIONS AT
ACQUIRED REALIZED DECEMBER 31, 1999 DECEMBER 31, 1999(1)
ON ON ------------------------------ ------------------------------
NAME EXERCISE EXERCISE EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Huber(3) 0 $ 0 363,060 366,666 $173,286 $556,250
Michael J. Cardillo 0 0 133,876 107,666 722,618 222,500
Frederick C. Copeland, Jr. 0 0 122,842 83,332 0 166,875
Thomas J. McInerney 600 13,200 183,178 103,333 67,625 222,500
Alan J. Weber 0 0 151,920 218,332 0 222,500
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on the December 31, 1999 closing stock price of $55.8125.
(2) Represents stock options that are not vested.
(3) Includes stock options held by Huber Associates Limited Partnership (HALP).
For additional information about HALP, see Note 8 to the Beneficial
Ownership Table. Mr. Huber disclaims beneficial ownership of the stock
options held by HALP, except as to his pecuniary interest in HALP.
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<PAGE> 24
Long-Term Incentive Awards Table
The following table sets forth certain information concerning long-term
incentive awards granted during 1999 to the persons listed in the Summary
Compensation Table on page 15 under the Company's 1996 Stock Incentive Plan.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS
OR OTHER (IN SHARES) UNDER
NUMBER OF PERIOD UNTIL NON-STOCK PRICE BASED PLANS
UNITS GRANTED MATURATION ------------------------------
NAME IN 1999(1) OR PAYOUT THRESHOLD TARGET MAXIMUM
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Richard L. Huber 50,000 1999 - 2002 25,000 50,000 87,500
Michael J. Cardillo 17,500 1999 - 2002 8,750 17,500 30,625
Frederick C. Copeland, Jr. 12,000 1999 - 2002 6,000 12,000 21,000
Thomas J. McInerney 17,500 1999 - 2002 8,750 17,500 30,625
Alan J. Weber 17,500 1999 - 2002 8,750 17,500 30,625
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) The incentive units will vest and shares will become payable if the
Company's total return to shareholders over the measurement period
(1999 - 2002) meets or exceeds each of two separate performance objectives.
First, the Company's total return to shareholders over the measurement
period must at least equal a threshold risk-free rate of return (the Return
Threshold), which for these incentive units is based on the annual rate of
return available on a four-year Treasury note compounded annually. If the
Return Threshold is not met, no incentive units will vest. Second, the
Company's total return to shareholders over the measurement period must
compare favorably to that of the other companies in the Morgan Stanley
Healthcare Payor Index (weighted 70%) and the Morgan Stanley Life Insurance
Index (weighted 30%) (together, the Composite Index) for the same period.
For the incentive units to become fully vested, the Company must achieve at
least the median level of total shareholder return for the companies in the
Composite Index (Target Performance). If the Committee on Compensation and
Organization determines that the Company's performance does not at least
equal the 33rd percentile of the companies in the Composite Index (the
Performance Threshold), no portion of the incentive units will vest
regardless of whether the Return Threshold is satisfied. If the Company's
performance is in the 90th percentile of companies in the Composite Index
(Maximum Performance), up to 175% of the incentive units will vest.
For purposes of determining the total return to shareholders over the
measurement period: the change in the price of the Company's Common Stock
and of the price of the common stock of each of the companies in the
Composite Index is calculated by comparing the average of the closing stock
price of the Company and each other company on the last business day of each
week in the 13-week period preceding the start and the 13-week period
preceding the end of the measurement period; all stock prices are adjusted
to reflect stock splits and stock dividends; and dividends are reinvested.
Pension Plan
The Company provides for certain of its employees a noncontributory, defined
benefit pension plan (the Pension Plan). Effective January 1, 1999 the Pension
Plan was amended to convert the plan's final average pay benefit formula to a
cash balance design. Under the new design, the pension benefit is expressed as a
cash balance account. Each year a participant's cash balance account is credited
with (i) a pension credit based on the participant's age, years of service and
eligible pay for that year, and (ii) an interest credit based on the
participant's account balance as of the beginning of the year and an interest
rate that equals the average 30-year U.S. Treasury bond rate for October of the
prior calendar year. (For 1999, the interest rate was 5.01%.)
In connection with the conversion to the cash balance design, certain
participants received an opening account balance effective January 1, 1999. For
employees with Aetna pension benefits as of December 31, 1998 (including Messrs.
Huber, Copeland and McInerney), the opening account balance was based on
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<PAGE> 25
average eligible pay from the highest 36 consecutive months between 1989 and
1998 multiplied by a conversion factor based on the participant's age and years
of service. For employees with Aetna U.S. Healthcare pension benefits as of
December 31, 1998 (including Mr. Cardillo), the opening account balance equaled
a percentage of eligible pay (up to a maximum opening account balance of
$5,100). For purposes of the Pension Plan, eligible pay is generally base pay
and certain other forms of cash compensation, including annual performance
bonuses but excluding long-term incentive compensation and proceeds from stock
option exercises.
Employees with Aetna pension benefits as of December 31, 1998 are considered
transition participants under the Pension Plan. Transition participants continue
to accrue benefits under the Pension Plan's final average pay formula until
December 31, 2006. Under this formula, retirement benefits are calculated on the
basis of (i) the number of years of credited service (maximum credit is 35
years) and (ii) the employee's average annual earnings during the 60 consecutive
months out of the last 120 months of service that yield the highest annual
compensation. On termination of employment, the value of the cash balance
account is compared to the lump sum value of the benefit under the final average
pay formula and the greater of these two amounts becomes the cash balance
account value.
The estimated annual benefits payable at age 65 for Messrs. Huber, Cardillo,
Copeland, McInerney and Weber are $245,146, $245,998, $332,158, $1,146,531 and
$477,288, respectively. These estimates assume each named executive continues
working for the Company until age 65, the account balance receives annual
interest credits of 5.01% for 1999 and 6% thereafter, pension eligible pay
increases 4% per year, the Social Security wage base increases 3.5% per year,
and the Pension Plan continues unchanged until the projection date. Actual
benefits will vary. The estimated benefits described above do not take into
account any reduction for joint and survivorship payments or any offset for
Social Security benefits to be received by the employee.
The Code limits the maximum annual benefit that may be accrued under and paid
from a tax-qualified plan such as the Pension Plan. As a result, the Company has
established a supplemental pension plan to provide benefits (included in the
amounts listed in the preceding paragraph) that would exceed the Code limit. The
supplemental pension plan also is used to pay other pension benefits not
otherwise payable under the Pension Plan, including additional years of credited
service beyond years actually served, additional years of age, and covered
compensation in excess of that permitted under the Pension Plan.
Other Agreements
The Company administers a Severance and Salary Continuation Benefits Plan
(Severance Plan) under which employees, including the Company's executive
officers, terminated by the Company without cause may receive up to two weeks of
continuing salary for every credited full year of employment to a maximum of one
year's salary. In addition, when an employee's job is eliminated due to
reengineering, reorganization or staff reduction efforts, employees, including
the Company's executive officers, are eligible for an additional 13 weeks of
salary continuation and outplacement assistance. Under certain circumstances,
determined on a case-by-case basis, additional severance pay benefits may be
granted for the purposes of inducing employment of senior officers or rewarding
past service. Certain benefits continue during the severance pay and salary
continuation periods.
In connection with the Merger, the Company assumed USHC's employment agreement
with Mr. Cardillo. The agreement has a five-year term, expiring in 2001, unless
renewed. The agreement provides that if Mr. Cardillo's employment is terminated
by the Company other than for "cause" or "disability" or by the executive for
"good reason" (as defined in the agreement), in lieu of participation in the
Company's Severance Plan, Mr. Cardillo will be entitled to a special termination
payment equal to the aggregate of three times base salary and target bonus, and
a pro rata portion of his annual bonus for the then uncompleted fiscal year. For
36 months following the date of such termination, he is eligible for
continuation of welfare and pension benefits. The agreement also provides that
upon such a termination, all outstanding equity-based
20
<PAGE> 26
awards will continue to vest for one year and will remain exercisable for a
period of 90 days thereafter. Under the terms of the agreement, Mr. Cardillo
generally will be reimbursed by the Company for applicable excise taxes
(including tax gross-up) incurred as a result of payments made under the
agreement.
In connection with Mr. Huber's resignation and in lieu of his existing agreement
with the Company, the Company has offered to pay him 88 weeks of salary
continuation (calculated as base salary and target bonus) in exchange for his
agreement generally not to compete with the Company. The Company also has
offered to provide Mr. Huber with an office and administrative support for up to
one year to accommodate his transition needs. Upon expiration of his salary
continuation period, Mr. Huber will be eligible for certain benefits offered to
employees who retire from the Company.
Upon commencement of his employment, Mr. Weber entered into an agreement with
the Company. The agreement provides that if Mr. Weber's employment is terminated
by the Company without cause, in lieu of participation in the Company's
Severance Plan, he will be entitled to not less than 52 weeks of salary
continuation (calculated as base salary and target bonus amount). Upon a
change-in-control of the Company (as defined in the agreement), Mr. Weber would
receive not less than 156 weeks of salary continuation. Mr. Weber will be vested
under the Company's pension plan after two years of service. The Company has
agreed to make certain minimum contributions to Mr. Weber's cash balance pension
account, which the Company believes are not greater than the value of the
pension benefits forgone by Mr. Weber as a result of his departure from his
previous employer. The Company has agreed generally to reimburse Mr. Weber for
applicable excise taxes (including tax gross-up) incurred as a result of
payments made under the agreement.
Mr. McInerney has entered into an agreement with the Company in lieu of
participation in the Company's Severance Plan. The agreement provides that if
Mr. McInerney's employment is terminated under circumstances that would call for
severance pay benefits, he will receive not less than 52 weeks of salary
continuation (calculated as base salary and target bonus amount). Upon a
change-in-control of the Company (as defined in the Company's Severance Plan),
Mr. McInerney's severance benefit would increase to 156 weeks of salary
continuation. The Company has agreed generally to reimburse Mr. McInerney for
applicable excise taxes (including tax gross-up) incurred as a result of
payments made under the agreement.
Mr. Copeland has entered into an agreement with the Company in lieu of
participation in the Company's Severance Plan. The agreement provides that if
Mr. Copeland's employment is terminated under circumstances that would call for
severance pay benefits, he will receive payment for not less than 52 weeks of
base salary. Upon a change-in-control of the Company (as defined in the
Company's Severance Plan), Mr. Copeland's severance benefit would increase to
156 weeks of base salary. Alternatively, the Company has offered Mr. Copeland,
upon a change-in-control of the Company (as defined in the Company's Severance
Plan), 104 weeks of salary continuation (calculated as base salary and target
bonus amount) and generally to reimburse Mr. Copeland for applicable excise
taxes (including tax gross-up) incurred as a result of payments made under the
agreement. Following certain specified events related to the Company's
International business segment, Mr. Copeland would instead receive 104 weeks of
salary continuation (calculated as base salary and target bonus amount) if he
were involuntarily terminated or his target cash compensation (base salary and
annual bonus opportunity for target level performance) were reduced.
The Company has agreed to provide Mr. Donaldson with a salary of $1,000,000 for
calendar year 2000. On February 29, 2000, Mr. Donaldson was granted a stock
option for 500,000 shares of Common Stock. The exercise price per share is
$41.125 for 300,000 shares, $55.00 for 100,000 shares and $65.00 for 100,000
shares. The closing price of the Common Stock on February 29, 2000 was $41.125.
Mr. Donaldson was also granted 100,000 shares of restricted Common Stock. The
option and restricted Common Stock will vest after one year, subject to earlier
vesting upon a change-in-control of the Company or certain terminations of
employment. The Company has agreed generally to reimburse Mr. Donaldson for
applicable excise taxes (including tax gross-up) incurred as a result of
payments made under his employment arrangement. The Company and Mr. Donaldson
are finalizing the remaining terms of his employment arrangement.
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<PAGE> 27
The Board of Directors has approved provisions to protect certain benefits of
Company employees upon a change-in-control of the Company (as defined). The
provisions provide that the Severance Plan shall become noncancelable for a
period of two years following a change-in-control. Also, all previously granted
stock options that have not yet vested will become vested and immediately
exercisable. Upon a change-in-control, bonuses payable under the Company's
annual bonus program will become payable based on the target award for
participants. Also, long-term incentive awards granted under the Company's 1996
Stock Incentive Plan will vest. If an award is in the final two years of a
performance cycle, the full award will be paid at the greater of target or
actual performance through the date of the change-in-control. If an award is in
the first two years of a performance cycle, a prorated award will be paid equal
to the greater of target or actual performance through the date of the
change-in-control. Provision has been made to limit certain amendments to the
Pension Plan and the supplemental pension plan following a change-in-control.
Provision also has been made to permit funding of a trust to protect
supplemental retirement benefits (pension and 401(k)) and deferred compensation
upon a change-in-control or potential change-in-control (each as defined) of the
Company.
REPORT OF THE COMMITTEE ON COMPENSATION AND ORGANIZATION
What is the Company's Compensation Philosophy?
The Company's executive compensation program is designed to:
- - attract and retain high-performing executives;
- - focus executives on increasing shareholder value by awarding them stock-based
compensation directly linked to improvements in shareholder return;
- - compensate executives based on the Company's performance relative to its
competitors and improvements in the Company's performance over time; and
- - create a performance-oriented environment in which executives can earn
increased levels of compensation by achieving annual and long-term success in
the areas of financial and operating results, quality and customer
satisfaction.
What is the Structure of the Executive Compensation Program?
The compensation program for executive officers consists of four principal
elements:
- - salaries;
- - annual incentive bonuses;
- - stock options; and
- - long-term incentive awards.
The program strives to achieve an appropriate mix of short and long-term
incentive awards.
The compensation program is designed to set total compensation opportunity
(salary, annual bonus, stock options and long-term incentive award) at a level
relative to the median level of total compensation paid to similarly-positioned
executives at companies in a comparison group selected for each position (the
Comparison Group). The Comparison Group for each position is selected from among
80 companies believed to be major competitors for executive talent and includes
health, financial services, insurance and other companies. Of these companies,
ten were included in the Morgan Stanley Healthcare Payor Index in 1999. The
specific companies selected for an executive's Comparison Group depend on the
executive's area of responsibility. An executive's total compensation relative
to the median depends upon the executive's experience, level and scope of
responsibility within the Company, and individual, as well as Company,
performance. Executive officers are also eligible for other employee benefits as
set forth in the Summary Compensation Table (see page 15).
22
<PAGE> 28
How are Salaries Determined?
The Committee reviews salaries annually. Salaries are based on the competitive
marketplace for comparable jobs. The Committee determines individual salaries
after evaluating the executive's experience, level and scope of responsibility
within the Company, and individual performance.
How are Bonuses Determined?
Annual bonus opportunities are designed to incent executive officers to achieve
specific financial and strategic goals.
Annual Incentive Plan. The Annual Incentive Plan (the Annual Plan) applies to
executives named in the Company's Proxy Statement. Under this Plan, specific
financial goals are established at the beginning of each performance year and
bonuses are linked directly to their achievement. If 100% of the goal is met,
the maximum award permitted under the Annual Plan may be paid. If less than 100%
of the financial goal is met, the maximum bonus payable is proportionately
reduced. The Committee has discretion to pay less than the maximum amount
permitted by the Annual Plan. For 1999, the financial goal established for the
Chief Executive Officer and the Vice Chairman was measured by the Company's net
income (adjusted by the Committee to exclude unplanned capital gains and losses,
as well as certain items identified at the start of the performance year and
determined to be unusual, nonrecurring or beyond management's control). The
financial goal established for lead business unit executives was based 25% on
the Company's net income, as adjusted by the Committee, and 75% on the business
unit's operating earnings (measured by income from continuing operations before
realized capital gains and losses). In setting the amount of the bonus award,
the Committee also considered achievement of specified quality goals (including
NCQA accreditation and customer service measures) as well as management of
diversity initiatives and Year 2000 issues.
Management Incentive Plan. Executive officers who do not participate in the
Annual Incentive Plan participate in the Company's Management Incentive Plan
(MIP). Under MIP, the Committee sets the amount of an executive officer's bonus
based on various levels of financial and strategic performance for each business
unit or staff area. Twenty-five to 40% of a staff unit head's bonus depends on
Company operating earnings and 60-75% depends on the unit's own financial
performance, measured by achievement of specified performance objectives and
expense level versus budget. Examples of the specified performance objectives
include improvements in the quality of customer service and effective resolution
of legal, regulatory or other important issues affecting the Company.
Under MIP, if 100% of the goal is met, up to 100% of the target bonus amount is
payable. If 88% of the goal is met, up to 50% of the bonus amount is payable. If
the goal is exceeded, up to 200% of the bonus amount is payable. If less than
70% of the goal is met, no bonus is payable unless the Committee determines,
based on the facts and circumstances, that a bonus is appropriate. At the
Committee's discretion, the amount of a bonus may be adjusted upward or downward
by up to 15% to take into account strategic results achieved by the business or
staff unit. The principal criteria used by the Committee in assessing strategic
results are positioning of the Company's businesses, sources of the unit's
earnings, compliance initiatives, management of human resources, diversity,
employee communications, management of Year 2000 issues and other (e.g.,
unplanned initiatives).
In 1999, some business and staff units exceeded their financial and strategic
performance goals. Some did not. The bonuses paid to executive officers
reflected this performance.
How are Stock Option Awards Determined?
The Company awards stock options to better align the interests of its executive
officers with those of its shareholders in increasing shareholder value. Stock
options are granted at not less than 100% of the fair
23
<PAGE> 29
market value of the Company's Common Stock on the date of grant. Stock options
normally vest over a three-year period. Because stock options provide value only
in the event of share price appreciation, the Committee believes stock options
represent an important component of the Company's executive compensation
program.
Annual Stock Option Grants. Stock options are granted annually to set total
compensation at a level relative to the median level of total compensation paid
to similarly-positioned executives at companies in the executive's Comparison
Group. The value of the stock option component of an executive officer's
compensation opportunity is converted into a specific number of shares subject
to option by assigning each option an estimated realizable value. In addition to
the annual stock option grant made in January 1999, the Company advanced to
October 1999 the annual grant that would otherwise have been made in January
2000. This was done to strengthen retention of employees, particularly employees
who joined the Company as a result of the acquisition of The Prudential
Insurance Company of America's (Prudential's) health care business. The options
granted to executive officers in October 1999 vest over a three-year period
provided the Company's stock price achieves specified performance targets.
Bonus Exchange Program. The Company permitted executive officers to elect to
forgo all or a portion of their 1999 annual bonus in exchange for an additional
grant of stock options. The options, which were immediately vested, were granted
effective as of February 8, 2000 at 100% of the fair market value of the
Company's Common Stock on that date. Participation in this program is voluntary.
The number of shares subject to options granted to any individual executive
varied depending on the amount of bonus forgone by the executive. Executives
were not permitted to acquire options on more than 100,000 shares under this
program.
Other Equity Grants. From time to time the Company also grants stock options or
restricted stock in connection with hiring, promotions or other situations where
the Committee believes the circumstances warrant a stock option or restricted
stock award. The amount granted in these instances is determined by the
Committee based on the individual circumstances.
How is Compensation Used to Focus Management on Longer-Term Creation of
Shareholder Value?
The purpose of the Company's long-term incentive award program is to increase
shareholder value over time. Under this program incentive units vest and shares
become payable if the Company's total return to shareholders over a four-year
measurement period meets or exceeds each of two separate performance objectives.
First, the Company's total return to shareholders must at least equal a
threshold risk-free rate of return (Return Threshold). If the Return Threshold
is not met, no units vest. If the Return Threshold is met, the Company's total
return to shareholders must also compare favorably to that of its competitor
companies for units to vest. For the current performance periods, the competitor
companies are the companies in the Morgan Stanley Healthcare Payor Index
(weighted 70%) and Morgan Stanley Life Insurance Index (weighted 30%).
The number of incentive units granted to each executive officer in 1999 was
determined by the Committee to set, at target performance levels, the total
compensation opportunity at a median level relative to similarly-positioned
executives in the executive officer's Comparison Group. The incentive unit
grants are intended to deliver below median compensation for below median
performance and above median compensation for above median performance.
How Does Stock Price Impact Executive Compensation?
Stock options and long-term incentive compensation are directly tied to stock
price appreciation. Options are granted at a price of at least the fair market
value of the Common Stock on the date of grant. If the stock price does not
appreciate after the grant date, the executive will receive no value from the
option. Similarly, under the long-term incentive program, shares become payable
only if the Company's total return to
24
<PAGE> 30
shareholders (stock price appreciation and dividends) meets or exceeds the total
return to shareholder performance of a group of comparator companies. Because a
significant portion of executive compensation is designed to come from incentive
units and options, the recent stock performance considerably reduces overall
executive compensation.
As explained elsewhere in this report, salaries and annual bonuses are not
directly impacted by positive or negative changes in the Company's stock price.
Because the annual bonus performance objectives were met or exceeded in 1999,
annual bonuses were paid even though the Company's stock did not perform well
during the year.
How has the Company Responded to IRS Limits on Deductibility of Compensation?
Section 162(m) of the Internal Revenue Code limits the tax deductibility of
compensation in excess of $1 million paid to certain executive officers, unless
the payments are made under plans that satisfy the technical requirements of the
Code. The Committee believes that performance-based pay over $1 million is
sometimes required to attract and retain executives in a competitive
marketplace. Stock options and incentive units granted under the 1996 Stock
Incentive Plan and annual bonuses paid under the Annual Plan are designed so
that the compensation paid will be tax deductible by the Company. The Committee
believes that there are certain limited circumstances under which it is
appropriate for the Committee to elect to forgo deductibility to maintain
flexibility or to continue to pay competitive compensation.
What was the Basis for Mr. Huber's 1999 Compensation?
Salary. Mr. Huber did not receive an increase in salary in 1999. The Committee
believes that Mr. Huber's total compensation opportunity (salary, annual bonus,
stock options and long-term incentive award) remained at a competitive median
level.
Annual Incentive Bonus. The financial goal established by the Committee at the
start of the 1999 performance year for Mr. Huber's annual bonus was measured by
the Company's net income. For 1999, the Committee adjusted net income
realization downward to exclude the positive impact of a reserve adjustment
related to discontinued products, and adjusted net income realization upward to
exclude the loss recognized on the redemption of certain Company securities.
This financial performance, as well as the Committee's review of Mr. Huber's
performance in positioning the Company as a world leader in providing health
benefits and financial services (with nearly 47 million customers in 17
countries), implementing major advances in the use of technology to create a
sustained competitive advantage, and strengthening middle management development
and succession throughout the Company, was the basis for the Committee's
decision to award Mr. Huber a bonus of $1,150,000 (which represents a 14.8%
decrease from his 1998 bonus). Under the Bonus Exchange Program, a portion of
Mr. Huber's bonus was exchanged for a grant of a stock option for shares of the
Company's Common Stock.
Stock Options. Mr. Huber was granted a stock option in January 1999 for 100,000
shares of the Company's Common Stock. In addition, Mr. Huber was granted a stock
option in October 1999 for an additional 100,000 shares. The amount of the
grants was determined to maintain Mr. Huber's total compensation opportunity at
a competitive median level. Under the Bonus Exchange Program, Mr. Huber received
an option for 100,000 shares in lieu of a portion of his 1999 bonus. This grant
was effective February 8, 2000.
Long-Term Incentive Award. In 1999, Mr. Huber was granted 50,000 incentive
units under the 1996 Stock Incentive Plan. These units will vest and shares will
be payable only if established performance objectives are met over a four-year
measurement period (1999-2002). The number of incentive units granted was
determined by the Committee in the manner described elsewhere in this report.
25
<PAGE> 31
Effective February 25, 2000, Mr. Huber resigned from all of his positions with
the Company.
The Committee on Compensation and Organization
Michael H. Jordan, Chairman
Betsy Z. Cohen
Jack D. Kuehler
Frank R. O'Keefe, Jr.
26
<PAGE> 32
CORPORATE PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Company's Common Stock (assuming reinvestment of dividends) with the cumulative
total return on the published Standard & Poor's 500 Stock Index (S&P 500) and
the cumulative total return on the published Morgan Stanley Healthcare Payor
Index (currently 12 companies) (MSHPI) over the preceding five-year period. The
graph assumes a $100 investment in shares of Aetna Common Stock on December 31,
1994.
FIVE-YEAR CUMULATIVE TOTAL RETURN
AETNA, S&P 500
AND MORGAN STANLEY HEALTHCARE PAYOR INDEX
[AETNA PERFORMANCE GRAPH NEW]
<TABLE>
<CAPTION>
MORGAN STANLEY HEALTHCARE
AETNA S&P 500 PAYOR INDEX
----- ------- -------------------------
<S> <C> <C> <C>
12/31/94 100 100 100
12/31/95 154.04 137.58 143.12
12/31/96 182.58 169.03 140.80
12/31/97 162.59 225.44 137.75
12/31/98 183.16 289.79 155.84
12/31/99 131.43 350.78 140.33
</TABLE>
* The MSHPI was created in January 1996. In order to report performance back to
December 31, 1994, as required by SEC rules, the Company used the companies
currently included in the MSHPI (as of December 31, 1999) as its peer group. The
companies included are: Aetna Inc., CIGNA Corporation, Coventry Corporation,
First Health Group Corp., Foundation Health Systems, Inc., Humana Inc.,
Mid-Atlantic Medical Services, Inc., Oxford Health Plans, Inc., PacifiCare
Health Systems, Inc., Trigon Healthcare, Inc., United Healthcare Corporation and
Wellpoint Health Networks, Inc. Cumulative total return calculations were
provided by SNL Securities LC.
27
<PAGE> 33
II. APPOINTMENT OF AUDITORS
Following the recommendation of its Audit Committee, the Company's Board of
Directors has appointed and recommends shareholder approval of KPMG LLP as the
Company's independent auditors for the current calendar year. The firm has acted
in this capacity since 1972. Representatives of the firm are expected to be
available at the Annual Meeting to make a statement if the firm desires and to
respond to appropriate questions.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES CAST IS REQUIRED FOR APPROVAL OF
THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF KPMG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE CURRENT CALENDAR YEAR. UNLESS DIRECTED TO THE
CONTRARY, THE SHARES REPRESENTED BY A PROPERLY COMPLETED PROXY WILL BE VOTED FOR
THE APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS FOR THE CURRENT CALENDAR
YEAR.
III. SHAREHOLDER PROPOSAL TO IMPLEMENT CUMULATIVE VOTING IN ELECTION OF
DIRECTORS
Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Ave. N.W., Suite 215,
Washington, D.C. 20037 (owner of 50 shares of Common Stock), has advised the
Company that she plans to present the following proposal at the Annual Meeting.
The proposal is included in this Proxy Statement pursuant to the rules of the
Securities and Exchange Commission.
"RESOLVED: That the stockholders of Aetna, assembled in Annual Meeting in
person and by proxy, hereby request the Board of Directors to take the necessary
steps to provide for cumulative voting in the election of directors, which means
each stockholder shall be entitled to as many votes as shall equal the number of
shares he or she owns multiplied by the number of directors to be elected, and
he or she may cast all of such votes for a single candidate, or any two or more
of them as he or she may see fit.
"REASONS: Many states have mandatory cumulative voting, so do National Banks.
"In addition, many corporations have adopted cumulative voting.
"Last year the owners of 33,959,421 shares, representing approximately 30.7% of
shares voting, voted FOR this proposal.
"If you AGREE, please mark your proxy FOR this resolution."
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES CAST IS REQUIRED FOR APPROVAL OF
THE FOREGOING PROPOSAL.
THE BOARD OF DIRECTORS WILL OPPOSE THIS PROPOSAL IF IT IS INTRODUCED AT THE 2000
ANNUAL MEETING AND RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING
REASONS:
THIS PROPOSAL WAS INTRODUCED AT LAST YEAR'S ANNUAL MEETING. APPROXIMATELY 69.3%
OF THE VOTES CAST AT THAT MEETING WERE CAST AGAINST THIS PROPOSAL.
The Board of Directors continues to believe that the present system of voting
for Directors provides the best assurance that the decisions of the Directors
will be in the interests of all shareholders, as opposed to the interests of
special interest groups.
Cumulative voting is one of those issues that favors special interest groups.
Cumulative voting would make it possible for such a group to elect one or more
Directors beholden to the group's narrow interests. This could increase the
likelihood of factionalism and discord within the Board, which may undermine its
ability to work effectively as a governing body on behalf of the common
interests of all shareholders. The present system of
28
<PAGE> 34
voting utilized by the Company and by most leading corporations prevents the
"stacking" of votes behind potentially partisan Directors. The present system
thus promotes the election of a more effective Board in which each Director
represents the shareholders as a whole.
The Board continues to believe that this proposal is not in the best interests
of the Company or its shareholders.
UNLESS DIRECTED TO THE CONTRARY, THE SHARES REPRESENTED BY A PROPERLY COMPLETED
PROXY WILL BE VOTED AGAINST THE FOREGOING PROPOSAL.
IV. SHAREHOLDER PROPOSAL RELATING TO ENDORSEMENT OF THE CERES PRINCIPLES
Mary Kay Gamel, c/o Harrington Investments, Inc., P.O. Box 6108, Napa,
California 94581 (owner of 100 shares of Common Stock), and The Sisters of St.
Joseph of Carondelet, Albany Province, 385 Watervliet-Shaker Road, Latham, New
York 12110 (owner of 1,600 shares of Common Stock), have advised the Company
that they plan to present the following proposal at the Annual Meeting. The
proposal is included in this Proxy Statement pursuant to the rules of the
Securities and Exchange Commission.
"WHEREAS:
"Leaders of industry in the United States now acknowledge their obligation to
pursue superior environmental performance and to disclose information about that
performance to their investors and other stakeholders.
"The integrity, utility, and comparability of environmental disclosure depend on
using a common format, credible metrics, and a set of generally accepted
standards. This will enable investors to assess environmental progress within
and across industries.
"The Coalition of Environmentally Responsible Economies (CERES) -- a ten-year
partnership between large investors, environmental groups, and corporations -
has established what we believe is the most thorough and well-respected
environmental disclosure form in the United States. CERES has also taken the
lead internationally, convening major organizations together with the United
Nations Environment Programme in the Global Reporting Initiative, which has
produced guidelines for standardizing environmental disclosure worldwide.
"Companies which endorse the CERES Principles engage with stakeholders in
transparent environmental management and agree to a single set of consistent
standard for environmental reporting. That standard is set by the endorsing
companies together with CERES.
"The CERES Principles and CERES Report have been adopted by leading firms in
various industries: Arizona Public Service, Bank America, BankBoston, Baxter
International, Bethlehem Steel, Coca-Cola, General Motors, Interface, ITT
Industries, Northeast Utilities, Pennsylvania Power and Light, Polaroid, and Sun
Company.
"We believe endorsing the CERES Principles commits a company to the prudent
oversight of its financial and physical resources through: 1) protection of the
biosphere; 2) sustainable use of natural resources; 3) waste reduction; 4)
energy conservation; 5) risk reduction; 6) safe products/services; 7)
environmental restoration; 8) informing the public; 9) management commitment;
10) audits and reports. (The full text of the CERES Principles and accompanying
CERES Report form are obtainable from CERES, 11 Arlington Street, Boston,
Massachusetts 02116, (617) 247-0700 / www.ceres.org).
"RESOLVED:
"Shareholders request that the company endorse the CERES Principles as a
reasonable and beneficial component of their corporate commitment to be publicly
accountable for environmental performance.
29
<PAGE> 35
"SUPPORTING STATEMENT
"Recent studies show that the integration of environmental commitment into
business operations provides competitive advantage and improves long-term
financial performance for companies. In addition, the depth of a firm's
environmental commitment and the quality with which it manages its environmental
performance are indicators of prudent foresight exercised by management.
"Given investors' needs for credible information about a firm's environmental
performance, and given the number of companies that have already endorsed the
CERES Principles and adopted its report format, it is a reasonable, widely
accepted step for a company to endorse those Principles if it wishes to
demonstrate its seriousness about superior environmental performance.
"Your vote FOR this resolution serves the best interests of our Company and its
shareholders."
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES CAST IS REQUIRED FOR APPROVAL OF
THE FOREGOING PROPOSAL.
THE BOARD OF DIRECTORS WILL OPPOSE THIS PROPOSAL IF IT IS INTRODUCED AT THE 2000
ANNUAL MEETING AND RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING
REASONS:
THIS PROPOSAL WAS INTRODUCED AT LAST YEAR'S ANNUAL MEETING. APPROXIMATELY 91.2%
OF THE VOTES CAST AT THAT MEETING WERE CAST AGAINST THIS PROPOSAL.
The Board of Directors continues to agree with the sentiments underlying the
proponents' proposal; that is, that, among other things, corporations should
conduct their businesses as responsible stewards of the environment. However,
the Board again recommends a vote against the proposal because it believes that
the environmental practices and principles followed by the Company already
address the environmental issues raised by the CERES Principles and effectively
demonstrate the Company's commitment to sound environmental practices. The
Company's policies relating to management of corporate facilities and the
operation of the Company's businesses mandate a number of the same initiatives
contemplated by CERES, such as recycling programs, energy conservation and other
steps. In addition, there are annual fees and expenses involved in endorsing the
CERES Principles. Accordingly, the Board continues to believe that endorsement
of the CERES Principles would be largely redundant and would not add substantial
value to the Company's shareholders.
UNLESS DIRECTED TO THE CONTRARY, THE SHARES REPRESENTED BY A PROPERLY COMPLETED
PROXY WILL BE VOTED AGAINST THE FOREGOING PROPOSAL.
VOTING OF OTHER MATTERS
After the deadline for inclusion of shareholder proposals in this Proxy
Statement established by Rule 14a-8 under the Securities Exchange Act of 1934,
as amended, the Medical Mission Sisters, also known as the Society of Catholic
Medical Missionaries, submitted a proposal that the Board of Directors institute
an executive compensation review to develop policies designed to link the
compensation of all of the Company's executives to health care quality and
report the results of that review (including any recommended changes) to
shareholders in the fall of 2000 (the Executive Compensation Proposal). The
Executive Compensation Proposal is substantially similar to a proposal by the
same shareholder that was included in the 1999 Proxy Statement and introduced at
the 1999 Annual Meeting. Approximately 95.5% of the votes cast at that meeting
were cast against that proposal. At December 31, 1999, approximately 86.5% of
Aetna U.S. Healthcare's managed care members and 89% of the former Prudential
managed care members were in health plans accredited by the National Committee
for Quality Assurance. The Board continues to believe that the material elements
of the Executive Compensation Proposal are in place and that approval of such
proposal would not add substantial value to the Company's shareholders.
Accordingly, if the Executive Compensation Proposal properly comes before the
Annual Meeting or any adjournment thereof, the persons
30
<PAGE> 36
named as proxies on the enclosed proxy card and acting thereunder intend to
exercise their discretion and vote AGAINST the Executive Compensation Proposal.
If any other matters are properly presented at the Annual Meeting for
consideration, including, among other things, consideration of a motion to
adjourn the Annual Meeting to another time or place, the persons named as
proxies on the enclosed proxy card and acting thereunder will have discretion to
vote on those matters according to their best judgment to the same extent as the
person delivering the proxy card or Internet or telephone vote would be entitled
to vote.
At this time, the Board of Directors is not aware of any matters that may be
properly presented for consideration at the Annual Meeting, other than the
Executive Compensation Proposal and those outlined in the Notice of Annual
Meeting of Shareholders.
OTHER INFORMATION
Shareholder Proposals for 2001 Annual Meeting
To be included in the 2001 Proxy Statement and on the 2001 proxy card,
shareholder proposals must be received by the Company not later than November
22, 2000. Such proposals must comply with all applicable Securities and Exchange
Commission rules and regulations. Proposals should be sent to the Corporate
Secretary, Aetna Inc., 151 Farmington Avenue, Hartford, Connecticut 06156.
Multiple Copies of Annual Report
The Company's 1999 Annual Report to Shareholders is being mailed to shareholders
in advance of or together with this Proxy Statement. If you hold Aetna shares in
your own name and you received more than one copy of the Annual Report at your
address and you wish to reduce the number of reports you receive and save the
Company the cost of producing and mailing these reports, we will discontinue the
mailing of reports on the accounts you select if you mark the designated box on
the appropriate proxy card(s), or follow the instructions provided when you vote
over the Internet or by telephone.
At least one account at your address must continue to receive an annual report,
unless you elect to review future annual reports over the Internet. Mailing of
dividends, dividend reinvestment statements, proxy materials and special notices
will not be affected by your election to discontinue duplicate mailings of
annual reports. Registered shareholders may discontinue or resume the mailing of
an annual report to an account by calling the Company's Transfer Agent at
1-800-446-2617.
If you own shares through a broker, bank or other holder of record and received
more than one Aetna Annual Report, please contact the holder of record to
eliminate duplicate mailings.
Electronic Access to Proxy Materials and Annual Report
The Notice of Annual Meeting, this Proxy Statement and the 1999 Annual Report
are available on Aetna's Internet site at
http://www.aetna.com/investor/proxy.htm and http://www.aetna.com/99annualrpt,
respectively. Most shareholders can elect to view future notices of annual
meeting, proxy statements and annual reports over the Internet instead of
receiving paper copies in the mail.
If you are a shareholder of record, you can choose this option and save the
Company the cost of producing and mailing these documents in the future by
following the instructions provided if you vote over the Internet or by
telephone. If you hold your shares through a broker, bank or other holder of
record, check the information provided by that entity for instructions on how to
elect to view future notices of annual meeting, proxy statements and annual
reports over the Internet.
If you are a shareholder of record and choose to view future notices of annual
meeting, proxy statements and annual reports over the Internet, you will receive
notification by e-mail next year with instructions containing the Internet
address of those materials.
31
<PAGE> 37
Most shareholders who hold their shares through a broker, bank or other holder
of record and who elect electronic access will receive an e-mail next year
containing the Internet address to access Aetna's notice of annual meeting,
proxy statement and annual report.
By order of the Board of Directors,
/s/ William J. Casazza
William J. Casazza
Vice President and Corporate Secretary
March 22, 2000
32
<PAGE> 38
151 Farmington Avenue
Hartford, Connecticut 06156
Cat. HR -- 1870300
Printed on recycled paper.
<PAGE> 39
AETNA INC.
PROXY
The undersigned hereby appoints Barbara Hackman Franklin, Michael H. Jordan and
Jack D. Kuehler, and each of them, the proxies of the undersigned, with full
power of substitution, to vote the shares of the undersigned at the Annual
Meeting of Shareholders of Aetna Inc. to be held April 28, 2000 and at any
adjournment or postponement thereof, and directs said proxies to vote as
specified herein on the four items specified in this Proxy, and in their
discretion on any other matters that may properly come before the meeting or
any adjournment or postponement thereof.
NOMINEES:
01. Leonard Abramson 05. Jeffrey E. Garten 09. Ellen M. Hancock
02. Betsy Z. Cohen 06. Jerome S. Goodman 10. Michael H. Jordan
03. William H. Donaldson 07. Earl G. Graves 11. Jack D. Kuehler
04. Barbara Hackman Franklin 08. Gerald Greenwald 12. Judith Rodin
THIS PROXY IS SOLICITED ON BEHALF OF AETNA'S BOARD OF DIRECTORS.
To vote by telephone or Internet, please see the reverse of this card. To vote
by mail, please sign and date the above proxy card on the reverse, tear off at
the perforation, and mail promptly in the enclosed postage-paid envelope.
SHAREHOLDER ACCOUNT INQUIRIES
Aetna's Transfer Agent, First Chicago Trust Company of New York, maintains a
telephone response center to service shareholder accounts. Registered owners of
Aetna shares may call the center at 1-800-446-2617 to inquire about replacement
dividend checks, address changes, stock transfers and other account matters or
to inquire about First Chicago's DirectSERVICE Investment Program.
For direct deposit of dividends, registered shareholders may call First Chicago
at 1-800-870-2340.
Registered shareholders with e-mail addresses can send account inquiries
electronically to First Chicago at [email protected].
Registered shareholders also can access their Aetna accounts via the Internet
through First Chicago's web site at http://www.equiserve.com.
<PAGE> 40
/X/ Please mark your
votes as in this
example.
This Proxy, when properly executed, will be voted in the manner directed
herein by the shareholder. If no direction is made, this Proxy will be voted
FOR Items 1 and 2 and AGAINST Items 3 and 4.
The Board of Directors recommends a vote FOR Items 1 and 2.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Approval of KPMG [ ] [ ] [ ]
Directors. LLP as Independent
(See reverse Auditors
side)
For, except vote withheld from the
following nominee(s):
__________________________________
The Board of Directors recommends a vote AGAINST Items 3 and 4.
FOR AGAINST ABSTAIN
3. Shareholder proposal on [ ] [ ] [ ]
cumulative voting
4. Shareholder proposal on [ ] [ ] [ ]
endorsement of CERES
Principles
MARK THIS BOX IF YOU HAVE MORE THAN ONE ACCOUNT AND WANT TO DISCONTINUE [ ]
RECEIVING MULTIPLE COPIES OF FUTURE ANNUAL REPORTS.
MARK THIS BOX IF YOU PLAN TO ATTEND THE ANNUAL MEETING. [ ]
SIGNATURE(S)______________________________________________ DATE______________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
or for a corporation, please give your title.
PLEASE SIGN AND DATE HERE, DETACH AND RETURN IN ENCLOSED ENVELOPE OR VOTE BY
TELEPHONE OR THE INTERNET.
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE OR INTERNET!
QUICK * EASY * IMMEDIATE * AVAILABLE 24 HOURS A DAY * 7 DAYS A WEEK
Your telephone or Internet vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed, and returned your proxy
card. Proxies granted by telephone or Internet are valid under Connecticut
corporation law. To vote by phone or Internet, please follow these easy steps:
TO VOTE BY PHONE Call toll free 1-877-PRX-VOTE (1-877-779-8683) on a touch
tone telephone. Shareholders residing outside the United
States, Canada and Puerto Rico should call 1-201-536-8073.
Telephone voting will be available until 8:00 a.m., Eastern
time, the morning of the Annual Meeting.
Use the Control Number located in the box above, just below
the perforation. Enter the Control Number and pound signs
(#) exactly as they appear.
Follow the recorded instructions.
TO VOTE BY INTERNET Log onto http://www.eproxyvote.com/aet which will be
available until midnight, Eastern time, on April 27, 2000.
Follow the instructions on the screen.
You can also elect to receive future shareholder materials
electronically at this web site.
TO ATTEND THE If you plan to attend the Annual Meeting, you should either
ANNUAL MEETING mark the box provided on the above proxy card or signify
your intention to attend when you access the telephone or
Internet voting system.
An admission card will then be mailed to you.
THANK YOU FOR VOTING!
<PAGE> 41
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
_____________________________________________________________________________
<TABLE>
<S> <C> <C> <C> <C> <C>
1) Election of Directors
NOMINEES:
01 - Leonard Abramson 02 - Betsy Z. Cohen (Mark only one)
03 - William H. Donaldson 04 - Barbara Hackman Franklin
05 - Jeffrey E. Garten 06 - Jerome S. Goodman FOR WITHHELD
07 - Earl G. Graves 08 - Gerald Greenwald ( ) ( )
09 - Ellen M. Hancock 10 - Michael H. Jordan
11 - Jack D. Kuehler 12 - Judith Rodin
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR PARTICULAR
NOMINEE(S), STRIKE A LINE THROUGH THOSE NOMINEES' NAMES IN
THE LIST ABOVE)
FOR AGAINST ABSTAIN
2) Approval of KPMG LLP as Independent Auditors ( ) ( ) ( )
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST ITEMS 3 AND 4.
______________________________________________________________________________
<TABLE>
<C> <S> <C> <C> <C>
FOR AGAINST ABSTAIN
3) Shareholder proposal on cumulative voting ( ) ( ) ( )
4) Shareholder proposal on endorsement of CERES Principles ( ) ( ) ( )
</TABLE>
Mark this box if you plan to
attend the Annual Meeting
THIS INSTRUCTION CARD IS SOLICITED ON BEHALF OF
MELLON BANK, N.A.
SIGNATURE(S) ____________________ SIGNATURE(S) ___________________ DATE ________
[UP ARROW] FOLD AND DETACH HERE [UP ARROW]
________________________________________________________________________________
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE
QUICK * EASY * IMMEDIATE
[Graphic of AVAILABLE 24 HOURS A DAY * SEVEN DAYS A WEEK [Graphic of
Phone] 1-800-840-1208 Phone]
________________________________________________________________________________
Your telephone vote authorizes the named Trustee to vote your shares in the
same manner as if you marked, signed, and returned your voting instruction
card. If you vote by telephone, there is no need to return your voting
instruction card.
TO VOTE BY TELEPHONE
Call toll free 1-800-840-1208 on a touch tone telephone by April 24, 2000. Use
the Control Number located in the box in the lower right hand corner. Enter the
Control Number and follow the recorded instructions.
TO ATTEND THE ANNUAL MEETING
If you plan to attend the Annual Meeting, you should either mark the box
provided on the above voting instruction card or signify your intention to
attend when you access the telephone voting system. An admission card will then
be mailed to you.
THANK YOU FOR VOTING.
<PAGE> 42
AETNA INC.
TO: PARTICIPANTS IN THE AETNA INCENTIVE SAVINGS PLAN
Mellon Bank, N.A., the Trustee under the Aetna Incentive Savings Plan (the
Plan), has been instructed to solicit your instructions on how to vote the
shares of Aetna Common Stock held by the Trustee on your behalf in accordance
with the terms of the Plan and to vote those shares in accordance with your
instructions at the Annual Meeting of Shareholders of Aetna Inc. to be held on
April 28, 2000 and at any adjournment or postponement thereof. Please indicate
by checking the appropriate box how you want these shares voted by the Trustee
and return this card to the Trustee in the envelope provided. Alternatively,
you may vote by telephone by following the instructions outlined on the reverse
side of this card. We would like to remind you that your individual voting
instructions are held in strictest confidence and will not be disclosed to the
Corporation. IF YOU FAIL TO PROVIDE VOTING INSTRUCTIONS TO THE TRUSTEE BY APRIL
24, 2000 EITHER BY TELEPHONE OR BY COMPLETING, SIGNING AND RETURNING THIS CARD,
YOUR SHARES WILL BE VOTED BY THE TRUSTEE IN THE SAME MANNER AND PROPORTION AS
THOSE SHARES FOR WHICH THE TRUSTEE RECEIVES PROPER AND TIMELY INSTRUCTIONS.
TO VOTE BY TELEPHONE, PLEASE SEE THE REVERSE SIDE OF THIS CARD. TO VOTE BY
MAIL, PLEASE SIGN AND DATE THIS CARD ON THE REVERSE SIDE, TEAR OFF AT THE
PERFORATION, AND MAIL PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
[UP ARROW] FOLD AND DETACH HERE [UP ARROW]
VOTE BY PHONE
QUICK - EASY - IMMEDIATE
IF YOU VOTED BY TELEPHONE DO NOT MAIL YOUR INSTRUCTION CARD
Note: Participants who received the 2000 Proxy Statement of Aetna Inc. over the
Internet and who would like a printed copy may call 1-800-237-4273.
<PAGE> 43
AETNA INC. PRESORTED
FIDELITY INSTITUTIONAL RETIREMENT SERVICES CO. STANDARD
P.O. BOX 9107 RATE
HINGHAM, MA 02043-9107 U.S. POSTAGE
PAID PROXY
TABULATOR
VOTE BY TELEPHONE
Quick * Easy * Immediate
Your telephone vote authorizes the Trustee to vote your shares in the same
manner as if you marked, signed and returned your Instruction Card.
You will be asked to enter the 14-digit Control Number which is located below.
Call Toll Free on a TOUCH-TONE PHONE. There is NO CHARGE to you FOR THIS CALL.
CALL 1-800-597-7657 -- 24 HOURS A DAY, 7 DAYS A WEEK
- --------------------------------------------------------------------------------
If you voted by telephone DO NOT MAIL your Instruction Card
- --------------------------------------------------------------------------------
[DOWN ARROW] Please fold and detach card at
perforation before mailing [DOWN ARROW]
AETNA INC.
TO: PARTICIPANTS IN THE U.S. HEALTHCARE, INC. SAVINGS PLAN
Fidelity Management Trust Company, the Trustee under the U.S. Healthcare, Inc.
Savings Plan (the Plan), has been instructed to solicit your instructions on how
to vote the shares of Aetna Common Stock held by the Trustee on your behalf in
accordance with the terms of the Plan and to vote those shares in accordance
with your instructions at the Annual Meeting of Shareholders of Aetna Inc. to
be held on April 28, 2000 and at any adjournment or postponement thereof.
Please indicate by checking the appropriate box how you want these shares voted
by the Trustee and return this card to the Trustee in the envelope provided.
Alternatively, you may vote by telephone by following the instructions
outlined above. We would like to remind you that your individual voting
instructions are held in strictest confidence and will not be disclosed to the
Corporation. If you fail to provide voting instructions to the Trustee by April
24, 2000, either by telephone or by completing, signing and returning this
Card, the Trustee will not vote the shares credited to your account.
If you are voting by mail, please vote, sign and date this Instruction Card and
return it promptly in the enclosed envelope. Your shares will not be voted by
the Trustee if you do not return this Card or provide voting instructions by
telephone.
Date
-----------------------------------
THIS TRUSTEE INSTRUCTION CARD IS
SOLICITED ON BEHALF OF FIDELITY
MANAGEMENT TRUST COMPANY
---------------------------------------
(Signature(s))
NOTE: Please sign as name appears hereon.
Joint owners should each sign. When
signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such.
932
<PAGE> 44
Note: Participants who received the 2000 Proxy Statement of Aetna Inc. over the
Internet and who would like a printed copy may call 1-800-237-4273.
[down arrow] Please fold and detach card at perforation before mailing [down
arrow]
Please vote by filling in the appropriate box(es) below.
- --------------------------------------------------------------------------------
This Trustee Instruction Card when properly executed will be voted in the manner
directed herein by the shareholder. If no direction is made, the Trustee will
not vote the shares credited to your account.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
1) Election of Directors FOR (Mark only one) WITHHELD
NOMINEES:
01. Leonard Abramson 05. Jeffrey E. Garten 09. Ellen M. Hancock ( ) ( ) 1.
02. Betsy Z. Cohen 06. Jerome S. Goodman 10. Michael H. Jordan
03. William H. Donaldson 07. Earl G. Graves 11. Jack D. Kuehler
04. Barbara Hackman Franklin 08. Gerald Greenwald 12. Judith Rodin
(INSTRUCTIONS: To withhold authority to vote for particular nominee(s),
write those names below.)
- ------------------------------------------------------------------------------------- FOR AGAINST ABSTAIN
2) Approval of KPMG LLP as Independent Auditors ( ) ( ) ( ) 2.
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
3) Shareholder proposal on cumulative voting ( ) ( ) ( ) 3.
4) Shareholder proposal on endorsement of CERES Principles ( ) ( ) ( ) 4.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
