<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CIGNA Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
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<PAGE> 2
CIGNA LOGO
CIGNA Corporation
One Liberty Place
1650 Market Street
Philadelphia, PA
19192-1550
March 19, 1997
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of CIGNA Corporation:
The Annual Meeting of Shareholders of CIGNA Corporation will be held at The
Conference Center at Eagle Lodge, Ridge Pike & Manor Road, Lafayette Hill,
Pennsylvania on Wednesday, April 23, 1997, at 1:00 p.m. local time, for the
following purposes:
1. to elect four Directors for terms to expire in April 2000;
2. to ratify the appointment of independent accountants for 1997;
3. to approve the CIGNA Executive Incentive Plan; and
4. to transact any other business that may properly come before the
meeting.
Shareholders of record at the close of business on March 3, 1997 are
entitled to notice of and to vote at the meeting or any adjournment thereof.
Directions to The Conference Center at Eagle Lodge are provided on the back
cover of the attached Proxy Statement.
Sincerely,
/s/ Wilson H. Taylor
WILSON H. TAYLOR
Chairman and Chief
Executive Officer
By order of the Directors
/s/ Carol J. Ward
CAROL J. WARD, Corporate Secretary
EVEN THOUGH YOU MAY PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE EXECUTE
THE ENCLOSED PROXY AND MAIL IT PROMPTLY. A RETURN ENVELOPE WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES IS ENCLOSED FOR YOUR CONVENIENCE.
<PAGE> 3
CIGNA CORPORATION
ONE LIBERTY PLACE
1650 MARKET STREET
PHILADELPHIA, PA 19192-1550
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information................................................................... 1
Ownership of CIGNA Corporation Common Stock and Equivalents by Directors, Nominees and
Executive Officers.................................................................. 2
Ownership of CIGNA Corporation Common Stock by Certain Beneficial Owners.............. 4
Item 1. Election of Directors......................................................... 4
Nominees for Election......................................................... 5
Incumbent Directors to Continue in Office..................................... 5
Board of Directors and Committees............................................. 7
Compensation of Directors..................................................... 8
Certain Transactions.......................................................... 9
Item 2. Ratification of Appointment of Independent Accountants........................ 9
Item 3. Approval of the CIGNA Executive Incentive Plan................................ 10
Item 4. Other Matters................................................................. 11
Vote Required......................................................................... 11
Executive Compensation................................................................ 12
Performance Graph..................................................................... 20
Section 16(a) Beneficial Ownership Reporting Compliance............................... 20
Additional Information................................................................ 20
1998 Annual Meeting................................................................... 21
Appendix A -- Text of the CIGNA Executive Incentive Plan.............................. A-1
</TABLE>
GENERAL INFORMATION
This Proxy Statement and the enclosed proxy card, which are first being
sent to Shareholders with the 1996 Annual Report on or about March 19, 1997,
relate to the Annual Meeting of Shareholders of CIGNA Corporation (the
"Corporation" or "CIGNA") to be held at The Conference Center at Eagle Lodge,
Lafayette Hill, Pennsylvania, on Wednesday, April 23, 1997 at 1:00 p.m. local
time (the "Annual Meeting"). The Board of Directors of the Corporation (the
"Board") is soliciting your proxy for use at the Annual Meeting and at any
adjournment thereof by asking you to sign, date, and return the enclosed proxy
card in the envelope provided.
Shares represented at the Annual Meeting or any adjournment thereof by
valid proxies received pursuant to this solicitation will be voted in accordance
with each Shareholder's instructions. If the proxy card is signed and returned
without specific instructions, the shares will be voted as recommended by the
Board. A Shareholder may revoke a proxy at any time before its use by giving
written notice of revocation to the Corporate Secretary, by submitting a
subsequent proxy or by voting in person at the meeting.
It is the Corporation's policy that all voted proxies be handled in a
manner which protects those Shareholders who request voting privacy, and that
neither the identity of such Shareholder nor such Shareholder's votes will be
disclosed except: as necessary to meet any legal requirements; in limited
1
<PAGE> 4
circumstances such as a contested election to the Board; to permit the
independent inspectors of election ("the Inspectors") to tabulate and certify
the vote; and to respond to Shareholders who have written comments on their
proxy cards. On an ongoing basis, the Inspectors will apprise the Corporation of
the total number of shares voted for, voted against or abstaining from voting on
each proposal and may tell the Corporation whether or not a particular account
has voted. The Inspectors may tell the Corporation how each account not
instructing confidentiality has voted. Except pursuant to one of the exceptions
described above, the Inspectors may not tell the Corporation how any account
instructing confidentiality has voted. Following the Annual Meeting, the
Inspectors will retain all proxy cards.
As of March 3, 1997, 74,020,823 shares of CIGNA Common Stock ("Common
Stock") were outstanding and entitled to vote. Each holder of Common Stock is
entitled to one vote for every share of Common Stock registered in that person's
name on the books of the Corporation at the close of business on March 3, 1997.
Each share of Common Stock includes a right to acquire Junior Participating
Preferred Stock, Series D.
OWNERSHIP OF CIGNA CORPORATION COMMON STOCK AND EQUIVALENTS
BY DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table shows the shares of Common Stock beneficially owned (as
determined pursuant to the rules of the Securities and Exchange Commission) as
of February 28, 1997, by each Director, Nominee for Director, by the Chief
Executive Officer and the four Executive Officers named in the table, and by all
such persons and other Executive Officers of CIGNA Corporation as a group. The
table also shows Common Stock equivalent units ("Equivalents") held as of
February 28, 1997, by non-employee Directors under CIGNA's Deferred Compensation
Plan for Directors, and by Executive Officers under the Deferred Compensation
Plan of CIGNA Corporation.
<TABLE>
<CAPTION>
SHARES OF
NAME COMMON STOCK(1) EQUIVALENTS(8)
------------------------------------------------------ --------------- ------------
<S> <C> <C>
Directors
Robert P. Bauman.................................... 3,077(2) 5,323
Robert H. Campbell.................................. 1,733(2) 1,315
Alfred C. DeCrane, Jr. ............................. 2,585(2) 5,262
James F. English, Jr. .............................. 3,500(2) 1,940
Bernard M. Fox...................................... 1,595(2) 953
Marilyn W. Lewis.................................... 1,965(2) 600
Paul F. Oreffice.................................... 3,816(2) 2,488
Charles R. Shoemate................................. 3,700(2) 929
Louis W. Sullivan, M.D. ............................ 2,084(2) 858
Wilson H. Taylor.................................... 143,184(3,4) 96,722
Harold A. Wagner.................................... 0 0
Carol Cox Wait...................................... 1,552(2) 621
Named Executive Officers
James G. Stewart.................................... 80,395(3,4) 51,416
Gerald A. Isom...................................... 109,649(3,4) 0
H. Edward Hanway.................................... 55,035(3,4) 20,316
Donald M. Levinson.................................. 49,492(3,4) 31,478
Directors, Nominees and all Executive Officers as a
group (24 persons)............................... 726,520(5,6,7) 251,246
</TABLE>
- ---------------
(1) The percentage of shares beneficially owned by any Director, Nominee or
Executive Officer, or by all Directors, Nominees and Executive Officers as a
group, does not exceed 1% of the outstanding shares of Common Stock.
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<PAGE> 5
(2) Includes 1,500 shares of restricted Common Stock awarded pursuant to the
Restricted Stock Plan for Non-Employee Directors of CIGNA Corporation
described on page 9.
(3) Includes shares which may be acquired within 60 days upon the exercise of
outstanding stock options, as follows: Mr. Taylor -- 71,394, Mr.
Stewart -- 48,564, Mr. Isom -- 79,818, Mr. Hanway -- 44,515, and Mr.
Levinson -- 31,977.
(4) Includes shares of restricted Common Stock awarded pursuant to the Executive
Stock Incentive Plan and CIGNA Corporation Stock Plan, the restrictions on
which had not lapsed as of February 28, 1997, as follows: Mr.
Taylor -- 12,699, Mr. Stewart -- 6,266, Mr. Isom -- 5,591, Mr.
Hanway -- 4,128, and Mr. Levinson -- 3,834.
(5) As of February 28, 1997, the CIGNA Pension Plan (the "Pension Plan") held a
total of 97,500 shares, or approximately 0.13%, of the then-issued and
outstanding Common Stock. The shares held by the Pension Plan are voted in
accordance with the instructions of an advisory committee consisting of
members of CIGNA's management.
(6) As of February 28, 1997, the CIGNA Stock Fund (the "Stock Fund") of the
Corporation's Savings and Investment Plus Plan (the "Savings Plan") held a
total of 844,346 shares of Common Stock, or approximately 1.14% of the
then-issued and outstanding Common Stock. Because two Executive Officers
have invested a portion of their Savings Plan accounts in the Stock Fund,
approximately 734 shares are attributable to their accounts and are included
in the shares shown above as beneficially owned by them. All shares in the
Stock Fund are owned by the Savings Plan Trustee; however, each Stock Fund
participant has pass-through voting rights for the number of shares
equivalent to the participant's interest in the Stock Fund. If participants
do not exercise their voting rights, the Savings Plan Trustee votes the
shares in accordance with the instructions of an advisory committee
consisting of members of CIGNA's management.
(7) The Directors and Executive Officers as a group have sole voting and
investment power over all shares of Common Stock they own beneficially,
except as described elsewhere in these notes. Shares beneficially owned by
Directors and Executive Officers include 456,034 shares of Common Stock
which may be acquired within 60 days upon exercise of stock options and
62,425 shares which are restricted as to disposition.
(8) As of February 28, 1997, non-employee Directors held 20,289 Equivalents, and
Executive Officers held 230,957 Equivalents. Equivalents track the economic
performance of Common Stock, but carry no voting rights.
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<PAGE> 6
OWNERSHIP OF CIGNA CORPORATION
COMMON STOCK BY CERTAIN BENEFICIAL OWNERS
The Corporation has no information that any person or entity beneficially
owns more than five percent of its outstanding Common Stock except as reported
on a Schedule 13G (reporting December 31, 1996 ownership) filed pursuant to the
Securities Exchange Act of 1934 and received by the Corporation during February
1997. The following table and footnote has been prepared in reliance upon such
filing:
<TABLE>
<CAPTION>
AMOUNT
AND NATURE
OF BENEFICIAL
OWNERSHIP PERCENT
REPORTED OF
ON SCHEDULE CLASS
13G AS OF AS OF
NAME AND ADDRESS OF BENEFICIAL OWNER 12/31/96 12/31/96
--------------------------------------------------------------- ------------- --------
<S> <C> <C>
Sanford C. Bernstein & Co., Inc. ("Bernstein") 6,067,405(1) 8.18%
767 Fifth Avenue
New York, NY 10153
</TABLE>
- ---------------
(1) Bernstein reported that as of December 31, 1996 it held these
shares for the accounts of discretionary clients who have the
right to receive dividends on these shares and any proceeds from
the sale of these shares. Bernstein also reported sole voting
power as to 3,078,935, shared voting power as to 755,266, and sole
dispositive power as to all, of these shares.
In its Schedule 13G, Bernstein represented that the shares reported were
acquired in the ordinary course of business, and that they were not acquired for
the purpose of, and do not have the effect of, changing or influencing the
control of the Corporation.
ITEM 1. ELECTION OF DIRECTORS
The Board is divided into three classes of Directors. The By-laws of the
Corporation provide that at each annual election Directors shall be chosen by
class for a term of three years, or for such shorter term as the Shareholders
may specify to preserve, as evenly as practicable, the division of Directors
into classes. Pursuant to the By-Laws, the Board has set four as the number of
Directors to be elected at the Annual Meeting for terms expiring in April 2000
or, in each case, until their respective successors shall have been elected and
qualified.
The Board recommends election of the three incumbent Nominees and one
additional Nominee identified below for terms to expire in April 2000. All of
the incumbent Nominees' current terms will expire on the date of the 1997 Annual
Meeting. The Board knows of no reason why any Nominee will be unavailable or
unable to serve. If any Nominee should become unavailable or unable to serve,
the persons named as proxies on the proxy card will vote for the person or
persons the Board recommends, if any.
The Board has set 70 years as the retirement age for non-employee
Directors. Pursuant to this policy, incumbent Director James F. English, Jr.
will retire as of the 1997 Annual Meeting. Also, it is anticipated that Mr. Paul
F. Oreffice, who will attain the age of 70 in November 1997, will retire
effective at the 1998 Annual Meeting after serving one year of his three-year
term.
Each non-employee Director is required to submit a resignation for the
Board's consideration upon discontinuing the principal position or
identification which prevailed at the time of such Director's most recent
election to the Board.
Set forth below is information about each Nominee and continuing incumbent
Director, including business history for at least five years, age as of the date
of this Proxy Statement, other directorships held and period of service as a
Director of the Corporation or a predecessor company, including Connecticut
General Corporation ("CGC") and INA Corporation ("INA").
4
<PAGE> 7
NOMINEES FOR ELECTION
FOR TERMS EXPIRING IN APRIL 2000
ALFRED C. DECRANE, JR., 65 Director since 1980
Retired Chairman of the Board of Texaco Inc. (integrated oil, gas and
chemical manufacturer). Mr. DeCrane served as Chairman of the Board of Texaco
Inc. from January 1987 until June 1996, and as Chief Executive Officer from
April 1993 until June 1996, and as a Director from 1977 until June 1996, and as
its President from 1983 through 1986. Between 1970 and 1983, Mr. DeCrane served
Texaco Inc. in various other positions. He also serves as a Director of CPC
International Inc., Dean Witter, Discover & Co. and Harris Corporation.
PAUL F. OREFFICE, 69 Director since 1979
Retired Chairman of the Board of The Dow Chemical Company (manufacturer of
chemicals, metals, plastics and other products). Mr. Oreffice served as Chairman
of the Board of Dow Chemical from 1986 through 1992, as President and Chief
Executive Officer from 1978 to 1987, and as a Director from 1971 through 1992.
Mr. Oreffice also serves as a Director of The Coca-Cola Company and Northern
Telecom, Ltd.; as Chairman of Fairfield Homes of Arizona, Inc.; as a member of
the International Advisory Board of Marsh & McLennan; and as an advisor to the
Chairman of Smith Barney Inc.
WILSON H. TAYLOR, 53 Director since 1988
Chairman of the Board, Chief Executive Officer and President of the
Corporation. Mr. Taylor has served as Chairman of the Board since November 1989,
as Chief Executive Officer since November 1988, and as President since May 1988.
Between 1964 and 1988, he held various positions with the Corporation and its
predecessor and subsidiary companies.
HAROLD A. WAGNER, 61
Chairman, President and Chief Executive Officer of Air Products and
Chemicals, Inc. (manufacturer of industrial gases and chemicals) since May 1992.
Mr. Wagner served as President and Chief Operating Officer of Air Products and
Chemicals, Inc. from 1991 until 1992, and as Executive Vice President, Gases and
Equipment from 1990 until 1991. He also serves as a Director of Daido-Hoxan,
Inc. and United Technologies Corporation.
INCUMBENT DIRECTORS TO CONTINUE IN OFFICE
FOR TERMS EXPIRING IN APRIL 1998
ROBERT P. BAUMAN, 65 Director since 1990
Non-Executive Chairman of British Aerospace, plc (manufacturer of aerospace
and other defense systems and commercial aircraft) since May 1994. From 1989
until May 1994, Mr. Bauman served as a Director and Chief Executive of
SmithKline Beecham plc (manufacturer of pharmaceuticals and health care
products). Mr. Bauman was Chairman of the Board and Chief Executive Officer of
Beecham Group plc from 1986 to 1989, and was Vice Chairman of Textron, Inc.
(aerospace technology, commercial products and financial services) from 1985 to
1986. He is a Director of Morgan Stanley, Reuters Holdings, plc, Russell
Reynolds Associates, Inc., Union Pacific Corporation and Hathaway Holdings Inc.
and a member of Booz-Allen & Hamilton, Inc.'s advisory board.
ROBERT H. CAMPBELL, 59 Director since 1992
Chairman of the Board and Chief Executive Officer of Sun Company, Inc.
(domestic refining and marketing of petroleum products). He was elected Chairman
of the Board in May 1992 and Chief Executive Officer in 1991. Mr. Campbell
additionally held the post of President from 1991 until 1996. Previously,
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<PAGE> 8
Mr. Campbell had been an Executive Vice President beginning in 1988 and a Group
Vice President beginning in 1983. Mr. Campbell is also a director of Hershey
Foods, Inc.
CHARLES R. SHOEMATE, 57 Director since 1991
Chairman, President (since 1988), and Chief Executive Officer of CPC
International Inc. (consumer foods) since 1990. Mr. Shoemate has served as a
Director of CPC International since 1988. Prior to his election as President in
1988, Mr. Shoemate served as Vice President of CPC International and President
of the Corn Refining Division. Mr. Shoemate joined CPC International in 1962 and
progressed through a variety of positions in manufacturing, finance, and
business management. Mr. Shoemate also serves as a Director of International
Paper Co.
LOUIS W. SULLIVAN, M.D., 63 Director since 1993
President, Morehouse School of Medicine (educational institution). Dr.
Sullivan became the first President of Morehouse School of Medicine in 1981 when
it became independent from Morehouse College, and has held that position since
1981 except for March 1989 to January 1993, when he served as Secretary of
Health and Human Services of the United States. Dr. Sullivan is a Director of
Bristol-Myers Squibb Company, Equifax Inc., Endo Vascular Instruments, Inc.,
General Motors Corporation, Georgia Pacific Corporation, Household
International, Inc., and Minnesota Mining & Manufacturing Co.
INCUMBENT DIRECTORS TO CONTINUE IN OFFICE
FOR TERMS EXPIRING IN APRIL 1999
BERNARD M. FOX, 54 Director since 1994
Chairman of the Board since August 1995, President and Chief Executive
Officer since July 1993 of Northeast Utilities (energy utility holding company)
and Chairman, Chief Executive Officer and a Director of its principal
subsidiaries. Mr. Fox is also Chairman, President, Chief Executive Officer and a
Director of Connecticut Yankee Atomic Power Company. From 1990 until July 1993,
he served as President and Chief Operating Officer of Northeast Utilities and of
its principal subsidiaries and of Connecticut Yankee Atomic Power Company. He is
also a Director of Fleet Financial Group and the Dexter Corporation.
MARILYN WARE LEWIS, 53 Director since 1993
Chairman of American Water Works Company, Inc. (water utility holding
company) since 1988 and a Director since 1982. Prior to her election as
Chairman, Ms. Lewis served for four years as Vice Chairman. From 1987 until
January 1992, Ms. Lewis served as President of KLS Educational Systems, Inc. She
is also a Director of Penn Fuel Gas Company, Inc. and serves as the Chief
Executive Officer of the Ware Family offices.
CAROL COX WAIT, 54 Director since 1995
Director, President and Chief Executive Officer, Committee for a
Responsible Federal Budget (a non-profit educational organization) since 1981.
Ms. Wait is also President of Carol Cox and Associates, a Washington, D.C.
consulting firm. Ms. Wait is also President of The International Women's Forum.
6
<PAGE> 9
BOARD OF DIRECTORS AND COMMITTEES
The Board held nine meetings during 1996. All of the incumbent Directors
attended at least 75% of the total number of meetings of the Board and
committees on which they served.
The Board has five standing committees:
EXECUTIVE COMMITTEE
Wilson H. Taylor (Chairman), Robert H. Campbell, Alfred C. DeCrane, Jr. and
Charles R. Shoemate are members of the Executive Committee. The Committee did
not meet during 1996. The function of the Committee is to exercise the authority
of the Board of Directors in the management of the business of the Corporation
between regular meetings of the Board.
AUDIT COMMITTEE
The members of the Audit Committee are James F. English, Jr. (Chairman),
Robert H. Campbell, Bernard M. Fox, Marilyn Ware Lewis and Carol Cox Wait. The
Audit Committee met five times in 1996. The Committee's responsibilities
include: reviewing and reporting to the Board on the appropriateness of the
Corporation's accounting policies; the adequacy of its financial controls and
the reliability of the Corporation's financial information reported to the
public; recommending independent accountants for appointment by the Board;
reviewing and approving audit plans; reviewing and advising the Board concerning
the work of internal auditors and independent accountants; reviewing and
approving the Corporation's Annual Report on Form 10-K; and reviewing and
advising the Board with respect to the Corporation's special exposures.
CORPORATE GOVERNANCE COMMITTEE
The Corporate Governance Committee held two meetings in 1996. (Its
predecessor committees, the Committee on Directors and the Public Issues
Committee, each held one additional meeting in 1996.) The members of the
Corporate Governance Committee are Robert P. Bauman (Chairman), Robert H.
Campbell, Alfred C. DeCrane, Jr., Marilyn Ware Lewis and Louis W. Sullivan, M.D.
The Committee reviews, advises and reports to the Board on the structure,
organization, performance and effectiveness of the Board as well as on the
compensation of active and retired Directors. The Committee advises the Board
with respect to Board membership and procedures governing the election of
Directors by Shareholders, considers suggestions for Board membership and
recommends to the Board persons to be nominated for election by the Shareholders
at the Annual Meeting of Shareholders or by the Directors as necessary to fill
Board vacancies. The Committee considers suggestions from Shareholders and other
sources as to possible nominees. Such suggestions should be submitted to the
Corporate Secretary not later than November 7, 1997 for the Committee's
consideration in advance of the 1998 Annual Meeting. Additionally, the Committee
exercises oversight of the Corporation's positions and policies with respect to
shareholder relations, corporate political contributions and the Corporation's
charitable contributions.
FINANCE COMMITTEE
The Finance Committee held three meetings in 1996. (Its predecessor
committees, the Finance Committee and the Investment Committee, held one and two
additional meetings, respectively, in 1996.) The members of the Finance
Committee are Paul F. Oreffice (Chairman), James F. English, Jr., Bernard M.
Fox, Charles R. Shoemate and Carol Cox Wait. The Committee reviews, advises and
reports to the Board on the management of the Corporation's financial resources
and invested assets, the annual Capital Plan, stockholder dividends, and capital
position; and acts upon proposed capital commitments of such amounts as are
established by the Board. The Committee also reviews investment policies,
strategies and guidelines of the Corporation, its subsidiaries and affiliates.
7
<PAGE> 10
PEOPLE RESOURCES COMMITTEE
The members of the People Resources Committee are Alfred C. DeCrane, Jr.
(Chairman), Robert P. Bauman, Paul F. Oreffice, Charles R. Shoemate and Louis W.
Sullivan, M.D. The Committee held four meetings in 1996. The Committee reviews
and reports to the Board on the management of the Corporation's human resources,
including personnel policies and policy controls, the development of people
including diversity programs, and compensation and benefit programs and plans.
It reviews and approves, subject to Board ratification, executive compensation
plans and targets and payouts thereunder, any compensation plans which involve
the issuance of equity securities of the Corporation, and as required by law,
adoption of and changes to qualified benefit plans. It sets the compensation of
the Chief Executive Officer, subject to Board ratification, approves the
compensation of other senior executives, and makes stock-related awards. The
Committee also reviews succession plans for the Corporation's principal
Executive Officers.
COMPENSATION OF DIRECTORS
Non-employee Directors are compensated for their services on the Board and
its committees as follows:
- Board retainer of $30,000 for service on the Board, $12,000 of which is
paid in shares of Common Stock or deferred into Equivalents, described in
footnote 8 on page 3, and ultimately paid in cash.
- Attendance fee of $1,250 for each Board and Committee meeting. Directors
were paid two meeting fees for attending an all-day corporate strategy
session in October 1996.
- Annual Committee retainer (for Committee members but not the Committee
Chairman) of $2,500 for service on each standing Committee (except the
Executive Committee).
- Annual Committee Chairman retainer of $7,500 (except the Executive
Committee Chairman).
- Directors may elect to receive payment of retainers and meeting fees in
cash or in shares of Common Stock, or partially in cash and partially in
shares of Common Stock, and may also elect to defer all or part of their
compensation under the Deferred Compensation Plan for Directors of CIGNA
Corporation. Currently, deferred cash compensation is credited at the
same rate of return paid on participant contributions to the Fixed Income
Fund, Fidelity Advisor Growth Opportunities Fund or the Stock Market
Index Fund of the Savings Plan. Hypothetical dividends paid on
Equivalents may be reinvested in Equivalents or at Saving Plan rates
specified above.
- The Retirement and Consulting Plan for Directors of CIGNA Corporation was
frozen effective December 31, 1996. Directors who had vested under this
Plan were permitted continued eligibility under it. Two vested Directors
elected to maintain their rights under the frozen Plan.
- In consideration for voluntarily relinquishing all rights to any
benefits under the frozen Plan, a Restricted Deferred Compensation
Account was established under the Deferred Compensation Plan for
Directors of CIGNA Corporation for each non-employee Director who had
relinquished his rights under the frozen Plan. The account was
credited with an amount based upon the Director's accrued benefit
under the frozen Plan. This value was then converted to Equivalents,
which will become payable in cash upon death or termination of Board
service. Beginning in April 1997, each participating, active
Director's Restricted Deferred Compensation Account will annually be
credited with $11,000 in the form of Equivalents.
- The Retirement and Consulting Plan provides for annual payments equal
to the annual retainer in effect at the time of the Director's
retirement. The two vested Directors who did not relinquish all rights
under the Plan and who retire at the mandatory retirement age,
currently age 70, will receive those payments for life. If they retire
prior to the mandatory retirement age, they will receive those
payments for a period equal to the number of months served as a
Director of CIGNA or a predecessor company, or they may request the
Corporate Governance Committee's approval to receive the discounted
value of the payments in a lump sum. In all cases, payments will be
reduced by any other pension or retirement benefits on account of
service as a Director or employee of CIGNA or a predecessor company.
Payment is conditioned on the Director's not competing with CIGNA and
being available to provide consulting services.
8
<PAGE> 11
- Pursuant to the terms of the Restricted Stock Plan for Non-Employee
Directors of CIGNA Corporation, which was approved by the Shareholders in
1989, each non-employee Director who has served for at least six months
and was not an officer or employee of the Corporation or any of its
subsidiaries during the ten preceding years receives a one-time grant of
1,500 shares of Common Stock. The shares are subject to transfer
restrictions until the later of 1) six months after the date of grant or
2) the date on which service as a Director of the Corporation terminates
due to death, disability, retirement or a change of control. The shares
are forfeited if the Director's service terminates for any other reason,
except as may be otherwise provided by a majority of the other members of
the Board. If one of the termination of service conditions has been met,
the former Director or his or her estate receives all such shares of
Common Stock without restriction. During the restricted period, stock
certificates are held in custody by the Corporation. However, commencing
on the date of grant, the Director has other rights and privileges of a
Shareholder as to such Common Stock, including the right to receive
dividends and to vote the shares.
- Non-employee Directors are eligible to participate in the financial
planning services available to CIGNA executives, and in life insurance,
medical/dental care programs, property/casualty personal lines insurance
programs and matching gift programs similar to those available to CIGNA
employees. Non-employee Directors also receive travel accident coverage
of $100,000. Directors who elected to do so prior to December 20, 1982
participate in a life insurance program which was available to CGC
employees prior to the combination of CGC and INA.
CERTAIN TRANSACTIONS
Management believes that all of the transactions described under this
caption were in the ordinary course of business and on terms as favorable to the
Corporation as if the transactions had involved unaffiliated persons or
organizations. It is expected that transactions, service arrangements, and
relationships similar to those described here will also occur in varying amounts
during 1997.
Various CIGNA companies provided a variety of insurance coverages, health
care services, pension contracts, and related products and services to;
purchased products and services from; and engaged in other transactions with
corporations (or their subsidiaries) of which CIGNA Directors were executive
officers during 1996. In connection with their investment operations, CIGNA
Corporation and its subsidiaries acquire, dispose of, or hold debt or rely on
the credit of other corporations or their subsidiaries -- including corporations
(or their subsidiaries) of which CIGNA Directors were executive officers during
1996. In addition, various CIGNA Directors and Executive Officers have purchased
insurance products or interests in investment vehicles marketed by CIGNA
companies in the ordinary course of business.
During 1996, various CIGNA companies engaged in various transactions with
Bernstein, a beneficial owner of more than five percent of the Corporation's
outstanding Common Stock (please see page 4 for the information about this
entity). In addition, on various occasions and in various amounts, Bernstein
purchased short-term negotiable unsecured promissory notes ("commercial paper")
issued by the Corporation; the maximum amount outstanding during 1996 was
approximately $30,000,000; no commercial paper remained outstanding as of
December 31, 1996.
ITEM 2. RATIFICATION OF APPOINTMENT
OF INDEPENDENT ACCOUNTANTS
The Board, on the recommendation of its Audit Committee, has appointed
Price Waterhouse LLP as independent accountants for 1997. Although ratification
by the Shareholders is not required, the Board requests that Shareholders ratify
this appointment. If ratification is not obtained, the Board will reconsider the
appointment.
Price Waterhouse LLP has served as independent accountants for CIGNA and
its subsidiaries since 1983, and for CGC and its subsidiaries since 1967.
9
<PAGE> 12
The Corporation has been advised that representatives of Price Waterhouse
LLP will be present at the Annual Meeting. They will be afforded the opportunity
to make a statement, should they desire to do so, and to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS PROPOSAL.
ITEM 3. APPROVAL OF THE CIGNA EXECUTIVE INCENTIVE PLAN
CIGNA's success depends, in large measure, on its ability to recruit and
retain executives with outstanding ability and experience. The Board of
Directors believes that there is a need to motivate executives with competitive
compensation conditioned upon achievement of CIGNA's financial goals and that
the compensation should be paid in a manner that allows it to be a deductible
expense for the Corporation. To achieve these objectives, on December 9, 1996,
the Board of Directors adopted, subject to approval by the Shareholders, the
CIGNA Executive Incentive Plan (the "Incentive Plan").
The affirmative vote of a majority of the shares of Common Stock present in
person or by proxy and entitled to vote at the Annual Meeting is required for
adoption of the Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS PROPOSAL.
Summary Description of the Incentive Plan
This summary describes the material terms of the Incentive Plan. The full
text of the Incentive Plan is attached as Appendix A to this Proxy Statement.
CIGNA encourages Shareholders to read the Incentive Plan as it is the legal
document that sets forth the terms of the Incentive Plan. If adopted by the
Shareholders, the Incentive Plan will be effective as of January 1, 1997.
The purpose of the Incentive Plan is to pay annual incentive bonuses to
certain Executive Officers of CIGNA if annual performance goals are achieved and
to qualify such bonuses as "performance-based compensation" under Section 162(m)
of the Internal Revenue Code. Qualification of the bonuses as "performance-based
compensation" permits a tax deduction for compensation over $1 million paid to
the Chief Executive Officer or any of the other four highest compensated
executives named in the proxy statement. The Incentive Plan will be administered
by the People Resources Committee of the Board of Directors (the "Committee").
Participation in the Incentive Plan is mandatory for each Executive Officer
designated by the Committee. An Executive Officer will participate in the
Incentive Plan for a specified performance period. Unless otherwise specified by
the Committee, the performance period is a calendar year.
The Committee will establish written, objective performance goals for a
performance period generally within 90 days of the beginning of each performance
period. The performance goals must be stated by the Committee as specific
amounts of, or specific changes in, one or more of the following financial
measures: revenues, earnings, earnings per share, shareholders' equity, return
on equity, assets, return on assets, capital, return on capital, book value,
economic value added, operating margins, cash flow, shareholder return,
expenses, expense ratios, or market share. In doing so, the Committee is
authorized to specify any reasonable definition of the financial measures it
uses, and the definitions may provide for reasonable adjustments and may include
or exclude certain items. Within a reasonable time after the close of a
performance period, the Committee will determine whether the performance goals
for that performance period have been met.
Participants are eligible to receive an award under the Incentive Plan only
if the Committee has certified in writing that the performance goals have been
met. The maximum award for each participant will consist of: (i) cash in the
amount of $3 million; and (ii) in lieu of additional cash, 25,000 shares of
Common Stock and/or restricted Common Stock to be paid under CIGNA's Long-Term
Incentive Plan, which was approved by the Shareholders in 1995. The Committee
has sole and absolute discretion to reduce or eliminate entirely the award to
one or more participants.
10
<PAGE> 13
Except for certain leaves of absence and termination of employment on
account of retirement, death or disability, a participant must be continuously
employed by CIGNA from the beginning of the performance period to the date of
the award to be eligible to receive an award. The Committee may determine, in
its sole discretion, whether the payment of the award will be made immediately
or deferred until a later date or the occurrence of a particular event. A
participant may also voluntarily defer receipt of an award.
The Committee or the Board may amend the Incentive Plan at any time.
However, an amendment will not be effective without the prior approval of the
Shareholders of CIGNA if such approval is necessary to continue to qualify the
awards as "performance-based compensation," or otherwise under Internal Revenue
Service or SEC regulations, the rules of the New York Stock Exchange or any
other applicable law or regulation. The Committee or the Board may terminate the
Incentive Plan at any time. Unless the Incentive Plan is extended, no awards may
be made under it for a performance period ending after December 31, 2001.
Actual amounts that will be payable under the Incentive Plan cannot be
determined at this time. The amount of awards under the Incentive Plan will
depend upon the performance goals established from time to time by the
Committee, CIGNA's performance during the applicable performance periods, and
the Committee's exercise of downward discretion in making awards. The bonuses
that were paid for 1996 to the Named Executive Officers under CIGNA's existing
bonus program, which is intended to be replaced for the Named Executive Officers
by the Incentive Plan, are summarized in the Summary Compensation Table on page
12 of this Proxy Statement.
ITEM 4. OTHER MATTERS
The Board of Directors knows of no matters to be brought before the Annual
Meeting other than the election of Directors, ratification of the appointment of
independent accountants for 1997 and approval of the CIGNA Executive Incentive
Plan. If other matters are properly presented to Shareholders for a vote at the
meeting, it is intended that the persons named as proxies on the proxy card will
have discretionary authority, to the extent permitted by law, to vote on such
matters in accordance with their best judgment.
VOTE REQUIRED
The Corporation's By-Laws provide that the holders of at least two-fifths
of the issued and outstanding stock of the Corporation entitled to vote at the
Annual Meeting present in person or represented by proxy will constitute a
quorum and that the vote of a majority of such Shareholders will decide any
question brought before the Annual Meeting, unless otherwise provided by statute
or the Corporation's Restated Certificate of Incorporation or By-Laws.
Abstentions and broker non-votes will be counted for the purpose of attaining a
quorum.
A broker non-vote occurs when a broker holding shares in street name for
its customer as beneficial owner withholds its vote on a particular matter
because it does not have discretionary authority under the rules of the New York
Stock Exchange to cast a vote on such matter and has not been given voting
instructions by the customer on that matter. The New York Stock Exchange has
advised the Corporation that brokers will have discretionary authority to vote
on the Items described in this Proxy Statement.
The Nominees for election as Directors at the Annual Meeting who receive a
plurality (the greatest number) of votes cast will be elected as Directors.
Ratification of the appointment of independent accountants and approval of the
CIGNA Executive Incentive Plan will be adopted by the affirmative vote of a
majority of the shares present in person or represented by proxy at the meeting
and entitled to vote thereon.
Abstentions will have no effect on the outcome of the election of Directors
but will have the same effect as a negative vote with respect to the
ratification of the appointment of independent accountants and the approval of
the CIGNA Executive Incentive Plan.
11
<PAGE> 14
EXECUTIVE COMPENSATION
The following information is furnished for the Corporation's Chief
Executive Officer ("CEO") and each of the four most highly compensated Executive
Officers other than the CEO at the end of 1996 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION(1) AWARDS PAYOUTS
------------------------------ ------------------------- ---------
(a) (b) (c) (d) (f) (g) (h) (i)
SECURITIES
NAME RESTRICTED UNDERLYING ALL OTHER
AND STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL SALARY BONUS AWARD(S) SARS PAYOUTS SATION
POSITION YEAR ($) ($) ($)(2,3) (#) ($)(3) ($)(4)
- --------------------------------------- ---- ------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Wilson H. Taylor....................... 1996 917,900 2,600,000 0 176,073 -- 89,139
Chairman and 1995 871,500 1,575,000 391,765 52,000 385,382 71,100
Chief Executive Officer 1994 822,900 900,000 222,337 120,000 1,225,550 50,700
James G. Stewart....................... 1996 531,900 650,000 0 82,998 -- 51,570
Executive Vice President 1995 501,900 800,000 175,027 30,000 172,300 40,600
and Chief Financial Officer 1994 471,900 525,000 117,906 70,000 540,400 21,800
Gerald A. Isom......................... 1996 525,000 525,000 0 60,095 -- 52,797
President, CIGNA 1995 518,300 575,000 175,027 43,695 172,300 36,500
Property & Casualty 1994 493,300 500,000 84,219 65,000 540,400 26,000
H. Edward Hanway....................... 1996 434,800 525,000 0 43,906 -- 38,650
President, CIGNA 1995 339,800 550,000 106,295 18,000 104,583 27,100
HealthCare 1994 274,200 325,000 134,750 45,000 180,455 15,200
Donald M. Levinson..................... 1996 405,600 520,000 0 46,484 -- 50,148
Executive Vice President, 1995 370,600 525,000 118,740 18,000 116,945 30,900
Human Resources and Services 1994 336,900 310,000 67,375 44,400 321,345 19,300
</TABLE>
- ---------------
(1) Pursuant to SEC Rules, column (e) has been omitted because there is no
"Other Annual Compensation" to report.
(2) The Named Executive Officers held the following aggregate shares of
restricted stock, with the following values, at December 31, 1996: Mr.
Taylor, 12,699 shares valued at $1,735,001; Mr. Stewart, 6,266 shares valued
at $856,092; Mr. Isom, 5,591 shares valued at $763,870; Mr. Hanway, 4,128
shares valued at $563,988; and Mr. Levinson, 3,834 shares valued at
$523,820. Dividends are paid on shares of restricted stock.
(3) Long-term compensation for the three-year period ending December 31, 1995
was paid in shares of restricted common stock (column (f)) and cash (column
(h)) in April, 1996. The restricted period for those shares was three years.
Long-term compensation for the three-year period ending December 31, 1996
will be determined in April, 1997. See discussion of Long-Term Incentive
Plan ("LTIP") Awards Table on page 14.
(4) The amounts shown in column (i) include CIGNA's contributions under its
savings plans and the value of benefits under CIGNA's Financial Services
Program (covering financial planning, tax preparation and legal services
related to financial and estate planning), which, for 1996, were as follows:
Mr. Taylor, $76,459 and $12,680; Mr. Stewart, $40,851 and $10,719; Mr. Isom,
$33,637 and $19,160; Mr. Hanway, $29,275 and $9,375; and Mr. Levinson,
$28,441 and $21,707, respectively.
12
<PAGE> 15
OPTION GRANTS TABLE
The following table provides additional information about the stock options
shown in column (g) of the Summary Compensation Table on page 12, which were
granted in 1996 to the Named Executive Officers.
OPTION GRANTS IN FISCAL YEAR 1996(1)
<TABLE>
<CAPTION>
GRANT
DATE
INDIVIDUAL GRANTS VALUE
- ------------------------------------------------------------------------------------------ ---------
(a) (b) (c) (d) (e) (f)
% OF
NUMBER OF TOTAL
SECURITIES OPTIONS EXERCISE GRANT
UNDERLYING GRANTED TO OR BASE DATE
OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED(#)(2) IN 1996 ($/SH) DATE VALUE($)(4)
- ---------------------------------- ----------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Wilson H. Taylor.................. 9,052(3) 1.04% 118.5625 02/24/03 261,533
5,682(3) 0.65% 118.5625 02/23/04 164,166
9,550(3) 1.10% 118.5625 07/27/04 275,922
80,000 9.18% 120.3750 02/28/06 2,242,400
5,638(3) 0.65% 119.5000 02/23/04 164,183
51,036(3) 5.86% 119.5000 07/27/04 1,486,211
11,621(3) 1.33% 119.5000 02/22/05 338,413
3,494(3) 0.40% 131.0000 02/22/05 111,540
James G. Stewart.................. 3,495(3) 0.40% 118.5625 02/24/03 100,979
2,841(3) 0.33% 118.5625 02/23/04 82,083
4,831(3) 0.55% 118.5625 07/27/04 139,579
40,000 4.60% 120.3750 02/28/06 1,121,200
2,819(3) 0.32% 119.5000 02/23/04 82,092
27,450(3) 3.15% 119.5000 07/27/04 799,367
1,562(3) 0.18% 131.0000 07/27/04 49,864
Gerald A. Isom.................... 40,000 4.60% 120.3750 02/28/06 1,121,200
1,200(3) 0.14% 140.3125 02/23/04 41,031
18,895(3) 2.17% 140.3125 07/27/04 646,070
H. Edward Hanway.................. 1,374(3) 0.16% 120.3750 02/24/03 40,299
30,000 3.44% 120.3750 02/28/06 840,900
2,012(3) 0.23% 120.3750 02/23/04 59,012
801(3) 0.09% 118.0000 02/23/04 23,033
8,770(3) 1.01% 118.0000 07/27/04 252,184
949(3) 0.11% 131.9375 07/27/04 30,512
Donald M. Levinson................ 2,099(3) 0.24% 118.5625 02/24/03 60,645
1,250(3) 0.14% 118.5625 02/23/04 36,115
3,121(3) 0.36% 118.5625 07/27/04 90,173
22,500 2.58% 120.3750 02/28/06 630,675
1,240(3) 0.14% 119.5000 02/23/04 36,109
15,215(3) 1.75% 119.5000 07/27/04 443,073
1,059(3) 0.12% 131.0000 07/27/04 33,807
</TABLE>
- ---------------
(1) Stock appreciation rights ("SARs") were not granted in 1996.
(2) All replacement options (see Note 3) become exercisable six months after
their grant date. All other options become exercisable over a three year
period, with one-third of those options becoming exercisable on the first,
second and third anniversary of their grant date. All options shown have a
replacement feature.
(3) Replacement options are intended to encourage employees to increase stock
ownership. They typically do not provide stock appreciation opportunity
greater than the original options. One replacement option is granted to
replace each share that is delivered by an employee as payment for the
purchase price of shares being acquired through the exercise of a stock
option. In comparison to the original option, the replacement option has a
higher exercise price, being equal to the fair market value of the
Corporation's Common Stock
13
<PAGE> 16
on the grant date of the replacement option. Similarly, its exercise period is
shorter, being equal to the period remaining for exercise of the original
option.
(4) Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options. Calculation of grant date present values assumes an
option life of six years, a dividend yield of 3.50%, a price volatility of
CIGNA Common Stock of 26.2% and an annualized risk-free interest rate of
5.9%. The calculation also reflects a 3% discount per year for risk of
forfeiture over the option vesting schedules. The approach used in
developing the foregoing assumptions is consistent with the requirements of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation". The actual value, if any, an executive may
realize will depend on the excess of the stock price on the date the option
is exercised over the exercise price, so that there is no assurance the
value realized by an executive will be at or near the value estimated by the
Black-Scholes model. The Corporation believes that no model accurately
predicts the future price of CIGNA's stock or places an accurate present
value on stock options.
OPTION/SAR EXERCISES AND
FISCAL YEAR-END VALUE TABLE
The following table provides information about options and SARs exercised
by the Named Executive Officers during 1996, and about unexercised stock options
and SARs held by the Named Executive Officers at the end of 1996.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1996 AND
1996 FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
NUMBER OF SECURITIES
NUMBER OF UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SECURITIES OPTIONS/SARS AT 1996 IN-THE-MONEY OPTIONS/ SARS
UNDERLYING YEAR-END(#) AT 1996 YEAR-END($)
OPTIONS/SARS VALUE --------------------------- ---------------------------
NAME EXERCISED(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wilson H. Taylor........... 162,600 7,961,371 50,684 177,789 2,667,988 4,345,402
James G. Stewart........... 73,067 3,599,329 42,570 86,831 2,472,873 2,225,399
Gerald A. Isom............. 39,164 2,675,496 51,484 75,095 2,933,828 1,652,500
H. Edward Hanway........... 24,519 1,219,261 36,342 49,520 2,201,996 1,295,455
Donald M. Levinson......... 40,758 2,009,269 30,807 49,014 1,840,692 1,277,893
</TABLE>
LONG-TERM INCENTIVE PLAN ("LTIP") AWARDS TABLE
The following table provides information about long-term incentive awards
granted in 1996 to the Named Executive Officers.
LONG-TERM INCENTIVE PLAN AWARDS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE BASED PLANS
---------------------------------
(a) (b) (c) (d) (e) (f)
PERIOD
NUMBER UNTIL THRESHOLD MAXIMUM
NAME OF UNITS MATURATION ($)(1) TARGET($) ($)
- -------------------------------------------- -------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Wilson H. Taylor............................ 14,000 3 years * 1,050,000 2,800,000
James G. Stewart............................ 7,000 3 years * 525,000 1,400,000
Gerald A. Isom.............................. 7,000 3 years * 525,000 1,400,000
H. Edward Hanway............................ 7,000 3 years * 525,000 1,400,000
Donald M. Levinson.......................... 4,000 3 years * 300,000 800,000
</TABLE>
- ---------------
(1) See discussion below.
14
<PAGE> 17
CIGNA's Strategic Performance Plan, and as of 1995 its successor, the
Long-Term Incentive Plan (together, the "Strategic Performance Unit Program" or
"SPU Program"), provide long-term incentives to Executive Officers and other key
employees. The SPU Program is designed to reward those employees for achievement
by CIGNA of long-term financial and strategic performance objectives in
comparison to a group of competitors that have a similar product mix.
Performance is evaluated over a three-year period.
The earned value of each unit for the three-year period depends on CIGNA's
relative financial performance. The People Resources Committee values the units
by comparing CIGNA's annual return on equity to the average annual return on
equity of peer companies, using a formula which permits negative adjustments to
the annual accrued value. The earned value is based on points that are
accumulated for each of the three performance years, with zero points earned if
CIGNA's return for each year is five percentage points below the competitors and
a maximum number of points earned if five percentage points above the
competitors. The earned value will range from zero to $200 per unit, with a
target value of $75 per unit. At the end of the three-year performance period,
the Committee may adjust downward the earned value of each unit by up to $25
(1/3 of its target value) for any three-year performance period, based on an
assessment of the factors that affected strategic and financial performance
during the period. For 1996 grants, the Committee will value the units in 1999
based on performance during 1996 through 1998.
If an employee is terminated within two years following a change of control
of CIGNA (other than on account of conviction of a felony involving fraud or
dishonesty directed against CIGNA), or if an employee resigns during that period
as a result of certain adverse changes in employment conditions stemming from
the change of control, payouts for the employee's outstanding units must be made
within 30 days at a value equal to the greatest of (i) the target value
established for those units at the time they were issued; (ii) the value for a
unit paid in the preceding twelve month period; or (iii) the average of the unit
values for the last two unit payments.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------------------
REMUNERATION 15 20 25 30 35
- --------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 200,000................. $ 60,000 $ 80,000 $ 100,000 $ 120,000 $ 140,000
400,000................. 120,000 160,000 200,000 240,000 280,000
600,000................. 180,000 240,000 300,000 360,000 420,000
800,000................. 240,000 320,000 400,000 480,000 560,000
1,000,000................. 300,000 400,000 500,000 600,000 700,000
1,200,000................. 360,000 480,000 600,000 720,000 840,000
1,400,000................. 420,000 560,000 700,000 840,000 980,000
1,800,000................. 540,000 720,000 900,000 1,080,000 1,260,000
2,200,000................. 660,000 880,000 1,100,000 1,320,000 1,540,000
2,600,000................. 780,000 1,040,000 1,300,000 1,560,000 1,820,000
3,000,000................. 900,000 1,200,000 1,500,000 1,800,000 2,100,000
3,400,000................. 1,020,000 1,360,000 1,700,000 2,040,000 2,380,000
3,800,000................. 1,140,000 1,520,000 1,900,000 2,280,000 2,660,000
4,200,000................. 1,260,000 1,680,000 2,100,000 2,520,000 2,940,000
</TABLE>
The table shows annual retirement benefits (before application of the
Social Security offset of 50% of annual primary Social Security benefit) under a
straight life annuity, computed assuming retirement at age 65 after specified
years of service and earnings. Mr. Isom's benefits would approximate 84% of the
amounts shown in the table.
Except as otherwise noted, annual retirement benefits for the Named
Executive Officers are based upon the Executive's earnings (generally, average
annual earnings over the final 36 months of service), an annual accrual rate of
2%, length of credited service (up to a maximum of 30 years), and age at
retirement. For Mr. Isom and other employees hired on or after January 1, 1989,
the calculation is based on average annual
15
<PAGE> 18
earnings over the final 60 months of service, an annual accrual rate of 1.67%
and maximum credited service up to 35 years.
Covered earnings include salary and bonuses, as set forth in columns (c)
and (d) of the Summary Compensation Table on page 12, but not long-term
incentive plan payouts or any other incentive awards.
As of January 1, 1997, credited years of service were as follows: Mr.
Taylor, 30 years; Mr. Stewart, 30 years; Mr. Isom, 4 years; Mr. Hanway, 19 years
and Mr. Levinson, 19 years. Because of Mr. Isom's proximity to retirement age
when he was hired, CIGNA will supplement his pension benefits. For each year of
service at CIGNA, Mr. Isom receives additional credit toward the supplement;
CIGNA estimates that, if he retires from CIGNA at age 65, the annual supplement
will approximate $100,000.
Subject to their continued employment, and compliance with contractual
obligations (including non-competition and confidentiality), Messrs. Taylor,
Stewart and Levinson will be credited with additional years of service (total
years of service cannot exceed 35). Additional credited service will vest in the
event of death, disability or certain voluntary terminations within two years
following a change of control of the Corporation, or otherwise upon termination
if the Corporation approves such vesting. Upon any termination initiated by
CIGNA, the maximum additional service provided in the contract will be credited,
unless such termination arises from a conviction of a felony involving fraud or
dishonesty directed against CIGNA. If any of the above officers dies while still
in the Corporation's employ after reaching age 55, his surviving spouse's
benefit will be the same as the benefit that would have been payable to the
spouse had the executive first retired and then died immediately.
If a change of control of CIGNA occurs, the pension plan cannot be
terminated, or benefit accruals reduced, for a three-year period. If the pension
plan is terminated in the fourth or fifth year following a change of control,
additional benefits will be provided to participants, including an immediate 10%
increase to persons receiving benefits and an annual 3% increase in benefits
beginning at age 65. In addition, employees terminated, other than for cause,
within three years following a change of control will receive up to three years
of additional service credit and a floor amount of final average earnings based
on their level of earnings when a change of control occurred.
TERMINATION OF EMPLOYMENT
CIGNA employees are entitled to severance benefits under certain
circumstances (not including termination for cause and, except as noted below,
resignation). Severance benefits include continuation of salary at termination
for a period (determined by completed years of service) of two to 52 weeks or,
in the case of termination within two years after a change of control of CIGNA,
13 to 104 weeks. A lump sum payment may be elected in lieu of periodic payments.
Employees terminated on account of job elimination or within two years after a
change of control of CIGNA also receive a supplemental payment equal to the
average of their last two incentive bonuses (prorated to reflect actual months
worked in the year of termination) if they are terminated between May 1 and
December 31, as well as a payment equal to the value of restricted CIGNA stock
forfeited upon termination.
Senior level employees, including the Named Executive Officers, terminated
other than for cause within two years after a change of control will receive
payments equal to 104 weeks of salary at termination (regardless of years of
service). Payments are subject to adjustment for certain tax contingencies. A
senior level employee will also receive a supplemental payment equal to the
higher of the bonus actually received for the preceding calendar year or the
amount of the annual incentive bonus guideline applicable to the employee under
the Corporation's incentive bonus plan (if the employee is terminated between
May 1 and December 31), as well as the payment for restricted stock described
above.
For a senior level employee, termination within two years after a change of
control includes a resignation following a reduction in authority, duties,
responsibilities or title, or following relocation to an office more than 35
miles from the location of the employee's office on the date of change of
control. A termination of employment following a change of control is "for
cause" under CIGNA's severance arrangements for senior
16
<PAGE> 19
level employees if termination results from conviction of a felony involving
fraud or dishonesty directed against CIGNA.
Notwithstanding anything to the contrary set forth in any of the
Corporation's previous filings under the Securities Act of 1933 or the
Securities Exchange Act of 1934 that might incorporate future filings, including
this Proxy Statement, in whole or in part, the following report and the
Performance Graph on page 20 shall not be incorporated by reference into any
such filings.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The People Resources Committee (the "Committee") of the Board of Directors
reviews and approves, subject to Board ratification, executive compensation
plans and targets and payouts thereunder, as well as any employee compensation
plans which involve the issuance of securities of the Corporation. It sets the
compensation of the CEO, subject to Board ratification, and approves
compensation of other senior executives, including those named in the Summary
Compensation Table, and makes stock-related awards. The Committee is composed
entirely of outside directors.
SUMMARY
The primary objective of CIGNA's executive compensation program is to pay
for performance that increases shareholder value. The program has three key
elements: (1) base salary; (2) annual bonus; and (3) long-term incentives.
Long-term incentives for the Named Executive Officers are in the form of stock
options as well as stock and/or cash awarded pursuant to a performance plan.
Annual bonus and long-term incentives are variable compensation elements that
are at risk because they are tied to corporate business results. The annual
bonus recognizes short-term business results and individual performance, while
long-term incentives recognize sustained corporate-wide results.
PROGRAM DESCRIPTION
The program provides opportunity targets for total pay (as well as for base
salary and for short- and long-term incentive elements) that correspond to the
median pay levels of comparable positions in similarly sized companies. A
significant number of companies are used in this comparison, including most of
the companies in the S&P Insurance Indexes shown in the proxy Performance Graph
on page 20. The Committee reviews data on these companies' compensation programs
in determining the appropriate levels of compensation for each of the most
senior executives.
Once total pay opportunity targets are set, the Committee determines the
appropriate pay elements to use in motivating the executives to achieve the
Corporation's performance and strategic objectives. The program is continually
monitored relative to CIGNA's own strategic goals as well as industry practices
and trends, and it is modified when considered appropriate to better support
shareholder interests. For example, in 1995 a feature was added to the stock
option program, wherein certain gains realized as a result of exercising an
option may be subject to forfeiture if an executive becomes employed by a
competitor and engages in activities deemed to be detrimental to the company. As
in the past, it is expected that CIGNA executives will demonstrate their
confidence in the company's future by retaining substantial ownership of company
shares. Executive share ownership levels are reviewed annually by the Committee.
The new CIGNA Executive Incentive Plan, which is being presented to
Shareholders, is intended to motivate executives with competitive compensation
based upon achievement of competitive financial and operational goals. The plan
complies with Section 162(m) of the Internal Revenue Code as described in more
detail elsewhere in this proxy statement. Compensation paid to the Named
Executive Officers, including bonuses under the new plan (if approved by
Shareholders), is expected to be fully tax deductible.
17
<PAGE> 20
Base Salary
Base salary is intended to provide a fixed level of compensation reflecting
the scope and nature of basic job responsibilities. The Committee grants salary
increases, if appropriate, after a review of individual performance and an
assessment of the relative competitiveness of the current salary.
Annual Bonus
Annual bonus awards recognize an executive's contribution to each year's
annual business results as measured against competitors and against CIGNA's
operational plans. Corporate-wide, business unit and individual performance are
assessed in relation to the following major factors, listed in order of
importance: earnings; revenue growth and customer service; and cost management.
Performance, as measured by these factors, which meets operational plans
and equals the results of the competition, provides for bonus opportunities that
are equal to median bonus levels at other large companies. Better or worse
performance can result in payments that are higher or lower than the median. An
individual's bonus, reflecting personal contribution to business results, can
range from 0 to 200% of the median for the individual's job.
If Shareholders approve the new CIGNA Executive Incentive Plan described on
page 10, bonuses not to exceed the limits provided in the Plan will be paid to
participants based on the company's performance.
Long-Term Incentives
In 1996, the Strategic Performance Unit Program provided incentive
opportunity based on CIGNA's long-term financial and strategic performance
relative to a group of seven peer companies. The companies in the program's peer
group reflect a composite product mix that represents CIGNA's key businesses and
rewards executives in all of CIGNA's operating and corporate staff divisions for
overall consolidated corporate performance. The proxy performance graph compares
CIGNA's total return performance to a broad industry group (a composite of the
Standard & Poor's Multi-Line Insurance, Property and Casualty Insurance and
Life/Health Insurance indexes). Most of the companies included in the program's
peer group are also represented in the Standard & Poor's indexes.
Grants of Strategic Performance Units are made annually, and the target
value of the grants varies by position responsibility levels. The Committee
values the units by comparing CIGNA's annual return on equity to the average
annual return on equity of the peer companies, using a formula which permits a
negative adjustment to the annual accrued value. At the end of the three-year
performance period, the Committee may further adjust the earned value of each
unit downward as much as $25 (1/3 of its target value) for any three-year
performance period, based on an assessment of the factors that affected
strategic and financial performance during the period. The earned value will
range from zero to $200 per unit, with a target value of $75 per unit.
The other long-term compensation component is stock options. As noted
above, total long-term incentive pay opportunity targets correspond to the
median levels of such compensation for comparable positions in similarly sized
companies. The portion of such targets granted to the Named Executive Officers
in 1996 as stock options was determined by the Committee to focus management on
long-term results, to retain key executives, to continue to bring the
executives' option holdings in line with those of executives in similar
positions at competitor companies and to enhance the link with shareholder
interests. Stock options provide the right to purchase, at fair market value on
grant date, a fixed number of shares of CIGNA Common Stock during the term of
the option (up to ten years from the date of grant). Options are subject to
vesting periods of up to three years.
PERFORMANCE EVALUATION
For the Chief Executive Officer (CEO), approximately 20% of the total
compensation opportunity target is base salary and approximately 80% is variable
compensation that is at risk and tied to competitive corporate business results.
Thirty-five percent of the CEO's total compensation opportunity is based on
annual business
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<PAGE> 21
performance and 45% is tied to long-term, sustained corporate-wide results. The
CEO's current base salary approximates the median salary of CEOs of
comparably-sized companies. The CEO's total compensation opportunity is also
consistent with the median compensation for CEOs in comparable companies.
Factors reviewed in the Committee's assessment of the Corporation's and the
CEO's performance include profitability of each business, profit improvement,
growth in revenue from profitable products/services, customer service, expense
management, as well as specific measures that may vary by business activity,
e.g., combined ratio for property and casualty businesses, profit margin and
managed care membership growth in health care, and asset growth in the pension
business. The Committee decided to grant an above target bonus to the CEO
primarily based on CIGNA's outstanding stock performance and superior earnings
performance in 1996. Earnings in 1996 exceeded 1995 results and the 1996
operational plan by a substantial margin. CIGNA's 1996 return on equity also
significantly exceeded competitors' results, based on all available information.
Also taken into account were other factors, including business strategy
implementation, cost management and improvement year over year in most of the
company's businesses.
For the long-term Strategic Performance Unit Program award, the Committee
approved a $123 unit value (as shown in the Summary Compensation Table for
1995), distributed to the CEO in the form of half cash and half CIGNA 3-year
restricted shares, reflecting performance against competitors over the 1993-95
performance period. The value approved by the Committee reflects CIGNA's strong
performance over the three-year performance period compared to the peer group.
Value earned for the 1994-96 performance period will be determined by the
Committee in late April based on competitive performance.
The CEO's overall compensation package acknowledges a significant increase
in CIGNA's share value in 1996 (see Performance Graph on page 20), achievement
of continued improvements in property and casualty operating performance,
continuing strong performance in the other businesses, and cost reduction
actions that are expected to have a positive impact on future earnings.
For the CEO, the 1996 award of stock options is also shown in the Summary
Compensation Table. The option award was above target to recognize the 68% total
shareholder return achieved in 1995 and was intended to link the CEO's future
compensation opportunity to the creation of additional shareholder value.
People Resources Committee:
Alfred C. DeCrane, Jr., Chairman
Robert P. Bauman
Paul F. Oreffice
Charles R. Shoemate
Louis W. Sullivan, M.D.
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<PAGE> 22
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in cumulative
total return (change in the year end stock price plus reinvested dividends) to
CIGNA's Shareholders for the preceding five fiscal years (measured from December
31, 1991 to December 31, 1996) against (i) the Standard & Poor's (S&P)
Composite-500 Stock Index, and (ii) an average of the S&P Multi-line, Property &
Casualty and Life/Health Insurance indexes.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG CIGNA, S&P 500 INDEX AND S&P INSURANCE INDEXES**
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P INS.
(FISCAL YEAR COVERED) CIGNA S&P 500 INDEXES**
<S> <C> <C> <C>
12/31/91 $100 $100 $100
12/31/92 $101 $108 $122
12/31/93 $114 $118 $126
12/31/94 $121 $120 $123
12/31/95 $204 $165 $174
12/31/96 $276 $203 $216
</TABLE>
- ---------------
* Assumes that the value of the investment in CIGNA Common Stock and each index
was $100 on December 31, 1991 and that all dividends were reinvested.
** Equally weighted average of S&P Multi-line, Property & Casualty, and
Life/Health Insurance indexes. (In 1996, S&P renamed its Life Insurance
index; the index is currently known as the S&P Life/Health Insurance index.)
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's Executive Officers and Directors to file initial reports of
ownership and reports of changes in ownership of the Corporation's Common Stock
with the Securities and Exchange Commission and the New York Stock Exchange.
Executive Officers and Directors are required by SEC regulations to furnish the
Corporation with copies of all Section 16(a) forms they file. Based solely on a
review of the copies of such forms furnished to the Corporation and written
representations from the Corporation's Executive Officers and Directors, the
Corporation believes that none of its Executive Officers and Directors failed to
comply with Section 16(a) reporting requirements in 1996.
ADDITIONAL INFORMATION
The Corporation will bear the cost of soliciting proxies from its
Shareholders and will enlist the help of banks and brokerage houses in
soliciting proxies from their customers. The Corporation will reimburse these
institutions for out-of-pocket expenses. In addition to being solicited through
the mails, proxies may also be solicited personally or by telephone by the
Directors, officers and employees of the Corporation or its subsidiaries. The
Corporation has engaged Georgeson & Company, Inc. to assist in soliciting
proxies for a fee of approximately $22,000 plus reasonable out-of-pocket
expenses.
20
<PAGE> 23
1998 ANNUAL MEETING
The 1998 Annual Meeting of Shareholders will be held on Wednesday, April
22, 1998, at a location and a time to be designated by the Board. The Board is
empowered by the By-Laws of the Corporation to change this date if it deems that
advisable.
Proposals of Shareholders must be received by the Corporation no later than
November 19, 1997 to be eligible for inclusion under the rules of the Securities
and Exchange Commission in the Corporation's proxy materials for the 1998 Annual
Meeting of Shareholders and must otherwise comply with such rules.
Under the Corporation's By-Laws, proposals of Shareholders not included in
the proxy materials may be presented at the 1998 Annual Meeting of Shareholders
only if the Corporate Secretary has been notified of the nature of the proposal
and is provided certain additional information at least ninety days before the
1998 Annual Meeting and the proposal is a proper one for Shareholder action.
The Corporation's By-Laws also require that notice of nominations of
persons for election to the Board, other than those made by or at the direction
of the Board, must be received by the Corporate Secretary at least ninety days
before the 1998 Annual Meeting. The notice must present certain information
concerning the nominees and the Shareholder making the nominations, as set forth
in the By-Laws. The Corporate Secretary must also receive such nominee's written
consent to serve if elected.
CAROL J. WARD, Corporate Secretary
21
<PAGE> 24
APPENDIX A -- TEXT OF THE CIGNA EXECUTIVE INCENTIVE PLAN
ARTICLE 1
STATEMENT OF PURPOSE
The CIGNA Executive Incentive Plan is intended to provide annual incentive
bonuses to executive officers of the Company if annual performance goals are
achieved. The Plan is also intended to qualify as a performance based
compensation plan under Section 162(m) of the Internal Revenue Code.
ARTICLE 2
DEFINITIONS
The terms used in this Plan include the feminine as well as the masculine
gender and the plural as well as the singular, as the context in which they are
used requires. The following terms, unless the context requires otherwise, are
defined as follows:
2.1 "Award" means the incentive compensation determined by the Committee
under Section 4.4 of the Plan.
2.2 "Board" means the CIGNA board of directors.
2.3 "CIGNA" means CIGNA Corporation, a Delaware corporation, or any
successor.
2.4 "CIGNA LTIP" means the CIGNA Long-Term Incentive Plan, or any
successor plan under which grants of Common Stock or Restricted Stock
are authorized.
2.5 "Code" means the Internal Revenue Code of 1986, as amended.
2.6 "Committee" means the People Resources Committee of the Board or any
successor committee with responsibility for compensation, or any
subcommittee, as long as the number of Committee members and their
qualifications shall at all times be sufficient to meet the
requirements for "outside directors" under Section 162(m), as in
effect from time to time.
2.7 "Common Stock" means CIGNA common stock other than Restricted Stock.
2.8 "Company" means CIGNA and/or its Subsidiaries.
2.9 "Deferred Compensation Plan" means the Deferred Compensation Plan of
CIGNA Corporation and Participating Subsidiaries, a similar or
successor plan, or other arrangement for the deferral of compensation
specified by the Committee.
2.10 "Disability" means permanent and total disability as defined in Code
Section 22(e)(3).
2.11 "Employer" means the Company which employs a Participant during a
Performance Period.
2.12 "Executive Officer" means any Company employee who is an "executive
officer" as defined in Rule 3b-7 promulgated under the Exchange Act.
2.13 "Exchange Act" means the Securities Exchange Act of 1934.
2.14 "Participant" means an employee described in Article 3 of the Plan.
2.15 "Performance Period" means the period for which an Award may be made.
Unless otherwise specified by the Committee, the Performance Period
shall be a calendar year.
2.16 "Plan" means the CIGNA Executive Incentive Plan, as it may be amended
from time to time. This Plan is deemed to be a Qualifying Incentive
Plan under Section 9.1 of the CIGNA LTIP.
2.17 "Restricted Stock" means CIGNA common stock that is subject to
restrictions on sale, transfer, or other alienation for a period
specified by the Committee.
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2.18 "Retirement" means a Termination of Employment, after appropriate
notice to the Company, (a) on or after age 65 with eligibility for
immediate annuity benefits under a qualified pension or retirement
plan of the Company, or (b) upon such terms and conditions approved
by the Committee, or officers of the Company designated by the Board
or the Committee.
2.19 "SEC" means the Securities and Exchange Commission.
2.20 "Section 162(m)" means Code Section 162(m) and regulations
promulgated thereunder by the Secretary of the Treasury.
2.21 "Subsidiary" means any corporation of which more than 50% of the
total combined voting power of all classes of stock entitled to vote,
or other equity interest, is directly or indirectly owned by CIGNA;
or a partnership, joint venture or other unincorporated entity of
which more than a 50% interest in the capital, equity or profits is
directly or indirectly owned by CIGNA.
2.22 "Termination of Employment" means (a) the termination of the
Participant's active employment relationship with the Company, unless
otherwise expressly provided by the Committee, or (b) the occurrence
of a transaction by which the Participant's employing Company ceases
to be a Subsidiary.
ARTICLE 3
PARTICIPATION
Any Executive Officer designated by the Committee shall be a Participant in
the Plan and shall continue to be a Participant until any Award he may receive
has been paid or forfeited under the terms of the Plan.
ARTICLE 4
INCENTIVE AWARDS
4.1 OBJECTIVE PERFORMANCE GOALS. The Committee shall establish written,
objective performance goals for a Performance Period not later than 90 days
after the beginning of the Performance Period (but not after more than 25% of
the Performance Period has elapsed), or by some other date required or permitted
under Section 162(m). The objective performance goals shall be stated as
specific amounts of, or specific changes in, one or more of the financial
measures described in Section 4.2 of the Plan. The objective performance goals
need not be the same for different Performance Periods and for any Performance
Period may be stated: (a) as goals for CIGNA, for one or more of its
subsidiaries, divisions, business units, lines of business, or for any
combination of the foregoing; (b) on an absolute basis or relative to the
performance of other companies or of a specified index or indices, or be based
on any combination of the foregoing; and (c) separately for one or more of the
Participants, collectively for the entire group of Participants, or in any
combination of the two.
4.2 FINANCIAL MEASURES. The Committee shall use any one or more of the
following financial measures to establish objective performance goals under
Section 4.1 of the Plan: revenues, earnings, earnings per share, shareholders'
equity, return on equity, assets, return on assets, capital, return on capital,
book value, economic value added, operating margins, cash flow, shareholder
return, expenses, expense ratios, or market share. The Committee may specify any
reasonable definition of the financial measures it uses. Such definitions may
provide for reasonable adjustments and may include or exclude items, including
but not limited to: realized investment gains and losses; extraordinary, unusual
or non-recurring items; effects of accounting changes, currency fluctuations,
acquisitions, divestitures, reserve strengthening, asbestos and environmental
losses, or financing activities; expenses for restructuring or productivity
initiatives; and other non-operating items.
4.3 PERFORMANCE EVALUATION. Within a reasonable time after the close of a
Performance Period, the Committee shall determine whether the objective
performance goals established for that Performance Period have been met. If the
objective performance goals and any other material terms established by the
Committee have been met, the Committee shall so certify in writing.
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<PAGE> 26
4.4 AWARD. If the Committee has made the written certification under
Section 4.3 for a Performance Period, each Participant to whom the certification
applies shall be eligible for an Award for that Performance Period. The Award
for each such Participant shall consist of (a) cash in the amount of $3 million
and (b) in lieu of additional cash, 25,000 shares of Common Stock and/or
Restricted Stock to be paid under Article 9 of the CIGNA LTIP. For any
Performance Period, however, the Committee shall have the sole and absolute
discretion to reduce the amount of, or eliminate entirely, the Award to one or
more of the Participants. Payment of all or part of an Award in Common Stock or
Restricted Stock shall be made under and subject to the terms and conditions of
the CIGNA LTIP and the applicable grant.
4.5 PAYMENT OF THE AWARD.
(a) When the Committee makes its determination under Section 4.4, it
shall also determine in its sole discretion whether a payment of an Award
in the form of cash or Common Stock shall be made immediately or deferred
until a later date or the occurrence of a particular event. An Award in the
form of Restricted Stock shall be deemed granted by the Committee on the
date of the Award.
(b) If the Committee determines that payment of an Award is to be made
immediately, then as soon as practicable after the Committee's
determination under Section 4.4, but subject to Section 4.6(a), the
Employer shall pay the cash Award to the Participant and/or CIGNA
Corporation shall issue and deposit the Common Stock and/or Restricted
Stock into the stock account maintained for the Participant under the CIGNA
LTIP.
(c) If the Committee defers payment of a cash Award, then, on the date
or after the event specified by the Committee, the Employer shall make the
cash Payment, together with any interest or hypothetical investment return
as may be specified by the Committee in its deferral determination. If the
Committee defers payment of a Common Stock Award, the deferral shall be
treated as a deferral of Common Stock under the terms of the Deferred
Compensation Plan.
(d) The Participant may voluntarily defer receipt of an Award in the
form of cash or Common Stock under the terms of the Deferred Compensation
Plan. Any interest rate or hypothetical investment return credited on a
voluntarily deferred Award shall be one that will produce a rate of return
not considered to be an impermissible increase in compensation under
Section 162(m).
(e) Deferred Awards will not be funded but will be a general
obligation of the Employer and will be payable out of that Employer's
general assets.
(f) The Employer shall have the right to deduct from any cash Award
any applicable Federal, state and local income and employment taxes and any
other amounts that the Company is required to deduct. Deductions from an
Award in the form of Common Stock and/or Restricted Stock shall be governed
by Section 15.6 of the CIGNA LTIP and the terms of the Award.
4.6 ELIGIBILITY FOR PAYMENTS.
(a) Except as otherwise provided in this Section 4.6:
(1) A Participant shall be eligible to receive an Award for a
Performance Period only if the Participant is employed by the Company
continuously from the beginning of the Performance Period to the date of
the Committee's determination under Section 4.4; and
(2) A Participant shall be eligible to receive payment of an Award
deferred by the Committee only if the Participant is also employed by
the Company continuously from the date of the Committee's determination
under Section 4.4 to the date or event specified by the Committee.
(b) Under paragraph 4.6(a), a leave of absence that lasts less than
three months and that is approved in accordance with applicable Company
policies is not a break in continuous employment. In the case of a leave of
absence of three months or longer, (1) the Committee shall determine
whether the leave of absence constitutes a break in continuous employment
and (2) if a Participant is on a leave of absence on the date that an Award
or payment of the Award is to be made, the Committee may require that the
Participant return to active employment with the Company at the end of the
leave of absence as
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a condition of receiving the Award or payment. Any determination as to a
Participant's eligibility for an Award or payment under this Section 4.6(b)
may be deferred for a reasonable period after such return.
(c) If a Participant's Termination of Employment occurs after the end
of a Performance Period but before the Committee makes an Award, and the
Termination of Employment is on account of Retirement, death or Disability,
the Committee shall determine whether to make an Award to or on behalf of
the Participant.
(d) If a Participant's Termination of Employment occurs after the
Committee makes a deferred Award under paragraph 4.5(a) but before the
Award payment is made:
(1) The Award payment shall be made as if the Participant had
remained continuously employed until the date of payment if the
Termination of Employment is on account of Disability;
(2) The Award payment shall be made as soon as practicable (and the
payee shall be determined under the provisions of the Deferred
Compensation Plan applicable to distributions upon the death of a
participant), if the Termination of Employment is on account of death;
and
(3) The Committee shall determine whether an Award payment shall be
made to the Participant or forfeited if the Termination of Employment is
on account of Retirement.
(e) Notwithstanding any other provision of the Plan, if a
Participant's Termination of Employment occurs after he receives an Award
in the form of Restricted Stock, the terms of the stock grant and the CIGNA
LTIP shall be applicable.
ARTICLE 5
ADMINISTRATION
5.1 GENERAL ADMINISTRATION. The Plan is to be administered by the
Committee, subject to such requirements for review and approval by the Board as
the Board may establish. Subject to the terms and conditions of the Plan, the
Committee is authorized and empowered in its sole discretion to select
Participants and to make Awards in such amounts and upon such terms and
conditions as it shall determine.
5.2 ADMINISTRATIVE RULES. The Committee shall have full power and
authority to adopt, amend and rescind administrative guidelines, rules and
regulations pertaining to this Plan and to interpret the Plan and rule on any
questions respecting any of its provisions, terms and conditions.
5.3 COMMITTEE MEMBERS NOT ELIGIBLE. No member of the Committee shall be
eligible to participate in this Plan.
5.4 DECISIONS BINDING. All decisions of the Committee concerning this Plan
shall be binding on CIGNA and its Subsidiaries and their respective boards of
directors, and on all Participants and other persons claiming rights under the
Plan.
5.5 SECTION 162(m); SHAREHOLDER APPROVAL. Awards under this Plan are
intended to satisfy the applicable requirements for the performance-based
compensation exception under Section 162(m). It is intended that the Plan be
administered, interpreted and construed so that Award payments remain tax
deductible to the Company. Any Awards under this Plan shall be contingent upon
shareholder approval of the Plan in accordance with Section 162(m) and
applicable Treasury regulations. Unless and until such shareholder approval is
obtained, no Award shall be made under this Plan.
ARTICLE 6
AMENDMENTS; TERMINATION
The Plan may be amended or terminated by the Board or Committee. All
amendments to this Plan, including an amendment to terminate the Plan, shall be
in writing. An amendment shall not be effective without the prior approval of
the shareholders of CIGNA Corporation if such approval is necessary to
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continue to qualify Awards as performance based compensation under Section
162(m), or otherwise under Internal Revenue Service or SEC regulations, the
rules of the New York Stock Exchange or any other applicable law or regulations.
Unless otherwise expressly provided by the Board or Committee, no amendment to
this Plan shall apply to Awards made before the effective date of the amendment.
A Participant's rights with respect to any Awards made to him may not be
abridged by any amendment, modification or termination of the Plan without his
individual consent.
ARTICLE 7
OTHER PROVISIONS
7.1 DURATION OF THE PLAN. This Plan is effective as of January 1, 1997
(the "Effective Date"), subject to approval by CIGNA shareholders. The Plan
shall remain in effect until all Awards made under this Plan have been paid or
forfeited under the terms of this Plan, and all Performance Periods related to
Awards made under the Plan have expired. No Awards may be made under the Plan
for any Performance Period that would end after December 31, 2001, unless the
Board, subject to any shareholder approval that may be required to continue to
qualify the Plan as a performance-based plan under Section 162(m), extends the
Plan.
7.2 AWARDS NOT ASSIGNABLE. No Award, or any right thereto, shall be
assignable or transferable by a Participant except by will or by the laws of
descent and distribution. Any other attempted assignment or alienation shall be
void and of no force or effect.
7.3 PARTICIPANT'S RIGHTS. The right of any Participant to receive any
Award payments under the provisions of the Plan shall be an unsecured claim
against the general assets of the Employer. The Plan shall not create, nor be
construed in any manner as having created, any right by a Participant to any
Award for a Performance Period because of a Participant's Participation in the
Plan for any prior Performance Period, or because the Committee has made a
written certification under Section 4.3 of the Plan for the Performance Period.
7.4 TERMINATION OF EMPLOYMENT. CIGNA and each Subsidiary retain the right
to terminate the employment of any employee at any time for any reason or no
reason, and an Award is not, and shall not be construed in any manner to be, a
waiver of such right.
7.5 SUCCESSORS. Any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of CIGNA's
business or assets, shall assume CIGNA's liabilities under this Plan and perform
any duties and responsibilities in the same manner and to the same extent that
CIGNA would be required to perform if no such succession had taken place.
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DIRECTIONS BY CAR:
From the West:
- --------------------------------------------------------------------------------
Take the Pennsylvania Turnpike (Interstate 276) to Valley Forge exit #24.
Follow Interstate 76 East (Schuylkill Expressway) to Interstate 476 North
(Plymouth Meeting). Follow 476 North for 2.7 miles to exit 7A Conshohocken.
At end of ramp turn right onto Ridge Pike and proceed for 3.2 miles through six
traffic lights to the seventh traffic light at Manor Road. Turn right onto
Manor Road. Proceed 200 yards and turn right into Eagle Lodge.
From the North:
- --------------------------------------------------------------------------------
Take the New Jersey Turnpike to the Pennsylvania Turnpike. Follow 276 West,
exit at #25 Norristown. Bear right when exiting the toll booth. Proceed down
ramp to Germantown Pike (East). Follow Germantown Pike 3 traffic lights (1.8
miles). At third traffic light turn right onto Joshua Rd. At first traffic
light turn left onto Ridge Pike. Follow Ridge Pike for 1.5 miles and turn
right onto Manor Rd. Proceed 200 yards and turn right into Eagle Lodge.
From the South:
- --------------------------------------------------------------------------------
Take Interstate 95 North to 476 North (Plymouth Meeting). Follow 476 North for
18 miles to exit 7A Conshohocken. At end of ramp turn right onto Ridge Pike
and proceed for 3.2 miles through six traffic lights to the seventh traffic
light at Manor Road. Turn right onto Manor Road. Proceed 200 yards and turn
right into Eagle Lodge.
From Philadelphia International Airport:
- --------------------------------------------------------------------------------
Take Interstate 95 South to 476 North (Plymouth Meeting). Follow 476 North for
18 miles to exit 7A Conshohocken. At end of ramp turn right onto Ridge Pike
and proceed for 3.2 miles through six traffic lights to the seventh traffic
light at Manor Road. Turn right onto Manor Road. Proceed 200 yards and turn
right into Eagle Lodge.
From Center City Philadelphia:
- --------------------------------------------------------------------------------
Follow Interstate 76 West (Schuylkill Expressway) to Interstate 476 North
(Plymouth Meeting). Follow 476 North for 2.7 miles to exit 7A Conshohocken.
At end of ramp turn right onto Ridge Pike and proceed for 3.2 miles through six
traffic lights to the seventh traffic light at Manor Road. Turn right onto
Manor Road. Proceed 200 yards and turn right into Eagle Lodge.
[MAP]
<PAGE> 30
CIGNA CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Robert A. Lukens, the
Corporation's Assistant Corporate Secretary, and Carol J. Ward, the
Corporation's Corporate Secretary, or either of them, proxies with full
power of substitution and each of them is hereby authorized to represent
P the undersigned and to vote all shares of the Corporation held by the
undersigned at the Annual Meeting of Shareholders, to be held at The
R Conference Center at Eagle Lodge, Ridge Pike & Manor Road, Lafayette
Hill, Pennsylvania on April 23, 1997, at 1:00 p.m. or at any adjournment
O thereof, on the matters set forth below:
X 1. ELECTION OF DIRECTORS, Nominees for term expiring April 2000:
Alfred C. DeCrane, Jr., Paul F. Oreffice,
Y Wilson H. Taylor and Harold A. Wagner.
2. RATIFICATION OF THE APPOINTMENT of Price Waterhouse LLP as
Independent Accountants.
3. APPROVAL OF THE CIGNA Executive Incentive Plan.
In their discretion, upon such other matters as may properly come before
the meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES [SEE REVERSE SIDE], BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO
VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS
CARD.
-----------
SEE REVERSE
SIDE
-----------
<PAGE> 31
<TABLE>
<CAPTION>
<S> <C>
- ----- PLEASE MARK YOUR
X 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 PROPOSALS 1, 2 AND 3.
- -------------------------------------------------------------------------------------- --------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3. Mark here if you would like
- -------------------------------------------------------------------------------------- your voting instructions to
FOR WITHHELD FOR AGAINST ABSTAIN be confidential pursuant to
1. Election of 2. Ratification of the procedures on confidential
Directors. [ ] [ ] Appointment [ ] [ ] [ ] voting described in the 1997
(See reverse) of Accountants. Proxy Statement. Marking this
box will not absolve you of [ ]
For, except vote withheld from the 3. Approval of the any independent fiduciary or
following nominee(s): CIGNA Executive [ ] [ ] [ ] other legal obligation to report
Incentive Plan. how you voted nor prevent the
- ---------------------------------------- inspectors from disclosing your
vote if required by law or if
otherwise permitted by the
procedures.
- -------------------------------------------------------------------------------------- --------------------------------------
Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full
title as such.
---------------------------------------------------------
Signature Date
---------------------------------------------------------
Signature Date
</TABLE>
