<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. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CIGNA Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[CIGNA LOGO]
CIGNA Corporation
One Liberty Place
1650 Market Street
Philadelphia, PA
19192-1550
March 18, 1998
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
CIGNA Corporation, which will be held at The Conference Center at Eagle Lodge,
Ridge Pike & Manor Road, Lafayette Hill, Pennsylvania on Wednesday, April 22,
1998, at 1:00 p.m. local time. We are holding the Annual Meeting for the
following purposes:
1. to elect four Directors for terms expiring in April 2001 and one
Director for a term expiring in April 1999;
2. to ratify the appointment of independent accountants for 1998;
3. to approve an amendment to Article Fourth of the Certificate of
Incorporation to increase the authorized Common Stock of the Corporation
from 200,000,000 shares, par value $1.00 per share, to 600,000,000
shares, par value $.25 per share, and to effect a split of the issued
Common Stock of the Corporation by changing each issued share of Common
Stock into three shares of Common Stock; and
4. to transact any other business that may properly come before the
meeting.
Shareholders of record at the close of business on February 23, 1998 are
entitled to notice of the Annual Meeting. They are also entitled to vote at the
Annual Meeting and any adjournment of it.
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........... 6
Board of Directors and Committees................... 7
Compensation of Directors........................... 8
Certain Transactions................................ 9
Item 2. Ratification of Appointment of Independent
Accountants............................................... 9
Item 3. Amendment of Certificate of Incorporation........... 10
Item 4. Other Matters....................................... 11
Vote Required............................................... 12
Executive Compensation...................................... 13
Board Compensation Committee Report on Executive
Compensation.............................................. 19
Performance Graph........................................... 22
Section 16(a) Beneficial Ownership Reporting Compliance..... 22
Additional Information...................................... 23
1999 Annual Meeting of Shareholders......................... 23
Appendix A -- Text of the Amendment to the Certificate of
Incorporation............................................. A-1
</TABLE>
GENERAL INFORMATION
This Proxy Statement and the enclosed proxy card are first being sent to
Shareholders with the 1997 Annual Report on or about March 18, 1998. They relate
to the Annual Meeting of Shareholders of CIGNA Corporation to be held at The
Conference Center at Eagle Lodge, Lafayette Hill, Pennsylvania, on Wednesday,
April 22, 1998 at 1:00 p.m. local time. The Board of Directors of CIGNA is
soliciting your proxy for use at the Annual Meeting and at any adjournment of
the Annual Meeting 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 of the Annual
Meeting by valid proxies received pursuant to this solicitation will be voted in
accordance with your instructions. If your proxy card is signed and returned
without specific instructions, the shares will be voted as recommended by the
Board. You 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.
CIGNA will handle all voted proxies in a manner which protects those
Shareholders who request voting privacy. Neither the identity of these
Shareholders nor their votes will be disclosed except: as necessary to meet any
legal requirements; in limited circumstances such as a contested Board election;
to permit the
1
<PAGE> 4
independent inspectors of election 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 CIGNA of the total number of shares
voted for, voted against or abstaining from voting on each proposal and may tell
CIGNA whether or not a particular account has voted. The inspectors may tell
CIGNA how each account not instructing confidentiality has voted. Except
pursuant to one of the exceptions described above, the inspectors may not tell
CIGNA how any account instructing confidentiality has voted. Following the
Annual Meeting, the inspectors will retain all proxy cards.
As of February 23, 1998, 72,129,426 shares of CIGNA 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 February 23, 1998.
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
of February 28, 1998 (except as provided in note 9), by each Director (including
the Chief Executive Officer), by the four other 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, 1998, by non-employee Directors and Executive Officers
under deferred compensation arrangements.
<TABLE>
<CAPTION>
SHARES OF
NAME COMMON STOCK(1) EQUIVALENTS(8)
---- --------------- --------------
<S> <C> <C>
Directors
Robert P. Bauman...................................... 3,118(2) 5,870
Robert H. Campbell.................................... 1,767(2) 1,530
Alfred C. DeCrane, Jr................................. 2,636(2) 5,491
Bernard M. Fox........................................ 1,626(2) 1,167
Peter N. Larson....................................... 1,000(9) 52
Marilyn W. Lewis...................................... 2,058(2) 676
Paul F. Oreffice...................................... 3,516(2) 2,655
Charles R. Shoemate................................... 3,793(2) 1,005
Louis W. Sullivan, M.D................................ 2,123(2) 1,041
Wilson H. Taylor...................................... 231,264(3,4) 118,467
Harold A. Wagner...................................... 2,572(2,9) 76
Carol Cox Wait........................................ 1,582(2) 804
Named Executive Officers
James G. Stewart...................................... 120,444(3,4) 64,657
Gerald A. Isom........................................ 108,767(3,4) 0
H. Edward Hanway...................................... 70,051(3,4) 33,925
Donald M. Levinson.................................... 69,409(3,4) 40,404
Directors, Nominees and all Executive Officers as a
group (23 persons)................................. 849,277(5,6,7) 344,962
</TABLE>
- ---------------
(1) No Director or Executive Officer beneficially owns more than 1% of the
outstanding shares of Common Stock. Directors, Nominees and Executive
Officers as a group beneficially own 1.2% of the outstanding shares of
Common Stock.
(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.
2
<PAGE> 5
(3) Includes shares which may be acquired within 60 days upon the exercise of
outstanding stock options, as follows: Mr. Taylor -- 162,546, Mr.
Stewart -- 90,148, Mr. Isom -- 68,430, Mr. Hanway -- 60,115, and Mr.
Levinson -- 52,836.
(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, 1998, as follows: Mr.
Taylor -- 6,794, Mr. Stewart -- 3,311, Mr. Isom -- 2,811, Mr.
Hanway -- 2,948, and Mr. Levinson -- 2,059.
(5) As of February 28, 1998, the CIGNA Pension Plan (the "Pension Plan") held a
total of 97,500 shares, or approximately .14%, 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, 1998, the CIGNA Stock Fund (the "Stock Fund") of the
CIGNA 401(k) Plan (the "401(k) Plan"), formerly the Savings and Investment
Plus Plan, held a total of 929,072 shares of Common Stock, or approximately
1.29% of the then-issued and outstanding Common Stock. All shares in the
Stock Fund are owned by the 401(k) 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 401(k) Plan Trustee votes the
shares in accordance with the instructions of an advisory committee
consisting of members of CIGNA's management. Approximately 858 shares in the
Stock Fund are attributable to the accounts of two Executive Officers and
are included in the shares shown above as beneficially owned by them.
(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 602,696 shares of Common Stock
which may be acquired within 60 days upon exercise of stock options and
40,432 shares which are restricted as to disposition.
(8) As of February 28, 1998, non-employee Directors held 20,367 Equivalents, and
Executive Officers held 324,595 Equivalents. Equivalents track the economic
performance of Common Stock, but carry no voting rights.
(9) Includes 1,000 shares acquired on March 2, 1998.
3
<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 three Schedules 13G (reporting December 31, 1997 ownership) filed pursuant to
the Securities Exchange Act of 1934 and received by the Corporation during
February 1998. The following table and footnotes have been prepared in reliance
upon such filings:
<TABLE>
<CAPTION>
AMOUNT
AND NATURE
OF BENEFICIAL
OWNERSHIP
REPORTED PERCENT
ON SCHEDULE OF CLASS
13G AS OF AS OF
NAME AND ADDRESS OF BENEFICIAL OWNER 12/31/97 12/31/97
------------------------------------ ------------- --------
<S> <C> <C>
Sanford C. Bernstein & Co., Inc. ("Bernstein") 6,263,994(1) 8.66%
767 Fifth Avenue
New York, NY 10153
Wellington Management Company, LLP ("Wellington") 4,276,700(2) 5.91%
75 State Street
Boston, MA 02109
Swiss Bank Corporation ("Swiss Bank") 3,868,333(3) 5.35%
Aeschenplatz 6 CH-4002
Basel, Switzerland
</TABLE>
- ---------------
(1) Bernstein reported that as of December 31, 1997 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 3,368,544, shared voting power as to 749,963, and sole
dispositive power as to all, of these shares.
(2) Wellington reported that as of December 31, 1997 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. Wellington also reported sole voting
power as to none, shared voting power as to 323,700, and shared
dispositive power as to all, of these shares.
(3) The Schedule 13G was filed jointly by Swiss Bank Corporation and
its subsidiaries, SBC Holding (USA), Inc., Brinson Partners, Inc.
and Brinson Holdings, Inc. As of December 31, 1997, Swiss Bank and
SBC reported shared voting and dispositive power over this number
of shares. Brinson Partners and Brinson Holdings reported shared
voting and dispositive power over 3,859,472 shares.
In their respective Schedules 13G, Bernstein, Wellington and Swiss Bank
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 CIGNA.
ITEM 1. ELECTION OF DIRECTORS
The Board is divided into three classes. The By-Laws of the Corporation
provide that at each Annual Meeting, 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 nominated four Directors to be elected at
the Annual Meeting for terms expiring in April 2001 and one for a term expiring
in April 1999 or, in each case, until their successors shall have been elected
and qualified.
The Board recommends election of the five incumbent Nominees for terms
expiring in April 2001 and 1999 as indicated below. All of the incumbent
Nominees' current terms will expire as of the 1998 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.
4
<PAGE> 7
The Board has set 70 years as the retirement age for non-employee
Directors. Pursuant to this policy, incumbent Director Paul F. Oreffice will
retire as of the 1998 Annual Meeting.
Each non-employee Director is required to submit a resignation for the
Board's consideration upon discontinuing the principal position or affiliation
held at the time of such Director's most recent election to the Board. Pursuant
to this policy, Bernard M. Fox submitted his resignation to be effective as of
the 1998 Annual Meeting.
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 and INA Corporation.
NOMINEE FOR ELECTION FOR TERM EXPIRING IN APRIL 1999
PETER N. LARSON, 58 Director since 1997
Chairman and Chief Executive Officer of Brunswick Corporation (manufacturer
of recreational equipment and supplies) since April 1995. Prior to joining
Brunswick, he had been Worldwide Chairman of the Consumer and Personal Care
Group of Johnson & Johnson since 1994 and Chairman, Consumer Products Group,
Johnson & Johnson since 1991. Mr. Larson is also a Director of COMPAQ Computer
Corporation and Coty, Inc.
NOMINEES FOR ELECTION FOR TERMS EXPIRING IN APRIL 2001
ROBERT P. BAUMAN, 66 Director since 1990
Deputy Chairman of BTR plc (manufacturer of automotive power drives,
process control, packaging and materials) since October 1997. 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 healthcare products). He is a Director of
Morgan Stanley, Dean Witter, Discover & Co.; Reuters Holdings, plc; Russell
Reynolds Associates, Inc.; Union Pacific Corporation and Hathaway Holdings Inc.
ROBERT H. CAMPBELL, 60 Director since 1992
Chairman of the Board and Chief Executive Officer of Sun Company, Inc.
(domestic refiner and marketer 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, 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, 58 Director since 1991
Chairman, President, and Chief Executive Officer of Bestfoods (formerly CPC
International Inc. -- consumer foods company) since 1990. Mr. Shoemate has
served as a Director of Bestfoods since 1988. 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.
5
<PAGE> 8
LOUIS W. SULLIVAN, M.D., 64 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 continued to hold 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 2000
ALFRED C. DECRANE, JR., 66 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, as Chief Executive Officer from April
1993 until June 1996, as a Director from 1977 until June 1996, and as its
President from 1983 through 1986. He also serves as a Director of Bestfoods
(formerly CPC International Inc.), Corn Products International and Harris
Corporation.
WILSON H. TAYLOR, 54 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, 62 Director since 1997
Chairman, President and Chief Executive Officer of Air Products and
Chemicals, Inc. (supplier of industrial gases and related equipment and selected
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 1999
MARILYN WARE LEWIS, 54 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. She is also a
Director of Penn Fuel Gas Company Inc., and PP&L Resources and also serves as
the Chief Executive Officer of The Ware Family Offices.
CAROL COX WAIT, 55 Director since 1995
Director, President and Chief Executive Officer, Committee for a
Responsible Federal Budget (non-profit educational organization) since 1981. Ms.
Wait is also President of Carol Cox and Associates, a Washington, D.C.
consulting firm.
6
<PAGE> 9
BOARD OF DIRECTORS AND COMMITTEES
The Board held six meetings during 1997. 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 met
once during 1997. 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 Robert H. Campbell (Chairman),
Bernard M. Fox, Peter N. Larson, Marilyn Ware Lewis, Harold A. Wagner and Carol
Cox Wait. The Audit Committee met five times in 1997. 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; reviewing and approving audit plans and the
Corporation's Annual Report on Form 10-K; reviewing and advising the Board
concerning the work of internal auditors and independent accountants; reviewing,
monitoring as appropriate and advising the Board with respect to compliance with
laws and regulations, any material regulatory examinations, illegal acts or
contingencies. The Committee also recommends the independent accountants for
appointment by the Board. All members are non-employee Directors.
CORPORATE GOVERNANCE COMMITTEE
The Corporate Governance Committee held three meetings in 1997. 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 13, 1998 for the Committee's
consideration in advance of the 1999 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. All members are non-employee Directors.
FINANCE COMMITTEE
The Finance Committee held four meetings in 1997. The members of the
Finance Committee are Paul F. Oreffice (Chairman), Bernard M. Fox, Peter N.
Larson, Charles R. Shoemate, Harold A. Wagner 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. All members are non-employee Directors.
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 six meetings in 1997. 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. All members are non-employee Directors.
COMPENSATION OF DIRECTORS
Non-employee Directors are compensated for their services on the Board and
its committees as follows:
- Annual retainer of $38,000 for service on the Board.
- Annual retainer (for Committee members but not the Committee Chairman) of
$2,500 for service on each standing Committee (except the Executive
Committee).
- Annual retainer of $7,500 for services as Committee Chairman (except the
Executive Committee Chairman).
- Attendance fee of $1,250 for each Board and Committee meeting.
- Directors receive $20,000 of the retainer for Board service in shares of
Common Stock or that amount is deferred into Equivalents, and ultimately
paid in cash. Directors may elect to receive payment of the remaining
retainers and meeting fees in cash or in shares of Common Stock, or
partially in cash and partially in shares of Common Stock. Directors 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 401(k)
Plan. Hypothetical dividends paid on Equivalents may be reinvested in
Equivalents or at 401(k) Plan rates specified above.
- The Retirement and Consulting Plan for Directors of CIGNA Corporation was
frozen effective December 31, 1996. Directors who had vested rights under
this Plan were permitted continued eligibility under it. One Director who
is still active on the Board elected to maintain his rights 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 relinquished his rights under the frozen
Plan. The account was credited with Equivalents in an amount based
upon the Director's accrued benefit under the frozen Plan. The
Equivalents will be payable in cash upon death or termination of Board
service. Each participating, active Director's Restricted Deferred
Compensation Account will be credited annually with $11,000 of
Equivalents. This new plan more closely aligns Directors' interests
with those of shareholders.
- The frozen Retirement and Consulting Plan provides for annual payments
equal to the annual retainer in effect at the time of the Director's
retirement. If the incumbent Director who did not relinquish his
rights under the Plan retires at the mandatory retirement age, he will
receive those payments for life. If he retires prior to the mandatory
retirement age, he will receive those payments for a period equal to
the number of months served as a Director of CIGNA or a predecessor
company, or he 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
8
<PAGE> 11
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.
- Pursuant to the terms of the Restricted Stock Plan for Non-Employee
Directors of CIGNA Corporation, 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. A Director cannot transfer his or her shares until the
later of 1) six months after the date of grant or 2) the date on which
service as a Director terminates due to death, disability, retirement or
a change of control. For this purpose, retirement means ceasing to be a
Director on or after the age of 70 or on or after age 65 with the consent
of a majority of the members of the Board other than the eligible
Director. A Director forfeits the shares if his or her service terminates
for any other reason. 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 $204,000. Directors who elected to do so prior to December 20, 1982
participate in a life insurance program which was available to employees
of Connecticut General Corporation prior to the formation of CIGNA.
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 1998.
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 1997. 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
1997. 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 1997, various CIGNA companies engaged, in the ordinary course of
business, in various transactions with Bernstein, Wellington and Swiss Bank,
each beneficial owners of more than five percent of the Corporation's
outstanding Common Stock (please see page 4 for more information about these
entities). These transactions included, in the case of Bernstein, commercial
paper transactions; in the case of Wellington, commercial paper transactions and
investment management services; and in the case of Swiss Bank, commercial paper
transactions, investment management, investment banking, health care and
insurance services.
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 1998. Although not required,
the Board requests that Shareholders ratify this appointment. If the
Shareholders do not ratify this appointment, the Board will reconsider the
appointment.
Price Waterhouse LLP has served as independent accountants for CIGNA and
its subsidiaries since 1983, and for Connecticut General Corporation and its
subsidiaries since 1967.
9
<PAGE> 12
Price Waterhouse LLP has advised the Corporation that its representatives
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. AMENDMENT OF CERTIFICATE OF INCORPORATION
Description of the Proposed Amendment and Vote Required
On February 25, 1998, the Board of Directors unanimously adopted
resolutions approving a proposal to amend Article Fourth of the Corporation's
Certificate of Incorporation in order to:
(i) increase the number of shares of Common Stock which the
Corporation is authorized to issue from 200,000,000, par value $1.00 per
share, to 600,000,000, par value $.25 per share; and
(ii) split the Common Stock of the Corporation by changing each issued
share of Common Stock, par value $1.00 per share, into three (3) shares of
Common Stock, par value $.25 per share.
The Board of Directors determined that this amendment is advisable and
directed that the proposed amendment be considered at the Annual Meeting of
Shareholders to be held April 22, 1998. The affirmative vote of the holders of a
majority of the outstanding shares of Common Stock of the Corporation is
required to approve the proposed amendment.
The full text of the proposed amendment to the Certificate of Incorporation
is set forth in Appendix A to this Proxy Statement. This amendment will not
affect the number of shares of Preferred Stock authorized, which is 25,000,000
shares, par value $1.00 per share.
Purposes and Effects of Increasing the Number of Authorized Shares of Common
Stock
The additional 400,000,000 shares of Common Stock would be a part of the
existing class of Common Stock and, if and when issued, would have the same
rights and privileges as the shares of Common Stock presently issued and
outstanding. The holders of Common Stock of the Corporation are not entitled to
preemptive rights or cumulative voting.
The Board of Directors believes that it is desirable to preserve the
present proportion of authorized and issued shares to authorized but unissued
shares, thus maintaining the same relative degree of flexibility for the
Corporation in meeting future stock needs. Such needs could include the sale of
stock to obtain additional capital funds, the purchase of property, the
acquisition of other companies and other corporate purposes. As of February 28,
1998, the Corporation had 88,109,595 shares of Common Stock authorized and
issued, of which 15,865,671 were held in the treasury of the Corporation. Of the
111,890,405 shares of Common Stock authorized but unissued, 10,331,578 were
reserved for issuance under the Corporation's stock compensation plans and other
benefit plans for employees and directors, and the remaining were unreserved. Of
the additional shares provided for by the proposed amendment, as of February 28,
1998, approximately 176,219,190 shares would be required to be reserved for
issuance to effect the three-for-one stock split.
The Board of Directors also believes that it is in the best interests of
the Corporation to decrease the par value of its shares, which will permit the
Corporation to increase the amount of surplus available for the payment of
dividends and the repurchase of capital stock.
Purposes and Effects of Proposed Three-for-One Stock Split
The Board of Directors anticipates that the increase in the number of
outstanding shares of Common Stock of the Corporation resulting from a
three-for-one stock split will place the market price of the Common Stock in a
range more attractive to investors, particularly individuals, and may result in
a broader market for the shares. The Corporation will apply for listing on the
New York, Philadelphia and Pacific Stock Exchanges
10
<PAGE> 13
(on which shares of the Corporation's Common Stock are listed for trading) of
the additional shares of Common Stock to be issued.
The Corporation has been advised by tax counsel that the proposed stock
split would result in no gain or loss or realization of taxable income to owners
of Common Stock under existing United States Federal income tax laws. The cost
basis for tax purposes of each new share and each retained share of Common Stock
would be equal to one-third of the cost basis for tax purposes of the
corresponding share immediately preceding the stock split. In addition, the
holding period for the additional shares issued pursuant to the stock split
would be deemed to be the same as the holding period for the original share of
Common Stock. The laws of jurisdictions other than the United States may impose
income or other taxes on the issuance of the additional shares. Shareholders are
urged to consult their tax advisors with respect to the laws of jurisdictions
outside the United States and with respect to tax consequences under U.S. state
and local laws.
If the Shareholders dispose of any of their shares subsequent to the stock
split, they may pay higher brokerage commissions on the same relative interest
in the Corporation because that interest is represented by a greater number of
shares. Shareholders may wish to consult their brokers to ascertain the broker
commission that would be charged for disposing of the greater number of shares.
In accordance with the various stock compensation plans and other employee
benefit plans of the Corporation, after the stock split, it will be necessary to
triple both the aggregate number of shares that may be sold under such plans and
the number of shares covered by outstanding options, restricted stock awards and
Common Stock equivalents granted under such plans. In addition, the exercise
price per share of the options granted under such plans will be divided by
three.
If the proposed amendment is adopted, approximately $22 million will be
transferred from the Corporation's Common Stock account to its additional
paid-in capital account with no effect on total Shareholders' equity. The number
of shares issued and outstanding, reserved for issuance and held in the treasury
would triple.
Record Date of Stock Split and Issuance of Shares for Stock Split
If the proposed amendment is adopted, each Shareholder of record at the
close of business on May 4, 1998 (the "Stock Split Record Date"), would be the
record owner of, and entitled to receive, two additional shares of Common Stock
for each share of Common Stock then owned of record by such Shareholder. The
effective date of the proposed amendment of Article Fourth of the Corporation's
Certificate of Incorporation will be the same as the Stock Split Record Date.
PLEASE DO NOT DESTROY OR SEND YOUR PRESENT STOCK CERTIFICATES TO THE
CORPORATION. IF THE PROPOSED AMENDMENT IS ADOPTED, THOSE CERTIFICATES WILL
REMAIN VALID FOR THE NUMBER OF SHARES SHOWN THEREON, AND SHOULD BE CAREFULLY
PRESERVED BY YOU. Distribution of the additional shares is expected to occur on
May 15, 1998. The distribution will be made in book-entry form by crediting on
the Corporation's books the additional shares of Common Stock as a result of the
stock split and by mailing an account statement showing the credited shares to
each Shareholder of record on the Stock Split Record Date. Shareholders of
record as of the Stock Split Record Date may request a physical certificate from
the Corporation's transfer agent for the additional shares they are entitled to
receive as a result of the stock split. If the proposed amendment is approved,
additional instructions will be mailed to Shareholders on May 15, 1998.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS PROPOSAL.
ITEM 4. OTHER MATTERS
The Board of Directors knows of no matters to be brought before the Annual
Meeting other than the three listed in the Notice. If other matters are properly
presented to Shareholders for a vote at the meeting, the Board of Directors
intends 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.
11
<PAGE> 14
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. The By-Laws also provide 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 Certificate of Incorporation
or By-Laws. Abstentions and broker non-votes are 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 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. The proposed
amendment to the Certificate of Incorporation of the Corporation will be adopted
by approval of a majority of the outstanding shares of Common Stock.
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 amendment to the Certificate of Incorporation increasing the number of
shares of authorized Common Stock and effecting a 3-for-1 stock split.
12
<PAGE> 15
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 1997 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION(1) AWARDS PAYOUTS
---------------------------- ------------------------ ---------
(A) (B) (C) (D) (F) (G) (I)
NAME RESTRICTED SECURITIES (H) ALL OTHER
AND STOCK UNDERLYING LTIP COMPEN-
PRINCIPAL SALARY BONUS AWARD(S) OPTIONS PAYOUTS SATION
POSITION YEAR ($) ($) ($)(2) (#) ($)(3) ($)(4)
--------- ---- ------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Wilson H. Taylor.......................... 1997 970,200 2,300,000 0 333,317 -- 118,391
Chairman and 1996 917,900 2,600,000 0 176,073 1,066,725 89,139
Chief Executive Officer 1995 871,500 1,575,000 391,765 52,000 385,382 71,100
James G. Stewart.......................... 1997 558,300 725,000 0 166,214 -- 44,921
Executive Vice President 1996 531,900 650,000 0 82,998 472,725 51,570
and Chief Financial Officer 1995 501,900 800,000 175,027 30,000 172,300 40,600
Gerald A. Isom............................ 1997 543,300 625,000 0 131,044 -- 32,658
President, CIGNA 1996 525,000 525,000 0 60,095 472,725 52,797
Property & Casualty 1995 518,300 575,000 175,027 43,695 172,300 36,500
H. Edward Hanway.......................... 1997 486,500 525,000 0 125,704 -- 41,526
President, CIGNA 1996 434,800 525,000 0 43,906 472,725 38,650
HealthCare 1995 339,800 550,000 106,295 18,000 104,583 27,100
Donald M. Levinson........................ 1997 440,600 550,000 0 123,427 -- 37,774
Executive Vice President 1996 405,600 520,000 0 46,484 363,000 50,148
Human Resources and Services 1995 370,600 525,000 118,740 18,000 116,945 30,900
</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, 1997: Mr.
Taylor, 9,574 shares valued at $1,650,318; Mr. Stewart, 4,701 shares valued
at $810,335; Mr. Isom, 5,591 shares valued at $963,749; Mr. Hanway, 3,503
shares valued at $603,830; and Mr. Levinson, 2,894 shares valued at
$498,853. Dividends are paid on shares of restricted stock.
(3) Long-term compensation for the three-year period ending December 31, 1996
was paid in cash in April, 1997. Long-term compensation for the three-year
period ending December 31, 1997 will be determined in April, 1998. See
discussion of Long-Term Incentive Plan ("LTIP") Awards Table on page 16.
(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 1997, were as follows:
Mr. Taylor, $109,501 and $8,890; Mr. Stewart, $37,059 and $7,862; Mr. Isom,
$32,658 and $0; Mr. Hanway, $30,918 and $10,608; and Mr. Levinson, $29,355
and $8,419, respectively.
13
<PAGE> 16
OPTION GRANTS TABLE
The following table provides additional information about the stock options
shown in column (g) of the Summary Compensation Table on page 13, which were
granted in 1997 to the Named Executive Officers.
OPTION GRANTS IN FISCAL YEAR 1997(1)
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
- ------------------------------------------------------------------------------------- ------------
(A) (C) (D) (E) (F)
(B) % OF
NUMBER OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED(#) IN 1997 ($/SH) DATE VALUE($)(13)
---- ----------- ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Wilson H. Taylor
New options(2)................ 45,000 1.61% 155.6875 02/26/2007 1,514,639
New options(2,3).............. 150,000 5.35% 167.0625 10/20/2007 5,417,601
Replacement options(4)........ 68,294 2.44% 157.2500 (5) 2,429,799
-----
Replacement options........... 3,495 0.12% 158.5625 07/27/2004 125,385
Replacement options........... 66,528 2.38% 182.5313 (6) 2,747,508
-----
James G. Stewart
New options(2)................ 30,000 1.07% 155.6875 02/26/2007 1,009,759
New options(2,3).............. 75,000 2.68% 176.8125 12/08/2007 2,697,449
Replacement options........... 30,268 1.08% 157.2500 (7) 1,076,891
-----
Replacement options........... 1,564 0.06% 158.5625 07/27/2004 56,109
Replacement options........... 29,382 1.05% 182.5313 (8) 1,213,433
-----
Gerald A. Isom
New options(2)................ 30,000 1.07% 155.6875 02/26/2007 1,009,759
New options(2,3).............. 75,000 2.68% 176.8125 12/08/2007 2,697,449
Replacement options........... 26,044 0.93% 157.6875 (9) 929,185
-----
H. Edward Hanway
New options(2)................ 30,000 1.07% 155.6875 02/26/2007 1,009,759
New options(2,3).............. 75,000 2.68% 176.8125 12/08/2007 2,697,449
Replacement options........... 9,570 0.34% 154.1250 07/27/2004 333,720
Replacement options........... 948 0.03% 158.5625 07/27/2004 34,010
Replacement options........... 9,238 0.33% 186.0000 (10) 388,766
-----
Replacement options........... 948 0.03% 170.0000 02/24/2003 36,463
Donald M. Levinson
New options(2)................ 15,000 0.54% 155.6875 02/26/2007 504,880
New options(2,3).............. 75,000 2.68% 176.8125 12/08/2007 2,697,449
Replacement options........... 12,159 0.43% 160.6875 (11) 442,056
-----
Replacement options........... 4,296 0.15% 157.2500 02/22/2005 152,845
Replacement options........... 16,972 0.61% 186.0000 (12) 714,238
-----
</TABLE>
- ---------------
(1) Stock appreciation rights were not granted in 1997.
(2) New options become exercisable over a three year period, with one-third of
those options becoming exercisable no earlier than the first anniversary of
their grant date. New options have a replacement feature (see note 4
below). Options granted in 1995 or later and gains realized upon exercise
of those options for certain periods, may be forfeited by the Named
Executive Officers if, following termination of employment with CIGNA, they
engage in activities harmful to or in competition with CIGNA.
(3) These grants of new options were conditioned on the Named Executive
Officers entering into non-compete agreements with CIGNA.
14
<PAGE> 17
(4) Replacement options are intended to encourage employees to increase share
ownership. They typically do not provide stock appreciation opportunity
greater than the original options. In addition, they do not result in an
increase in an employee's equity position, which is the total combined
number of shares and options held by the employee. Replacement options are
granted when employees use their shares of the Corporation's Common Stock
to pay the exercise price of stock 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. Replacement options become exercisable six months after their
grant date and terminate on the expiration date of the option that they
replace. The exercise price of replacement options is equal to the fair
market value of the Corporation's Common Stock on the grant date of the
replacement options. All replacement options granted in 1997 have a
replacement feature.
(5) This replacement option grant includes 21,910 options expiring on February
22, 2005; 30,992 options expiring on July 27, 2004; 8,568 options expiring
on February 23, 2004; and 6,824 options expiring on February 24, 2003.
(6) This replacement option grant includes 5,878 options expiring on February
24, 2003; 7,380 options expiring on February 23, 2004; 33,177 options
expiring on July 27, 2004; 2,507 options expiring on February 22, 2005; and
17,586 options expiring on February 28, 2006.
(7) This replacement option grant includes 2,635 options expiring on February
24, 2003; 4,284 options expiring on February 23, 2004; 9,029 options
expiring on July 27, 2004; and 14,320 options expiring on February 22,
2005.
(8) This replacement option grant includes 2,270 options expiring February 24,
2003; 3,690 options expiring February 23, 2004; 14,629 options expiring
July 27, 2004; and 8,793 options expiring February 28, 2006.
(9) This replacement option grant includes 1,314 options expiring February 24,
2003; 10,450 options expiring July 27, 2004; and 14,280 options expiring
February 22, 2005.
(10) This replacement option grant includes 508 options expiring February 23,
2004; 1,466 options expiring July 27, 2004; and 7,264 options expiring
February 22, 2005.
(11) This replacement option grant includes 7,955 options expiring July 27,
2004; and 4,204 options expiring February 22, 2005.
(12) This replacement option grant includes 1,337 options expiring February 24,
2003; 1,592 options expiring February 23, 2004; 8,674 options expiring July
27, 2004; 516 options expiring February 22, 2005; and 4,853 options
expiring February 28, 2006.
(13) 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 four years, a dividend yield of 2.37%, a price volatility
of CIGNA Common Stock of 23.67% and an annualized risk-free interest rate
of 6.14%. 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.
15
<PAGE> 18
OPTION EXERCISES AND
FISCAL YEAR-END VALUE TABLE
The following table provides information about options exercised by the
Named Executive Officers during 1997, and about unexercised stock options held
by the Named Executive Officers at the end of 1997. No stock appreciation rights
were exercised or held by the Named Executive Officers during 1997.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997 AND
1997 FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT 1997 IN-THE-MONEY OPTIONS AT
UNDERLYING YEAR-END(#) 1997 YEAR-END($)
OPTIONS VALUE --------------------------- ---------------------------
NAME EXERCISED(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wilson H. Taylor........... 192,578 9,067,578 54,351 314,861 3,403,409 4,321,129
James G. Stewart........... 97,134 5,978,700 37,433 161,048 1,859,159 1,887,257
Gerald A. Isom............. 54,816 4,536,733 45,097 157,710 2,155,882 2,269,778
H. Edward Hanway........... 45,503 4,229,708 30,877 135,186 1,252,929 1,542,877
Donald M. Levinson......... 57,912 4,148,652 23,364 121,972 1,089,434 1,030,313
</TABLE>
LONG-TERM INCENTIVE PLAN ("LTIP") AWARDS TABLE
The following table provides information about long-term incentive awards
granted in 1997 to the Named Executive Officers.
LONG-TERM INCENTIVE PLAN AWARDS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE BASED PLANS
---------------------------------
(A) (B) (C) (D) (E) (F)
PERIOD
NUMBER UNTIL THRESHOLD MAXIMUM
NAME OF UNITS MATURATION ($)(1) TARGET($) ($)
---- -------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Wilson H. Taylor............................ 14,665 3 years * 1,099,875 2,933,000
James G. Stewart............................ 9,335 3 years * 700,125 1,867,000
Gerald A. Isom.............................. 9,335 3 years * 700,125 1,867,000
H. Edward Hanway............................ 9,335 3 years * 700,125 1,867,000
Donald M. Levinson.......................... 4,665 3 years * 349,875 933,000
</TABLE>
- ---------------
(1) See discussion below.
Strategic performance units awarded under the CIGNA Long-Term Incentive
Plan 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
designated group of competitors that have, in the aggregate, business lines that
are similar to CIGNA's. 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 designated competitors, using a formula which permits negative
adjustments to the valuation. 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,
based on an assessment of the factors that affected strategic and financial
performance during
16
<PAGE> 19
the period. For 1997 grants, the Committee will value the units in 2000 based on
performance during 1997 through 1999.
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.
Under the CIGNA Pension Plan in which Messrs. Taylor, Stewart, Hanway and
Levinson participate, annual retirement benefits 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. Under the CIGNA Retirement Plan in
which Mr. Isom and other employees hired on or after January 1, 1989
participate, employees accumulate benefit credits based on an employee's opening
account balance (equal to the lump sum value of any pension benefit earned under
the CIGNA Pension Plan through December 31, 1997), years of credited service,
and interest credits based on U.S. Treasury bond rates. The employee's pension
benefit under the CIGNA Retirement Plan equals the value of accumulated benefit
credits, and may be paid at or after separation from service in cash in a lump
sum or an annuity. CIGNA estimates that, if Mr. Isom retires from CIGNA at age
65 and he decides to receive his accumulated retirement benefit under the CIGNA
Retirement Plan in the form of an annuity, annual retirement benefits under a
straight life annuity will approximate $227,000.
Under the CIGNA Pension Plan and the CIGNA Retirement Plan, covered
earnings include salary and bonuses, as set forth in columns (c) and (d) of the
Summary Compensation Table on page 13, but not long-term incentive plan payouts
or any other incentive awards.
As of January 1, 1998, credited years of service were as follows: Mr.
Taylor, 30 years; Mr. Stewart, 30 years; Mr. Isom, 5 years; Mr. Hanway, 20 years
and Mr. Levinson, 20 years. Because of Mr. Isom's proximity to retirement age
when he was hired, CIGNA will supplement his pension benefits. For each year of
17
<PAGE> 20
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 $140,000.
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 level employees if
termination results from conviction of a felony involving fraud or dishonesty
directed against CIGNA.
18
<PAGE> 21
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 22 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.
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 or engages in other 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.
Compensation paid to the Named Executive Officers is expected to be fully
tax deductible.
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
19
<PAGE> 22
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.
The new CIGNA Executive Incentive Plan, approved by shareholders in April
1997, is intended to motivate Named Executive Officers with competitive annual
bonuses based upon achievement of competitive financial and operational goals.
The Plan complies with Section 162(m) of the Internal Revenue Code. Bonuses
under the Plan, not to exceed the limits provided in the Plan, will be paid only
if objective performance goals established under the Plan are met, and bonus
amounts will be based on the company's competitive performance.
Long-Term Incentives
In 1997, 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 and Poor's Multi-Line Insurance, Property & Casualty Insurance,
Life/Health Insurance and Managed Care indexes). Most of the companies included
in the program's peer group are also represented in the Standard and 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 1997 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.
In addition to the annual stock option grant made in February, 1997, the
committee awarded special awards to key executives including those named in the
Summary Compensation Table. The awards were made to recognize superior long-term
results and strategic positioning, and to support the company's long-term
succession needs. These special awards were contingent on the option recipient
signing a non-compete agreement.
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
20
<PAGE> 23
business results. Thirty-five percent of the CEO's total compensation
opportunity is based on annual business 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, and 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 healthcare, and
asset growth in the pension business. The Committee determined that the
objective performance goals established under the CIGNA Executive Incentive Plan
had been met and decided to grant a bonus to the CEO based on CIGNA's stock
performance and earnings performance in 1997. Earnings in 1997 exceeded 1996
results and competition, and were in line with the 1997 operational plans.
CIGNA's 1997 return on equity also significantly exceeded competitors' results,
based on all available information. Also taken into account were other factors,
including the significant acquisition and divestiture activity to support
implementation of the company's business strategy, 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 formula generated $165 unit value (as shown in the Summary
Compensation Table for 1996), distributed in cash to the CEO and other
executives who met the company's stock ownership guidelines (one to seven times
salary), reflecting performance against competitors over the 1994-96 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 1995-97 performance period will be determined by the Committee in late
April based on competitive performance.
The CEO's overall compensation package acknowledges a record of significant
increases in CIGNA's share value (see Performance Graph on page 22), achievement
of continued improvements in property and casualty operating performance, as
well as strong performance in the other businesses, acquisition of Healthsource,
divestiture of the Individual Insurance business and cost reduction actions that
are expected to have a positive impact on future earnings.
For the CEO, the 1997 awards of stock options are also shown in the Summary
Compensation Table. The option awards recognize the total shareholder return
achieved in 1996 as well as the company's long-term succession needs and were
intended to link the CEO's future compensation opportunity to the creation of
additional shareholder value.
People Resources Committee:
Alfred C. DeCrane, Chairman
Robert P. Bauman
Paul F. Oreffice
Charles R. Shoemate
Louis W. Sullivan, M.D.
21
<PAGE> 24
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, 1992 to December 31, 1997) against (i) the Standard & Poor's (S&P)
Composite-500 Stock Index, (ii) an average of the S&P Multi-line, Property &
Casualty, Life/Health Insurance and Managed Care indexes, and (iii) an average
of the S&P Multi-line, Property & Casualty and Life/Health Insurance indexes.
Because including the Managed Care index better reflects the Corporation's
businesses, CIGNA intends to stop using the average of the S&P Multi-line,
Property & Casualty and Life/ Health Insurance indexes after this Proxy
Statement.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG CIGNA, S&P 500 INDEX AND S&P INSURANCE/MANAGED CARE INDEXES
<TABLE>
<CAPTION>
S&P
MEASUREMENT PERIOD INS./MANAGED S&P INS.
(FISCAL YEAR COVERED) CIGNA CORP. S&P 500 CARE INDEXES** INDEXES***
<S> <C> <C> <C> <C>
12/31/92 100 100 100 100
12/31/93 112 110 111 104
12/30/94 119 112 114 102
12/29/95 201 153 157 144
12/31/96 272 189 179 179
12/31/97 351 252 241 255
</TABLE>
- ---------------
* Assumes that the value of the investment in CIGNA Common Stock and each
index was $100 on December 31, 1992 and that all dividends were reinvested.
** Equally weighted average of S&P Multi-line, P&C, Life/Health Insurance and
Managed Care indexes.
*** Equally weighted average of S&P Multi-line, P&C and Life/Health Insurance
indexes.
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 1997.
22
<PAGE> 25
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, employees and agents 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.
1999 ANNUAL MEETING OF SHAREHOLDERS
The 1999 Annual Meeting will be held on Wednesday, April 28, 1999, 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 18, 1998 to be eligible for inclusion under the rules of the Securities
and Exchange Commission in the Corporation's proxy materials for the 1999 Annual
Meeting 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 1999 Annual Meeting 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 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 1999 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
23
<PAGE> 26
APPENDIX A -- TEXT OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION
RESOLVED, that the first paragraph of Article Fourth of the Restated
Certificate of Incorporation of the Company be amended in its entirety and that
a new paragraph 4 be added to Section B of Article Fourth, both to read as
follows:
"Fourth: The total number of shares of all classes of capital stock which
the Corporation shall have the authority to issue is 625,000,000 shares divided
into two classes as follows: 600,000,000 shares of Common Stock (the "Common
Stock") of the par value of $.25 per share and 25,000,000 shares of Preferred
Stock (the "Preferred Stock") of the par value of $1 per share.
B. COMMON STOCK
4. Subdivision. Each share of Common Stock of the Corporation issued and
outstanding or held in the treasury of the Corporation immediately prior to the
close of business on May 4, 1998, that being the time when the amendment,
including this paragraph 4 of Section B, shall have become effective, is
subdivided into three fully paid and nonassessable shares of Common Stock, par
value $.25 per share, and at the close of business on such date, each holder of
record of Common Stock shall, without further action, be and become the holder
of two additional shares of Common Stock for each share of Common Stock held of
record immediately prior thereto."
A-1
<PAGE> 27
MAP
<PAGE> 28
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> 29
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 22, 1998, 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 1999: Peter N. Larson.
Y April 2001: Robert P. Bauman, Robert H. Campbell,
Charles R. Shoemate and Louis W. Sullivan.
2. RATIFY the Appointment of Price Waterhouse LLP as
Independent Accountants.
3. APPROVE an Amendment to Article Fourth of the Certificate of
Incorporation to Increase the Number of Authorized Common Shares
and to Effect a 3-for-1 Stock Split.
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
-----------
- ------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
[CIGNA LOGO]
CIGNA
CIGNA CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
APRIL 22, 1998
1:00 P.M.
THE CONFERENCE CENTER AT EAGLE LODGE
RIDGE PEAK & MANOR ROAD
LAFAYETTE HILL, PENNSYLVANIA
<PAGE> 30
<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. Ratify the the procedures on confidential
Directors. [ ] [ ] Appointment of [ ] [ ] [ ] voting described in the 1998
(see reverse) Price Waterhouse LLP Proxy Statement. Marking this
as Independent box will not absolve you of [ ]
Accountants. any independent fiduciary or
For, except vote withheld from the 3. Approve an Amendment other legal obligation to report
following nominee(s): to Article Fourth [ ] [ ] [ ] how you voted nor prevent the
of the Certificate inspectors from disclosing your
- ---------------------------------------- of Incorporation. 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(S) DATE
</TABLE>
- ------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
[CIGNA LOGO]
CIGNA
PLEASE SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
THANK YOU FOR YOUR PROMPT REPLY.
