Humana 2013 Annual Report Download - page 128

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Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Restricted Stock
Restricted stock is granted with a fair value equal to the market price of our common stock on the date of
grant and generally vests three years from the date of grant. The weighted-average grant date fair value of our
restricted stock was $73.50 in 2013, $85.29 in 2012, and $67.70 in 2011. Activity for our restricted stock was as
follows for the year ended December 31, 2013:
Shares
Weighted-
Average
Grant-Date
Fair Value
(shares in thousands)
Nonvested restricted stock at December 31, 2012 ......... 2,954 $67.29
Granted ...................................... 1,546 73.50
Vested ....................................... (619) 53.45
Forfeited ..................................... (239) 66.83
Nonvested restricted stock at December 31, 2013 ......... 3,642 $71.84
The fair value of shares vested during the years ended was $52 million in 2013, $75 million in 2012, and
$36 million in 2011. Total compensation expense not yet recognized related to nonvested restricted stock was
$81 million at December 31, 2013. We expect to recognize this compensation expense over a weighted-average
period of approximately 1.9 years. There are no other contractual terms covering restricted stock once vested.
Stock Options
Stock options are granted with an exercise price equal to the fair market value of the underlying common
stock on the date of grant. Our stock plans, as approved by the Board of Directors and stockholders, define fair
market value as the average of the highest and lowest stock prices reported on the composite tape by the New
York Stock Exchange on a given date. Exercise provisions vary, but most options vest in whole or in part 1 to 3
years after grant and expire 7 to 10 years after grant.
The weighted-average fair value of each option granted during 2013, 2012, and 2011 is provided below. The
fair value was estimated on the date of grant using the Black-Scholes pricing model with the weighted-average
assumptions indicated below:
2013 2012 2011
Weighted-average fair value at grant date ......................... $21.8 $30.15 $28.29
Expected option life (years) .................................... 4.4 4.4 4.8
Expected volatility ........................................... 38.8% 46.3% 46.8%
Risk-free interest rate at grant date .............................. 0.8% 0.8% 1.7%
Dividend yield (1) ........................................... 1.5% 1.2% 0.5%
(1) As discussed in Note 14, in April 2011, our Board of Directors approved the initiation of a quarterly cash
dividend policy.
When valuing employee stock options, we stratify the employee population into three homogenous groups
that historically have exhibited similar exercise behaviors. These groups are executive officers, directors, and all
other employees. We value the stock options based on the unique assumptions for each of these employee
groups.
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