Retired Aetna CEO exercised $50M in stock options
Aetna's retired CEO Ronald Williams gave himself a lucrative farewell last year by exercising stock options worth more than $50 million.
The 61-year-old executive also received a compensation package totaling $18.4 million from Aetna and heads into retirement with a pension valued at $9.5 million and a consulting job that pays $20,000 per month, according to a recent regulatory filing.
Williams retired as CEO last November and as chairman this month. He joined the Hartford, Conn., insurer in March 2001 and had served as chairman and CEO since 2006.
He was replaced in both roles by company president Mark Bertolini, who received compensation for 2010 valued at $8.8 million last year. That included a salary and performance-related bonus amounting to $2.8 million and stock awards valued at $5.8 million.
Williams exercised 2.4 million in stock options last year for $50.4 million. The options were granted when he joined the company in 2001 and had been set to expire on March 15, 2011, according to the proxy statement filed Monday with the Securities and Exchange Commission.
"It's an exercise of options he's been holding for 10 years," spokesman Fred Laberge said. He noted Aetna's stock price, when adjusted for two splits, was $9.35 when Williams started at Aetna. It closed at $30.16 on Nov. 29, his last day as CEO.
The stock, however, is down about 42 percent from the end of 2006, the year he became chairman and CEO.
Last year, Williams received a salary of about $1.1 million and a performance-related cash bonus of $2.75 million, according to the filing. Williams also received a stock award valued at $14.3 million when it was granted.
Williams received $300,000 in other compensation, including $257,659 for personal use of corporate aircraft, something the company requires for security reasons. He also received about $16,000 for personal use of a company driver and vehicle.
Williams' total compensation package rose 13 percent compared to 2009, according to Associated Press calculations. That does not include the value of the stock options he exercised during the year or his pension.
The Associated Press formula calculates an executive's total compensation during the last fiscal year by adding salary, bonuses, perks, above-market interest the company pays on deferred compensation and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits. That makes the AP total slightly different in most cases from the total reported by companies to the Securities and Exchange Commission.
The value that a company assigned to an executive's stock and option awards for 2010 was the present value of what the company expected the awards to be worth to the executive over time. Companies use one of several formulas to calculate that value. However, the number is just an estimate, and what an executive ultimately receives will depend on the performance of the company's stock in the years after the awards are granted. Most stock compensation programs require an executive to wait a specified amount of time to receive shares or exercise options.
After retiring as chairman, Williams will work as a consultant for Aetna and Aetna Foundation Inc. until next February.
Aetna provides health, dental, group life and disability coverage and is the third-largest publicly traded health insurer based on enrollment, trailing only WellPoint Inc. and UnitedHealth Group Inc. The insurer's net income climbed 38 percent last year to $1.77 billion, but revenue fell slightly to $34.25 billion.
Aetna's stock fell 4 percent in 2010 to close at $30.51. That compares with a 12.8 percent increase recorded by the Standard & Poor's 500 index.
Like other health insurers, Aetna saw its shares tumble in the first quarter of 2010, as Congress passed the health care overhaul, which aims to cover millions of uninsured people but will impose a host of taxes and restrictions on insurers. But sector stocks rallied in the second half of last year, as investors saw little impact from the first few provisions of the overhaul.
Aetna said in its proxy that operating earnings per share increased 34 percent last year compared to 2009, and the company has introduced a larger quarterly dividend payment, "reflecting our confidence in our strategy and a continued commitment to enhancing total return for our shareholders."
It now pays shareholders a 15-cent quarterly dividend, or 60 cents annually, up from the 4-cent annual one it paid last November.