UNITEDHEALTH GROUP INC | 2013 | FY | 3


Share-Based Compensation
The Company’s outstanding share-based awards consist mainly of non-qualified stock options, SARs and restricted stock and restricted stock units (collectively, restricted shares). As of December 31, 2013, the Company had 35 million shares available for future grants of share-based awards under its share-based compensation plan, including, but not limited to, incentive or non-qualified stock options, SARs and 14 million of awards in restricted shares. As of December 31, 2013, there were also 17 million shares of common stock available for issuance under the ESPP.
Stock Options and SARs
Stock option and SAR activity for the year ended December 31, 2013 is summarized in the table below:
 
Shares
 
Weighted-
Average
Exercise
Price
 
Weighted-
Average
Remaining
Contractual Life
 
Aggregate
Intrinsic Value
 
(in millions)
 
 
 
(in years)
 
(in millions)
Outstanding at beginning of period
63

 
$
45

 
 
 
 
Granted
8

 
58

 
 
 
 
Exercised
(28
)
 
44

 
 
 
 
Forfeited
(2
)
 
55

 
 
 
 
Outstanding at end of period
41

 
48

 
4.5

 
$
1,121

Exercisable at end of period
30

 
46

 
3.1

 
879

Vested and expected to vest, end of period
40

 
48

 
4.5

 
1,110


Restricted Shares
Restricted share activity for the year ended December 31, 2013 is summarized in the table below:
(shares in millions)
 
Shares
 
Weighted-Average
Grant Date
Fair Value
per Share
Nonvested at beginning of period
 
9

 
$
46

Granted
 
4

 
58

Vested
 
(1
)
 
38

Forfeited
 
(1
)
 
51

Nonvested at end of period
 
11

 
50


Other Share-Based Compensation Data
(in millions, except per share amounts)
 
For the Years Ended December 31,
 
2013
 
2012
 
2011
Stock Options and SARs
 
 
 
 
 
 
Weighted-average grant date fair value of shares granted, per share
 
$
19

 
$
18

 
$
15

Total intrinsic value of stock options and SARs exercised
 
592

 
559

 
327

Restricted Shares
 
 
 
 
 
 
Weighted-average grant date fair value of shares granted, per share
 
58

 
52

 
42

Total fair value of restricted shares vested
 
$
31

 
$
716

 
$
113

Employee Stock Purchase Plan
 
 
 
 
 
 
Number of shares purchased
 
3

 
3

 
3

Share-Based Compensation Items
 
 
 
 
 
 
Share-based compensation expense, before tax
 
$
331

 
$
421

 
$
401

Share-based compensation expense, net of tax effects
 
239

 
299

 
260

Income tax benefit realized from share-based award exercises
 
206

 
461

 
170

(in millions, except years)
 
December 31, 2013
Unrecognized compensation expense related to share awards
 
$
310

Weighted-average years to recognize compensation expense
 
1.3


Share-Based Compensation Recognition and Estimates
The principal assumptions the Company used in calculating grant-date fair value for stock options and SARs were as follows:
 
 
2013
 
2012
 
2011
Risk-free interest rate
 
1.0% - 1.6%
 
0.7% - 0.9%
 
0.9% - 2.3%
Expected volatility
 
41.0% - 43.0%
 
43.2% - 44.0%
 
44.3% - 45.1%
Expected dividend yield
 
1.4% - 1.6%
 
1.2% - 1.7%
 
1.0% - 1.4%
Forfeiture rate
 
5.0%
 
5.0%
 
5.0%
Expected life in years
 
5.3
 
5.3 - 5.6
 
4.9 - 5.0

Risk-free interest rates are based on U.S. Treasury yields in effect at the time of grant. Expected volatilities are based on the historical volatility of the Company’s common stock and the implied volatility from exchange-traded options on the Company’s common stock. Expected dividend yields are based on the per share cash dividend paid by the Company. The Company uses historical data to estimate option and SAR exercises and forfeitures within the valuation model. The expected lives of options and SARs granted represents the period of time that the awards granted are expected to be outstanding based on historical exercise patterns.
Other Employee Benefit Plans
The Company also offers a 401(k) plan for its employees. Compensation expense related to this plan was not material for the years ended December 31, 2013, 2012 and 2011.
 
In addition, the Company maintains non-qualified, unfunded deferred compensation plans, which allow certain members of senior management and executives to defer portions of their salary or bonus and receive certain Company contributions on such deferrals, subject to plan limitations. The deferrals are recorded within Long-Term Investments with an approximately equal amount in Other Liabilities in the Consolidated Balance Sheets. The total deferrals are distributable based upon termination of employment or other periods, as elected under each plan and were $441 million and $348 million as of December 31, 2013 and 2012, respectively.

us-gaap:DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock