2018 Guide to Effective Proxies

2.17.2 Executive summary | 267 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES HILTON WORLDWIDE HOLDINGS EXECUTIVE COMPENSATION – COMPENSATION DISCUSSION AND ANALYSIS (“CD&A”) EXECUTIVE SUMMARY: Why we recommend you vote for our Say on Pay OurCD&Adescribesourexecutivecompensationprogramand2017compensationforourNamedExecutiveOfficers(“NEOs”).Theoverarching goaloftheprogramistomotivateourleaderstoachieveourkeystrategicprioritiesandfocusonlong-termvaluecreationforourstockholders. InJanuary2017,wecompletedthespin-offsofourrealestate(Park)andtimeshare(HGV)businesses,creatingsignificantvalueforour stockholders.Thetremendouspotentialofournew,fee-basedandcapital-efficientbusinessmodelisdemonstratedbyour2017performance, ashighlightedbelow.Hiltonwelcomedapproximately160millionguestsatmorethan5,200propertiesthroughout105countriesandterritoriesin 2017.Ourglobalfootprintandscalegiveusauniqueopportunitytocreateheartfeltexperiencesforguests,meaningfulopportunitiesforteam members,highvalueforhotelownersandapositiveimpactinourcommunities–allwhilegeneratingpremiumreturnsforourstockholders. 1) 2017 COMPANY PERFORMANCE Page21 Adj.EBITDA (1) +11% Year-over-Year (“YOY”) Pipeline +11% YOY & Largestin Industry Numberofroomsunder constructionglobally Successful Spin-Offs ofourrealestate andtimeshare businesses NetUnit Growth +6.5% YOY Opened >1Hotel perday (onaverage) $1.1B TotalCapital Returnedto Stockholders & Approximately 45% (2XS&PIndex) Total Stockholder Return(“TSR”) GREAT PLACE TO WORK ® Ranked #9 Best Multinational Workplaces 2) PROGRAM CHANGES FOR 2017 Page22 Š Adjustedtheequitymix todeliver50%ofthetotalannualLong-termIncentive(“LTI”) (2) awardinperformanceshares Š SelectedanewLTIperformancemetric ,freecashflow(“FCF”)pershare (3) compoundannualgrowthrate(“CAGR”),toreflectourpost- spinbusinessmodelandkeystrategicpriorities Š Implementeddoubletriggervesting afterchangeincontrolforallequityawards 3) PROCESS FOR DETERMINING PAY Page23 Š Designpayprograms torewardforfinancialperformanceandspecificbusinessresults,mitigatematerialrisks andalignwithstockholderinterestsbyhavingasignificantportioncomposedoflong-termequity-basedawards 99% Voted “FOR” Š Setpaylevels commensuratewithperformanceandtheneedtoattractandretainhighqualitytalent Š Considermanyfactors ,includingtheadviceoftheCompensationCommittee’sconsultant,internalpay equityamongexecutives,externalmarketdata,CompanyandindividualperformanceandresultsofourSay onPay 2017SAYONPAY Approvedbystockholderswith supportlevelsimilar toprioryears 4) 2017 NEO PAY DECISIONS Page25 NEOPAY AnnualBaseSalaries&TargetTotal AnnualCashIncentives AnnualLTI Spin-OffGrants DirectCompensation(“TDC”) (4) Š 3%-4%increasesinbase salariesandTargetTDCtoall excepttheCFO,whoreceiveda 7%increaseinbasesalaryand an11%increaseinTargetTDC afterconsideringinternalequity andmarketdata Š Payoutsfrom114%to 139%oftarget Š Awardedbasedon financial,businessarea andorganizational strengthobjectives Š Grantedattargetlevel Š Awardedasamixof50% performanceshares(vesting basedonFCFpershareCAGR andEBITDACAGR),25% restrictedstockunits(“RSUs”) and25%stockoptions Š Spin-offgrantswere awardedtorecognize successfullycompleting thespin-offs Š Thespin-offscreated significantvalueforour stockholders CEOPAY $1.25M $1.25M $1.88M $2.60M $6.88M $6.88M Target Awarded AnnualBaseSalary AnnualCash Incentives LTI Awarded 107% of $10MTarget TDC +$8M one-timeSpin-OffGrant 5) RISK & GOVERNANCE Page33 Noemploymentagreementsorindividualchangeincontrol agreements Limitedperquisites Emphasizelong-termperformance Doubletriggerchangeincontrolvesting Goodgovernancepractices,withpoliciesonclawbacks,anti- pledging,anti-hedgingandstockownership Capsonmaximumpayoutsforannualcashincentivesandlong- termperformanceshares (1) PleaseseeAnnexAforadditionalinformationandareconciliationofAdjustedEBITDAtofinancialmeasuresderivedinaccordancewithUnitedStatesGAAP. (2) LTIreferstograntsunderourannualprogramanddoesnotincludeoff-cycleawards(e.g.,sign-onorspin-offgrants). (3) FCFpershareiscalculatedasdescribedunder“PerformanceSharesGrantedin2017.” (4) TDCincludesannualbasesalary,annualcashincentivesandLTI. 20 PROXYSTATEMENT Hilton HUMANA, INC. Historically,wehavedeliveredsignificantstockpriceappreciation,whilealsoreturningcapitaltoour stockholdersintheformofdividendsandsharerepurchases 1 : 22.6% 76.1% 276.5% 1Year (2017) 3Year (2015–2017) 5Year (2013–2017) $3.5 Billion $220 Million Returned toStockholders ShareRepurchases Dividends TotalStockholderReturn 1 Cumulativestockpriceappreciationplusdividends,withdividendsreinvestedquarterly,throughDecember31,2017. ThefollowinggraphcomparesourtotalreturntostockholderswiththereturnsoftheStandard&Poor’s Composite500Index,whichwerefertoastheS&P500,andtheDowJonesUSSelectHealthCareProviders Index,whichwerefertoastheDJPeerGroup,forthefiveyearsendedDecember31,2017.Thegraphassumes aninvestmentof$100ineachofourcommonstock,theS&P500andtheDJPeerGrouponDecember31,2012, andthatdividendswerereinvestedwhenpaid. 0 12/31/12 12/31/16 12/31/13 12/31/14 PeriodEnding 12/31/15 12/31/17 100 200 300 400 HUM S&P 500 DJPeerGroup 12/31/12 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 Humana $100 $152 $214 $267 $307 $377 S&P500 $100 $132 $150 $153 $171 $208 DJPeerGroup $100 $137 $175 $186 $188 $238 Thestockpriceperformanceincludedinthisgraphisnotnecessarilyindicativeoffuturestockprice performance. 38 Total of 03 pages in section Withsignificantprogressmadeonourstrategicinitiatives,2017wasanextremelysuccessfulyearduring whichwereturnedstrongfinancialperformance: Š Wereportedearningspershare(EPS)of$16.81andadjustedEPSof$11.71 * ,exceedingour initialadjustedEPSguidanceof$$10.80to$11.00,asweincreasedourpublicearningsestimate twiceoverthecourseoftheyearasaresultofstrongperformanceacrossouroperating segments. Š OurindividualMedicareAdvantagemembershipexperiencedstrongmembershipgrowthduring theannualelectionperiod,providingmomentuminto2018. Š Wereturnedover$3.5billiontoourstockholdersintheformofsharerepurchasesand dividends,andalsoincreasedourquarterlydividendto$0.40persharefrom$0.29pershare (withafurtherincreaseto$0.50pershareinFebruary2018). Š Wemadeinvestmentsforthelong-termsuccessofourbusiness,whichincludedinvestmentsin ourworkforce,mergerandacquisitionactivity,optimizationofourrealestatefootprint,member benefitstogenerategrowth,andaone-timecontributiontotheHumanaFoundation. Wealsoadvancedourstrategybyexpandingourproviderintegration,expandingourclinicalprogramsand simplifyingthememberexperiencethroughseveralkeyinitiatives: Announcedacquisi�onof40%of KindredatHome toexpand reach into ourmember’shome TransformedHumanaAtHome intoa more personalized,event-driven monitoringprogram ,usingpredic�ve modelingandadvancedanaly�cs Using scales tomonitorandmanage over2,000membersdaily care for Conges�veHeartFailure (CHF) ClinicalModel 195Owned, JV,andAlliance centers in27markets GreenvillePartners inPrimaryCare clinicsdemonstra�ng success of modeloutsideofFL Opened5new clinics in2017,4 in KansasCityand1 inNorthCarolina Consolida�ngand rightsizing our ownedproviderassetsunderone brandwithonemanagement team Provider Integra�on Ranked #1na�onalhealth insurer in consumerexperience in2017 survey 1 Launched Transcend Insights popula�onhealth pla�orm within ourownedprimary careassets CustomerRela�onshipManagement pla�orm —360° viewof customer, usedbyover20,000employees Reduced call transfers by13% 2 Improved rela�onal Na�onal PromotorScore (NPS) by500basis pointsand transac�onalNPSby600 basispoints SimplifiedExperience We con�nued to advance our strategy in 2017 1.Temkin.#1Na�onalplayer;Rated#2overall 2.FromNovember2016 toNovember2017 37 Executive Summary Humana’s 2017 Performance HumanaInc.’ssuccessfulhistoryincaredeliveryandhealthplanadministrationishelpingusdelivera uniqueintegratedcareapproachtoimprovingthehealthandwell-beingofourmorethan14millionmembers whileloweringthecostsofcare.Toaccomplishourgoals,wesupportphysiciansandotherhealthcare professionalsastheyworktodelivertherightcareintherightplacefortheirpatients,ourmembers.Ourrangeof clinicalcapabilities,resourcesandtools—suchasin-homecare,behavioralhealth,pharmacyservices,data analyticsandwellnesssolutions—combinetoproduceasimplifiedexperiencethatmakeshealthcareeasierto navigateandmoreeffective. Aspartofourefforts,HumanaestablishedaBoldGoaltohelpmakethecommunitiesweserve 20percent healthierby2020 bymakingiteasierforpeopletoachievetheirbesthealth.Thispopulationhealthstrategy focusesonimprovingkeysocialdeterminantsofhealthandchronicconditionsthroughpilotprogramsand interventionswithcommunityandphysicianpartners.WiththehelpoftheU.S.CentersforDiseaseControland Prevention’stool,HealthyDays,wearetrackingprogresstowardourBoldGoal.Thiskeyindicatorconfirmsthat Humana’sBoldGoaleffortsarehavingasignificantimpactinourBoldGoalcommunities. FollowingtheterminationofourproposedmergerwithAetnaInc.,werefreshedourstrategytosupportour pathforwardasastandaloneorganizationandpreparedtomeetthedynamicneedsoftoday’shealthcareindustry andourmembersandproviderpartners.Werealizethecurrenthealthcaresystemisnotsuitedtoaddressthe growingneedforchroniccaremanagement,withthemostimpactfulpartofthehealthcaresystembeingthe consumerandproviderrelationship.Oursuccesswillbehighlydependentonourabilitytoengageandinfluence membersandproviders.Tobesuccessful,itrequirespersonalizedinteractionstoimprovethequalityof experiencesandclinicaloutcomestohelpmembersbaseduponthespecificneedsandcircumstances. Our Strategy We strive to improve thehealthof seniors livingwith chronic condi�ons throughan IntegratedCareDelivery model thatbrings simplicityand connec�vity to thehealthcareexperience How we win Provider jointventures Alliances Owned clinics MSO 1 Partnerwithproviders toevolve incen�ves from trea�nghealth episodically to managinghealthholis�cally Homehealth Behavioralhealth Pharmacy Preven�on Integrate clinicalprograms that intersect healthcareand lifestyle – helping thematkeymomentsofneed Advancedanaly�cs Provider-facingworkflows Consumerapplica�ons to reduce fric�onpoints Simplifyprocessesby leveraging technology, consumer segmenta�onandanaly�cs 1.ManagementServicesOrganiza�on 36