MetLife 2009 Annual Report Download - page 200

The binomial lattice model used by the Company incorporates the contractual term of the Stock Options and then factors in expected
exercise behavior and a post-vesting termination rate, or the rate at which vested options are exercised or expire prematurely due to
termination of employment, to derive an expected life. Exercise behavior in the binomial lattice model used by the Company is expressed
using an exercise multiple, which reflects the ratio of exercise price to the strike price of Stock Options granted at which holders of the Stock
Options are expected to exercise. The exercise multiple is derived from actual historical exercise activity. The post-vesting termination rate is
determined from actual historical exercise experience and expiration activity under the Incentive Plans.
The following weighted average assumptions, with the exception of risk-free rate, which is expressed as a range, were used to determine
the fair value of Stock Options issued during the:
2009 2008 2007
Years Ended December 31,
Dividendyield ..................................... 3.15% 1.21% 0.94%
Risk-freerateofreturn................................ 0.73%-6.67% 1.91%-7.21% 4.30%-5.32%
Expectedvolatility................................... 44.39% 24.85% 19.54%
Exercisemultiple ................................... 1.76 1.73 1.66
Post-vestingterminationrate............................ 3.70% 3.05% 3.66%
Contractualterm(years)............................... 10 10 10
Expectedlife(years) ................................. 6 6 6
Weighted average exercise price of stock options granted . . . . . . . . . $23.61 $59.48 $62.86
Weighted average fair value of stock options granted . . . . . . . . . . . . $8.37 $17.51 $17.76
Compensation expense related to Stock Option awards expected to vest and granted prior to January 1, 2006 is recognized ratably over
the requisite service period, which equals the vesting term. Compensation expense related to Stock Option awards expected to vest and
granted on or after January 1, 2006 is recognized ratably over the requisite service period or the period to retirement eligibility, if shorter.
Compensation expense of $55 million, $51 million and $55 million related to Stock Options was recognized for the years ended December 31,
2009, 2008 and 2007, respectively.
At December 31, 2009, there was $40 million of total unrecognized compensation costs related to Stock Options. It is expected that these
costs will be recognized over a weighted average period of 1.67 years.
The following is a summary of Stock Option exercise activity for the:
2009 2008 2007
Years Ended
December 31,
(In millions)
Totalintrinsicvalueofstockoptionsexercised .................................. $ 1 $36 $122
Cashreceivedfromexerciseofstockoptions................................... $ 8 $45 $110
Taxbenefitrealizedfromstockoptionsexercised ................................ $ — $13 $ 43
Performance Shares
Beginning in 2005, certain members of management were awarded Performance Shares under (and as defined in) the 2005 Stock Plan.
Participants are awarded an initial target number of Performance Shares with the final number of Performance Shares payable being
determined by the product of the initial target multiplied by a performance factor of 0.0 to 2.0. The performance factor applied is based on
measurements of the Holding Company’s performance, including with respect to: (i) the change in annual net operating earnings per share, as
defined; and (ii) the proportionate total shareholder return, as defined, each with reference to the applicable three-year performance period
relative to other companies in the S&P Insurance Index with reference to the same three-year period. Beginning with awards made in 2009, in
order for Performance Shares to be payable, the Holding Company must generate positive net income for either the third year of the
performance period or for the performance period as a whole. Also beginning with awards made in 2009, if the Holding Company’s Total
Shareholder Return with reference to the applicable three-year performance period is zero percent or less, the performance factor will be
multiplied by 75%. Performance Share awards will normally vest in their entirety at the end of the three-year performance period (subject to
certain contingencies) and will primarily be payable in shares of the Holding Company’s common stock.
The following is a summary of Performance Share activity for the year ended December 31, 2009:
Performance
Shares
Weighted Average
Grant Date
Fair Value
Outstanding at January 1, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,586,650 $55.63
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,944,298 $20.72
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (224,538) $25.75
Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (812,975) $48.43
Outstanding at December 31, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,493,435 $38.43
Performance Shares expected to vest at December 31, 2009 . . . . . . . . . . . . . . . . . . 3,452,028 $44.55
F-116 MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)