MetLife 2011 Annual Report Download - page 224

MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)
Compensation Expense Related to Stock-Based Compensation
The components of compensation expense related to stock-based compensation which includes compensation expense related to Phantom
Stock-Based Awards, and excludes the insignificant compensation expense related to the 2005 Directors Stock Plan, were as follows:
Years Ended December 31,
2011 2010 2009
(In millions)
Stock Options ...................................................................................... $ 58 $45 $55
Performance Shares(1) ............................................................................... 68 29 11
Restricted Stock Units ................................................................................ 18 10 3
Total compensation expenses .......................................................................... $144 $84 $69
Income tax benefits .................................................................................. $ 50 $29 $24
(1) Performance Shares expected to vest and the related compensation expenses may be further adjusted by the performance factor most likely to be
achieved, as estimated by management, at the end of the performance period.
The following table presents the total unrecognized compensation expense related to stock-based compensation and the expected weighted
average period over which these expenses will be recognized at:
December 31, 2011
Expense Weighted Average Period
(In millions) (Years)
Stock Options ................................................................... $52 1.82
Performance Shares .............................................................. $44 1.76
Restricted Stock Units ............................................................. $23 1.82
Stock Options
Stock Options are the contingent right of award holders to purchase shares of MetLife, Inc. common stock at a stated price for a limited time. All
Stock Options have an exercise price equal to the closing price of MetLife, Inc. common stock reported on the NYSE on the date of grant, and have a
maximum term of 10 years. The vast majority of Stock Options granted have become or will become exercisable at a rate of one-third of each award on
each of the first three anniversaries of the grant date. Other Stock Options have become or will become exercisable on the third anniversary of the grant
date. Vesting is subject to continued service, except for employees who are retirement eligible and in certain other limited circumstances.
A summary of the activity related to Stock Options for the year ended December 31, 2011 was as follows:
Shares Under
Option Weighted Average Exercise Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value(1)
(Years) (In millions)
Outstanding at January 1, 2011 ............................ 32,702,331 $38.47 5.30 $195
Granted(2) ............................................. 5,471,447 $45.16
Exercised ............................................. (2,944,529) $29.83
Expired ............................................... (317,342) $42.32
Forfeited .............................................. (198,381) $38.34
Outstanding at December 31, 2011 ......................... 34,713,526 $40.22 5.35 $ —
Aggregate number of stock options expected to vest at a future
date as of December 31, 2011 ........................... 33,596,536 $40.31 5.25 $ —
Exercisable at December 31, 2011 ......................... 24,345,356 $41.06 4.02 $ —
(1) The aggregate intrinsic value was computed using the closing share price on December 30, 2011 of $31.18 and December 31, 2010 of $44.44,
as applicable.
(2) The total fair value on the date of the grant was $78 million.
The fair value of Stock Options is estimated on the date of grant using a binomial lattice model. Significant assumptions used in the Company’s
binomial lattice model, which are further described below, include: expected volatility of the price of MetLife, Inc. common stock; risk-free rate of return;
expected dividend yield on MetLife, Inc. common stock; exercise multiple; and the post-vesting termination rate.
Expected volatility is based upon an analysis of historical prices of MetLife, Inc. common stock and call options on that common stock traded on the
open market. The Company uses a weighted-average of the implied volatility for publicly-traded call options with the longest remaining maturity nearest
to the money as of each valuation date and the historical volatility, calculated using monthly closing prices of MetLife, Inc.’s common stock. The
Company chose a monthly measurement interval for historical volatility as it believes this better depicts the nature of employee option exercise decisions
being based on longer-term trends in the price of the underlying shares rather than on daily price movements.
220 MetLife, Inc.