Travelers 2005 Annual Report Download - page 202

THE ST. PAUL TRAVELERS COMPANIES, INC.AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
190
13. INCENTIVE PLANS (Continued)
period. Awards granted to non-U.S. participants were in the form of deferred stock awards. These deferred
stock awards are subject to the same conditions as the restricted stock awards except that the shares are
not issued until the vesting criteria are satisfied.
Legacy SPC 1994 Stock Plan
On April 1, 2004, in connection with the merger, the Company assumed approximately 240,000 of
outstanding SPC restricted stock awards related to SPC equity-based compensation plans. These restricted
stock awards retained the same terms and conditionsthat were applicable prior to the merger. Under the
SPC 1994 Stock Plan, the awards of restricted stock were subject to completing a specified objective or
period of employment, generally one to five years. Under the SPC Capital Accumulation Plan,
implemented in 2002, the number of shares included in the restricted stock award is calculated at a 10%
discount from the market price at the date of the award and generally vests in full after a two-year period.
The unvested restricted stock awards require the holder to render service during the vesting period and are
therefore considered unearned compensation. At April 1, 2004, the estimated fair value of the unvested
restricted stock awards subject to amortization was $9million and has been included in unearned
compensation as a separate component of equity. The unearned compensation expense is being recognized
as a charge to income over the remaining vesting period.
Information with respect to restricted stock and deferred stock awards is as follows:
2005 2004 2003
New shares granted ........................ 2,257,101 1,668,862 947,233
SPCassumed awardsApril 1, 2004 ........... —237,592 —
Weighted average fair value per share at
issuance................................ $ 36.29 $ 37.03 $37.26
Unearned compensation expense is recognized as a charge to income ratably over the vesting period.
The after-tax compensation cost charged to earnings for these restricted stock and deferred stock awards
was $40million, $26 million and $17 million for the years ended December 31, 2005, 2004 and 2003,
respectively.
Other Incentive Plans
In addition to the Company’s equity-based compensation plans discussed above, Nuveen Investments
had an equity-based compensation plan in which awardswere granted in Nuveen Investments’ publicly
traded common stock. The after-tax compensation cost associated with these awards included in the
Company’s 2004 net income was approximately $9 million. The compensation cost associated with the
Nuveen Investments’ equity-based plan was excluded from the Company’s results in 2005 due to the
divestiture of Nuveen Investments (see Note 3).
14. PENSION PLANS,RETIREMENT BENEFITS AND SAVINGS PLANS
The Company sponsors a qualified non-contributory defined benefit pension plan, which covers
substantially all employees and provides benefits under a cash balance formula, except that employees
satisfying certain age and service requirements remain covered by a prior final pay formula. Prior to
December 31, 2004, both TPC and SPC sponsored qualified noncontributory defined benefit pension
plans. These plans were merged to form one Company plan on December 31, 2004. In addition, the
Company and TPC sponsor nonqualifieddefined benefit pension plans which cover certain highly-
compensated employees and also sponsor postretirement health and life insurance benefit plans for
employees satisfying certain age and service requirements and for certain retirees.