Travelers 2008 Annual Report Download - page 237

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. SHARE-BASED INCENTIVE COMPENSATION (Continued)
2007 Original Grants Reload Grants
Weighted average grant-date fair value of options granted
(per share) ..................................... $14.36 $5.31
Total intrinsic value of options exercised during the year
(in millions) ..................................... $ 90 $ 5
2006 Original Grants Reload Grants
Weighted average grant-date fair value of options granted
(per share) ..................................... $13.60 $4.94
Total intrinsic value of options exercised during the year
(in millions) ..................................... $ 74 $ 5
Restricted Stock, Restricted Stock Units, Deferred Stock and Performance Share Award Programs
The Company, commencing with equity grants on or after January 1, 2007, issues restricted stock
unit awards to eligible officers and key employees under the Equity Awards program established
pursuant to the 2004 Incentive Plan. A restricted stock unit represents the right to receive a share of
common stock. These restricted stock unit awards are granted at market price, generally vest three
years from the date of grant, do not have voting rights and the underlying shares of common stock are
not issued until the vesting criteria is satisfied. Previously equity awards were granted under the Capital
Accumulation Program (CAP) which was discontinued following the issuance of CAP awards in
February 2006. Awards issued under CAP were in the form of restricted stock and the number of
shares included in the restricted stock award was calculated at a 10% discount from the market price
on the date of the award and generally vested in full after a two-year period from the date of grant.
During the vesting period, the stock generally could not be sold or transferred by the participant, who
was required to render service to the Company during the restricted period.
The Company also has a Performance Share Awards Program pursuant to the 2004 Incentive Plan
which became effective beginning in 2006. Under the program, the Company may issue performance
share awards to certain employees of the Company who hold positions of Vice President (or its
equivalent) or above. The performance awards represent shares that provide the recipient the right to
earn shares of the Company’s common stock based upon the Company’s attainment of certain
performance goals. The performance goals for performance awards are based on the Company’s
adjusted return on equity over a three-year performance period. Vesting of any performance shares is
contingent upon the Company attaining the relevant performance period minimum threshold return on
equity. If the performance period return on equity is below the minimum threshold, none of the shares
will vest; if performance meets or exceeds the minimum performance threshold, between 50%-160% of
the performance shares will vest, depending on the actual return on equity attained.
The fair value of restricted stock units, deferred stock and performance shares is measured at the
market price of the Company stock at date of grant.
The total fair value of shares that vested during the years ended December 31, 2008, 2007 and
2006 was $82 million, $99 million and $59 million, respectively.
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