Travelers 2008 Annual Report Download - page 238

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. SHARE-BASED INCENTIVE COMPENSATION (Continued)
A summary of restricted stock units, deferred stock awards and performance share activity under
the Company’s 2004 Incentive Plan and legacy plans as of and for the year ended December 31, 2008 is
as follows:
Restricted and Deferred Shares Performance Shares
Weighted Average Weighted Average
Grant-Date Grant-Date
Other Equity Instruments Number Fair Value Number Fair Value
Outstanding, beginning of year ........... 3,590,164 $44.45 1,252,451 $49.12
Granted .......................... 1,315,106 47.20 788,677 47.31
Vested(1) ......................... (1,410,764) 39.94 (579,510) 44.80
Forfeited ......................... (143,552) 46.72 (37,909) 48.87
Performance-based adjustment(2) ....... — — 26,319 49.78
Outstanding, end of year ............... 3,350,954 $47.33 1,450,028 $49.87
(1) Represents awards for which the requisite service has been rendered including those that are
retirement eligible. Excludes performance shares which remain subject to attainment of a
performance condition.
(2) Represents the current year change in estimated performance shares from the initial grant, for
grant years 2008, 2007 and 2006, to reflect the attainment of certain performance levels during the
performance measurement period.
On February 3, 2009, the Company, under The Travelers Companies, Inc. Amended and Restated
2004 Stock Incentive Plan, granted 2,370,043 common stock awards in the form of restricted stock
units, deferred stock and performance share awards to participating officers, non-employee directors
and other key employees. The restricted stock units and deferred stock awards totaled 1,437,922 shares
while the performance share awards totaled 932,121 shares. The fair value per share attributable to the
common stock awards on the date of grant was $39.19.
Share-Based Compensation Recognition
The compensation cost for awards subject to a service condition is based upon the number of
equity instruments for which the requisite service period is expected to be rendered. Awards granted to
retiree-eligible or to employees who become retiree-eligible before an award’s vesting date are
considered to have met the requisite service condition. The compensation cost for awards subject to a
performance condition is based upon the probable outcome of the performance condition. The
compensation cost reflects an estimated annual forfeiture rate of 5% over the requisite service period
of the awards. That estimate is revised if subsequent information indicates that the actual number of
instruments expected to vest is likely to differ from previous estimates. Compensation costs for awards
are recognized on a straight-line basis over the requisite service period. For awards that have a graded
vesting schedule, the compensation cost is recognized on a straight-line basis over the requisite service
period for each separate vesting portion of the award as if the award was, in substance, multiple
awards. The total compensation cost for all share-based incentive compensation awards recognized in
earnings for the years ended December 31, 2008, 2007 and 2006 was $123 million, $125 million and
$147 million, respectively. Included in those amounts were approximately $2 million, $6 million and
$12 million respectively, of compensation costs related to awards granted, prior to the adoption of
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