Travelers 2008 Annual Report Download - page 239

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. SHARE-BASED INCENTIVE COMPENSATION (Continued)
FAS 123R, to retiree-eligible employees or to employees who became retiree-eligible before the awards
vesting date. Also included are compensation cost adjustments of $6 million, $5 million and $2 million,
for the years ended December 31, 2008, 2007 and 2006, respectively, that reflected the cost associated
with the updated estimate of performance shares due to attaining certain performance levels from the
date of the initial grant of the performance awards. The related tax benefits recognized in earnings
were $42 million for the each of the years ended December 31, 2008 and 2007 and $51 million for the
year ended December 31, 2006.
As of December 31, 2008, there was $112 million of total unrecognized compensation cost related
to all nonvested share-based incentive compensation awards. This includes stock options, restricted
stock, restricted stock units, deferred stock and performance shares granted under the Company’s 2004
Incentive Plan and legacy TPC and legacy SPC share-based incentive compensation plans. The
unrecognized compensation cost is expected to be recognized over a weighted-average period of
1.7 years.
Cash received from the exercise of employee stock options under share-based compensation plans
totaled $89 million and $218 million in 2008 and 2007, respectively. The tax benefit realized for tax
deductions from employee stock options exercised during 2008 and 2007 totaled $12 million and
$32 million, respectively.
13. 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 average pay formula. In
addition, the Company and TPC sponsor nonqualified defined 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.
As discussed in note 1, the Company adopted the provisions of FAS 158, Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88,
106 and 132(R) at December 31, 2006.
The incremental effects of applying FAS 158 on individual line items of the Company’s balance
sheet at December 31, 2006 were as follows:
Before After
Application of Application of
(in millions) FAS 158 Adjustments FAS 158
Deferred tax asset ................................. $ 1,493 $ 43 $ 1,536
Other assets ..................................... 2,742 (155) 2,587
Total assets ...................................... 113,873 (112) 113,761
Other liabilities ................................... 6,674 (32) 6,642
Total liabilities ................................... 88,658 (32) 88,626
Accumulated other changes in equity from nonowner sources . 532 (80) 452
Total shareholders’ equity ........................... 25,215 (80) 25,135
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