Travelers 2010 Annual Report Download - page 233

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. SHARE-BASED INCENTIVE COMPENSATION (Continued)
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.
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 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, a range of performance shares will vest
(50%–160% for awards granted prior to and including February 2009; 50%–150% for awards granted in
February 2010; and 50%–130% for awards granted in February 2011), 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, 2010, 2009 and
2008 was $113 million, $78 million and $82 million, respectively.
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, 2010 is
as follows:
Restricted and Deferred Shares Performance Shares
Weighted Average Weighted Average
Grant-Date Fair Grant-Date Fair
Other Equity Instruments Number Value Number Value
Outstanding, beginning of year ............ 3,382,548 $45.05 1,709,962 $42.93
Granted ........................... 1,129,117 51.18 905,439 51.20
Vested ............................ (1,318,138)(1) 49.36 (904,218)(2) 47.68
Forfeited .......................... (107,175) 45.08 (154,382) 44.57
Performance-based adjustment ........... — — 187,089(3) 42.70
Outstanding, end of year ................. 3,086,352 $45.46 1,743,890 $44.52
(1) Represents awards for which the requisite service has been rendered.
(2) Reflects the number of performance shares attributable to the performance goals attained over the
completed performance period (3 years) and for which service conditions have been met.
(3) Represents the current year change in estimated performance shares to reflect the attainment of
performance goals for the awards that were granted in each of the years 2006 through 2010.
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