Travelers 2012 Annual Report Download - page 238

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. SHARE-BASED INCENTIVE COMPENSATION (Continued)
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. In addition, the Company’s board of directors can be
issued deferred stock unit awards from (i) an annual award; (ii) deferred compensation (in lieu of cash
retainer); and (iii) dividend reinvestment shares earned on outstanding deferred compensation.
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, 2012 and 2013); depending on
the actual return on equity attained.
The fair value of restricted stock units, deferred stock units 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, 2012, 2011 and
2010 was $146 million, $121 million and $113 million, respectively.
A summary of restricted stock units, deferred stock units and performance share activity under the
Company’s 2004 Incentive Plan and legacy plans as of and for the year ended December 31, 2012 is as
follows:
Restricted and Deferred Stock
Units Performance Shares
Weighted Average Weighted Average
Grant-Date Grant-Date
Other Equity Instruments Number Fair Value Number Fair Value
Outstanding, beginning of year ........ 2,780,504 $48.03 1,547,402 $53.79
Granted ....................... 953,630 60.18 719,841 59.48
Vested ........................ (1,379,608)(1) 42.90 (868,250)(2) 51.82
Forfeited ...................... (158,144) 52.96 (70,856) 55.15
Performance-based adjustment ...... — — 110,084(3) 54.06
Outstanding, end of year ............ 2,196,382 $56.17 1,438,221 $58.22
(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 (three 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 2009 through 2012.
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