Travelers 2014 Annual Report Download - page 235

Table of Contents
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. SHARE - BASED INCENTIVE COMPENSATION (Continued)
On February 3, 2015, the Company, under the 2014 Stock Incentive Plan, granted 1,044,313 common stock awards in the form of restricted stock
units, deferred stock units and performance share awards to participating officers, non
- employee directors and other key employees. The restricted
stock units and deferred stock units totaled 583,458 shares while the performance share awards totaled 460,855 shares. The fair value per share
attributable to the common stock awards on the date of grant was $106.04.
Share
- Based Compensation Cost Recognition
The amount of compensation cost for awards subject to a service condition is based on the number of shares expected to be issued and is
recognized over the time period for which service is to be provided (requisite service period). Awards granted to retiree
- eligible employees 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, which on the
grant date reflects an estimate of attaining 100% of the performance shares granted. The compensation cost reflects an estimated annual forfeiture
rate from 3.0% to 4.5% 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 graded vesting terms, 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, 2014, 2013 and 2012
was $138 million, $129 million and $120 million, respectively. Included in these amounts are compensation cost adjustments of $14 million, $8 million
and $4 million, for the years ended December 31, 2014, 2013 and 2012, 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 $47 million, $45 million and $42 million for the years ended December 31, 2014, 2013 and 2012, respectively.
At December 31, 2014, there was $123 million of total unrecognized compensation cost related to all nonvested share
- based incentive
compensation awards. This includes stock options, restricted and deferred stock units and performance shares granted under the 2014 Incentive
Plan and the 2004 Incentive Plan. 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 $195 million and $206 million in 2014 and
2013, respectively. The tax benefit realized for tax deductions from employee stock options exercised during 2014 and 2013 totaled $40 million and
$42 million, respectively.
14. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS
The Company sponsors a qualified non
- contributory defined benefit pension plan, which covers substantially all U.S. domestic 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 sponsors a nonqualified defined benefit pension plan which covers certain highly
-
compensated employees, pension plans for employees of its foreign subsidiaries,
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