Travelers 2015 Annual Report Download - page 230

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. SHARE-BASED INCENTIVE COMPENSATION (Continued)
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. In addition, the
Company’s board of directors can be issued deferred stock units from (i) an annual award; (ii) deferred
compensation (in lieu of cash retainer); and (iii) dividend equivalents earned on outstanding deferred
compensation.
The Company also has a Performance Share Awards Program established pursuant to the 2004
Incentive Plan and which continues pursuant to the 2014 Incentive Plan. 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 share 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 and the recipient meeting certain years of service criteria. The
performance goals for performance share awards are based on the Company’s adjusted return on equity
over a three-year performance period. Vesting of performance shares is contingent upon the Company
attaining the relevant performance period minimum threshold return on equity and the recipient
meeting certain years of service criteria, generally three years for full vesting, subject to proration for
certain termination conditions. If the performance period return on equity is below the minimum
threshold, none of the performance shares will vest. If performance meets or exceeds the minimum
performance threshold, a range of performance shares will vest (50% to 150% for awards granted in
2014, 2015 and 2016), 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. Under terms of the 2014 Incentive Plan,
holders of deferred stock units and performance shares may receive dividend equivalents.
The total fair value of shares that vested during the years ended December 31, 2015, 2014 and
2013 was $179 million, $147 million and $151 million, respectively.
A summary of restricted stock units, deferred stock units and performance share activity under the
2014 Incentive Plan and the legacy plans as of and for the year ended December 31, 2015 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
Nonvested, beginning of year ............. 1,760,971 $ 72.40 1,290,069 $ 79.46
Granted .......................... 607,200 106.02 460,855 106.04
Vested ........................... (789,538)(1) 69.03 (676,177)(2) 79.28
Forfeited .......................... (142,675) 73.57 (31,352) 86.41
Performance-based adjustment .......... — — 58,594(3) 94.06
Nonvested, end of year ................. 1,435,958 $ 88.35 1,101,989 $ 91.27
(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 2013 through 2015.
230