Ameriprise 2012 Annual Report Download - page 168

qualified retirement. Compensation expense related to the Company match is recognized on a straight-line basis over the
vesting period.
Ameriprise Financial 2008 Employment Incentive Equity Award Plan
The 2008 Plan is designed to align employees’ interests with those of the shareholders of the Company and attract and
retain new employees. The 2008 Plan provides for the grant of equity incentive awards to new employees who became
employees in connection with a merger or acquisition, including stock options, restricted stock awards, restricted stock
units, and other equity-based awards designed to comply with the applicable federal and foreign regulations and laws of
jurisdiction. Under the 2008 Plan, a maximum of 6.0 million shares may be issued.
Stock Options
Stock options granted have an exercise price not less than 100% of the current fair market value of a share of the
Company’s common stock on the grant date and a maximum term of 10 years. Stock options granted generally vest
ratably over three to four years. Vesting of option awards may be accelerated based on age and length of service. Stock
options granted are expensed on a straight-line basis over the option vesting period based on the estimated fair value of
the awards on the date of grant using a Black-Scholes option-pricing model.
The following weighted average assumptions were used for stock option grants:
2012 2011 2010
Dividend yield 2.0% 1.3% 1.5%
Expected volatility 45% 44% 50%
Risk-free interest rate 0.8% 2.3% 2.3%
Expected life of stock option (years) 5.0 5.0 5.0
The dividend yield assumption represents the Company’s expected dividend yield based on its historical dividend payouts.
The expected volatility is based on the Company’s historical and implied volatilities. The risk-free interest rate for periods
within the expected option life is based on the U.S. Treasury yield curve at the grant date. The expected life of the option
is based on the Company’s past experience and other considerations.
The weighted average grant date fair value for options granted during 2012, 2011 and 2010 was $18.15, $21.38 and
$15.89, respectively.
A summary of the Company’s stock option activity for 2012 is presented below (shares and intrinsic value in millions):
Weighted Average
Remaining
Weighted Average Contractual Term Aggregate
Shares Exercise Price (Years) Intrinsic Value
Outstanding at January 1 18.9 $ 38.85 5.3 $ 241
Granted 1.9 54.37
Exercised (5.4) 30.03
Forfeited (0.4) 42.71
Outstanding at December 31 15.0 43.91 5.9 281
Exercisable at December 31 10.3 42.61 4.9 207
The intrinsic value of a stock option is the amount by which the fair value of the underlying stock exceeds the exercise
price of the option. The total intrinsic value of options exercised was $153 million, $58 million and $70 million during the
years ended December 31, 2012, 2011 and 2010, respectively.
Restricted Stock Awards
Restricted stock awards generally vest ratably over three to four years or at the end of five years. Vesting of restricted stock
awards may be accelerated based on age and length of service. Compensation expense for restricted stock awards is
based on the market price of Ameriprise Financial stock on the date of grant and is amortized on a straight-line basis over
the vesting period. Quarterly dividends are paid on restricted stock, as declared by the Company’s Board of Directors,
during the vesting period and are not subject to forfeiture.
Certain advisors receive a portion of their compensation in the form of restricted stock awards which are subject to
forfeiture based on future service requirements.
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