Ameriprise 2014 Annual Report Download - page 174

Stock Options
Stock options granted under the 2005 ICP and the 2008 Plan 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 vesting period based on the fair
value of the awards on the date of grant. The grant date fair value of the options is calculated using a Black-Scholes
option-pricing model.
The following weighted average assumptions were used for stock option grants:
2014 2013 2012
Dividend yield 2.0% 3.0% 2.0%
Expected volatility 31% 41% 45%
Risk-free interest rate 1.5% 0.9% 0.8%
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
and management’s expectations. 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 2014, 2013 and 2012 was $25.59, $18.16 and
$18.15, respectively.
A summary of the Company’s stock option activity for 2014 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 9.4 $ 53.03 5.2 $ 583
Granted 1.6 108.32
Exercised (3.7) 52.59
Forfeited (0.1) 74.77
Outstanding at December 31 7.2 65.07 6.7 485
Exercisable at December 31 4.1 49.92 5.4 334
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 $243 million, $299 million and $153 million during
the years ended December 31, 2014, 2013 and 2012, respectively.
Restricted Stock Awards
Restricted stock awards granted under the 2005 ICP and 2008 Plan 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 common 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.
Restricted Stock Units and Deferred Share Units
The 2005 ICP provides for the grant of deferred share units to non-employee directors of the Company and the 2005 ICP
and 2008 Plan provide for the grant of restricted stock units to employees. The director awards are fully vested upon
issuance and are settled for Ameriprise Financial common stock upon the director’s termination of service. The employee
awards generally vest ratably over three to four years. Compensation expense for deferred share units and restricted stock
units is based on the market price of Ameriprise Financial stock on the date of grant. Restricted stock units granted to
employees are expensed on a straight-line basis over the vesting period or on an accelerated basis if certain age and
length of service requirements are met. Deferred share units granted to non-employee directors are expensed immediately.
Dividends are paid on restricted stock units, as declared by the Company’s Board of Directors, during the vesting period
and are not subject to forfeiture. Dividend equivalents are issued on deferred share units, as dividends are declared by the
Company’s Board of Directors, until distribution and are not subject to forfeiture.
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