Aviva 2009 Annual Report Download - page 204

202
Aviva plc Notes to the consolidated financial statements continued
Annual Report and Accounts 2009
29 – Equity compensation plans continued
(c) Movements in the year
A summary of the status of the option plans as at 31 December 2009 and 2008, and changes during the years ended on those
dates, is shown below.
2009 2008
Weighted average Weighted average
exercise price exercise price
Number of options p Number of options p
Outstanding at 1 January 26,278,223 477.82 22,999,532 534.70
Granted during the year 14,863,272 316.00 12,392,826 410.00
Exercised during the year (146,330) 359.55
(2,344,424) 420.90
Forfeited during the year (1,149,764) 459.77 (528,037) 497.32
Cancelled during the year (8,604,422) 433.40 (3,980,590) 483.76
Expired during the year (4,885,886) 513.42 (2,261,084) 561.62
Outstanding at 31 December 26,355,093 395.90 26,278,223 477.82
Exercisable at 31 December 6,709,247 550.41 6,709,247 550.41
(d) Expense charged to the income statement
The total expense recognised for the year arising from equity compensation plans was as follows:
2009
£m
2008
£m
Equity-settled expense (note 10b)
Cash-settled expense
56
—
39
—
56 39
(e) Fair value of options and awards granted after 7 November 2002
The weighted average fair values of options and awards granted during the year, estimated by using the Black-Scholes option
pricing model, were £1.78 and £1.94
(2008: £1.99 and £4.44) respectively.
(i) Share options
The fair value of the options was estimated on the date of grant, based on the following weighted average assumptions:
Weighted average assumption 2009 2008
Share price 480p 518p
Exercise price 316p 410p
Expected volatility 55% 32.6%
Expected life 5.00 years 5.00 years
Expected dividend yield 5.06% 5.5%
Risk-free interest rate 2.47% 4.4%
The expected volatility used was based on the historical volatility of the share price over a period equivalent to the expected life
of the options prior to its date of grant.
The risk-free interest rate was based on the yields available on UK government bonds as at the date of grant. The bonds
chosen were those with a similar remaining term to the expected life of the options.
1 options granted after 7 November 2002 were exercised during the year
(2008: 1,112,282) .
44,590
(ii) Share awards
The fair value of the awards was estimated on the date of grant, based on the following weighted average assumptions:
Weighted average assumption 2009 2008
Share price 216.25p 608p
Expected volatility* 60% 25%
Expected volatility of comparator companies’ share price* 61% 26%
Correlation between Aviva and competitors’ share price* 55% 65%
Expected life 2.75 years 2.78 years
Expected dividend yield 8.23% 4.5%
Risk-free interest rate* 1.76% 3.9%
* For awards with market-based performance conditions.
The expected volatility used was based on the historical volatility of the share price over a period equivalent to the expected life of
the options prior to its date of grant.
The risk-free interest rate was based on the yields available on UK government bonds as at the date of grant. The bonds chosen
were those with a similar remaining term to the expected life of the options.