Unum 2008 Annual Report Download - page 140
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136
We estimated the fair value on the date of initial grant using the Monte-Carlo model. The following assumptions were used to value
the grant:
• Expected volatility of 29 percent, based on our historical daily stock prices.
• Expected life of 4.4 years, which equals the maximum term.
• Expected dividend yield of 1.24 percent, based on the dividend rate at the date of grant.
• Risk-free interest rate of 3.97 percent, based on the yield of treasury bonds at the date of grant.
Stock Options
Stock option activity is summarized as follows:
Shares Weighted Average Remaining Intrinsic
(000s) Exercise Price Contractual Term Value (000s)
7,703 $32.81
Granted 458 23.74
Exercised (105) 14.75
Expired (615) 47.66
7,441 31.28 1.8 years $4,833
6,872 $31.94 1.4 years $4,833
All outstanding stock options at December 31, 2008 are expected to vest. Stock options vest over a three year service period, beginning
at the date of grant, and the compensation cost is recognized ratably during the vesting period. The total intrinsic value of options exercised
during 2008, 2007, and 2006 was $1.0 million, $3.9 million, and $0.9 million, respectively. The total fair value of options that vested during
2008 and 2006 was $1.2 million and $0.5 million, respectively. No stock options vested in 2007. At December 31, 2008, we had $1.9 million
of unrecognized compensation cost related to stock options that will be recognized over a weighted average period of 1.0 year.
The weighted average grant date fair value of options granted during 2008 and 2007 was $8.84 and $8.61, respectively. No stock
options were granted during 2006. We estimated the fair value on the date of grant using the Black-Scholes valuation model. The following
assumptions were used to value the 2008 and 2007 grants:
• Expected volatility of 43 percent and 44 percent, respectively, based on our historical daily stock prices.
• Expected life of 5.0 years, based on historical average years to exercise.
• Expected dividend yield of 1.30 percent and 1.57 percent, respectively, based on the dividend rate at the date of grant.
• Risk-free interest rate of 2.93 percent and 4.67 percent, respectively, based on the yield of treasury bonds at the date of grant.
ESPP
ESPP activity is summarized as follows:
Year Ended December 31
2007 2006
Number of Shares Sold 114,420 148,833
Weighted Average Exercise Price $24.32 $18.99
Weighted Average Grant Date Fair Value $ 5.18 $ 3.90