Share-Based Compensation Plans

Share-based incentive awards are provided to employees under the 2013 Incentive Award Plan (“2013 Plan”). The 2013 Plan is administered by the Compensation Committee of the Board of Directors (“Compensation Committee”), and awards under the plan include stock options, restricted stock and other stock awards. The maximum number of shares of common stock that can be granted under the 2013 Plan is 33 million shares plus any shares awarded under the 2013 Plan and any prior plan that are forfeited or expired. Stock option awards reduce the number of shares available for grant on a one-for-one basis. All other awards reduce the number of shares available for grant by 3.5 shares for every one share of common stock awarded. The terms of each award and the exercise date are determined by the Compensation Committee. The 2013 Plan does not permit the holder of an award to elect cash settlement under any circumstances. At December 31, 2014, there were 32,671,988 shares available for grant under the 2013 Plan. If all shares available for grant were for awards other than stock options, shares available for grant would be 9,334,854.

Share-based compensation expense was $93.5 million, $86.3 million and $80.8 million in 2014, 2013 and 2012, respectively. At December 31, 2014, unamortized share-based compensation that will be expensed over the next five years is $210.1 million. We record a deferred tax asset for share-based compensation expense recognized for financial reporting that has not been deducted on our income tax return. If the actual tax deduction exceeds the deferred tax asset, the difference is recorded in additional paid-in capital (“APIC Pool”). If the actual tax deduction is less than the deferred tax asset and no APIC Pool exists, the difference is recorded in results of operations. To the extent that future tax deductions for share-based compensation are less than the deferred tax assets resulting from recording book share-based compensation expense, we expect to have a sufficient pool of excess tax benefits within the APIC Pool available to offset any potential future shortfall.

Stock Options

The exercise price of stock option awards may not be less than 100% of the market price of our common stock on the grant date and the option term cannot exceed ten years from the grant date. Typically, stock option awards vest 30% per year in the first two years and are fully vested three years from grant date. Generally, stock option exercises are settled with treasury shares.

Stock option activity for the three years ended December 31, 2014 was:



	2014			2013			2012
	Shares		Weighted Average Exercise Price	Shares		Weighted Average Exercise Price	Shares		Weighted Average Exercise Price
January 1	2,643,680		$26.39	5,590,880		$25.72	18,301,409		$26.22
Granted	60,000		$66.16	60,000		$70.68	60,000		$49.65
Exercised	(1,046,540	)	$26.19	(3,021,200	)	$26.01	(12,673,529	)	$26.47
(Forfeited) reinstated	(5,000	)	$23.40	14,000		$23.40	(97,000	)	$35.98
December 31	1,652,140		$27.97	2,643,680		$26.39	5,590,880		$25.72

Exercisable December 31	1,526,140		$24.95	2,505,680		$24.67	5,333,880		$24.89

Options outstanding and exercisable at December 31, 2014 were:



			Options Outstanding			Options Exercisable
Range of Exercise Prices			Shares	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Shares	Weighted Average Exercise Price
$23.40	to	$29.99	1,437,140	4.2 years	$23.40	1,437,140	$23.40
$30.00	to	$44.99	41,000	6.1 years	$41.57	41,000	$41.57
$45.00	to	$59.99	54,000	7.5 years	$49.32	30,000	$49.05
$60.00	to	$70.68	120,000	9.4 years	$68.42	18,000	$70.68
			1,652,140			1,526,140

The fair value of each grant was determined on the grant date using the Black-Scholes option valuation model. The Black-Scholes assumptions (without adjusting for the risk of forfeiture and lack of liquidity) and the weighted average fair value per share for options granted were:



	2014	2013	2012
Expected option lives	5 years	5 years	5 years
Risk free interest rate	1.4%	1.4%	0.8%
Expected volatility	22.3%	26.0%	29.5%
Dividend yield	3.0%	2.0%	3.1%
Weighted average fair value per option granted	$10.50	$14.50	$10.42

Restricted Stock

Restricted stock activity for the three years ended December 31, 2014 was:



	2014		2013		2012
January 1	6,090,697		7,241,490		6,038,978
Granted	915,922		706,900		2,515,127
Vested	(1,619,444	)	(1,490,786	)	(981,737	)
Forfeited	(346,534	)	(366,907	)	(330,878	)
December 31	5,040,641		6,090,697		7,241,490

Weighted average grant date fair value of shares granted in the period	$64.92		$60.98		$49.55

Weighted average grant date fair value at December 31	$50.98		$47.47		$45.34

Restricted shares typically vest 20% per year and are fully vested five years from the grant date provided the employee remains employed by us. Restricted shares may not be sold, transferred, pledged or otherwise encumbered until the forfeiture restrictions lapse. Under most circumstances, the employee forfeits the shares if employment ceases prior to the end of the restriction period.

Performance Restricted Stock Units

The Compensation Committee grants certain employees performance restricted stock units (“PRSUs”). Each PRSU represents the right to receive one share of common stock on vesting. The ultimate number of PRSUs received by the employee depends on the Company's average return on equity over a three year period compared to the average return on equity of a peer group of four principal competitors over the same period. The PRSUs granted in 2011 (“2011 PRSUs”) vest over five years and all other PRSUs vest over three years. One half of the 2011 PRSUs have a service only vesting condition and compensation expense is recognized on a straight-line basis over the service period. The other half of the 2011 PRSUs and all other PRSUs have a service and performance vesting condition and compensation expense is recognized on a graded-vesting basis. Over the performance period, the recognition of compensation expense is adjusted upward or downward based on our estimate of the probability of achievement of the performance target for the portion of the awards subject to the performance vesting condition. We assume that substantially all the PRSUs subject to the service and performance condition will vest.

PRSU activity of the three years ended December 31, 2014 was:



	2014				2013				2012
	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
January 1	681,555		$	51.19	538,948		$	48.74	413,909		48.56
Granted	188,621		69.89		183,998		57.77		166,426		$	49.13
Distributed	(165,562	)	48.56		(41,391	)	48.56		(41,387	)	48.56
Forfeited	(81,755	)	61.76		—		—		—		—
December 31	622,859		$	56.16	681,555		$	51.19	538,948		$	48.74

The 2011 PRSUs subject to the service only vesting condition are distributed as they vest. The 2011 PRSUs subject to the service and performance condition are distributed, based on the vesting schedule, upon achieving the performance target. All other PRSUs subject to the service and performance conditions are distributed upon achieving the performance target. All shares distributed to date relate to the 2011 PRSUs.

ESPP

We have an employee stock purchase plan (“ESPP”) that enables employees to purchase our common stock through payroll deductions over each plan quarter at 95% of the market price on the last trading day of the plan quarter. Purchases are limited to 10% of eligible compensation as defined by the Employee Retirement Income Security Act of 1974 (“ERISA”). Employees purchased 113,293 shares, 175,002 shares and 189,307 shares in 2014, 2013 and 2012, respectively, all of which were treasury shares, for which $8.0 million, $9.9 million and $8.6 million, respectively, was paid to us. At December 31, 2014, 9,078,083 shares are available for the ESPP.