Stock Compensation Plans

6 Months Ended

Jun. 30, 2011

Stock Compensation Plans

Stock Compensation Plans

12.  Stock Compensation Plans

The following table summarizes stock-based compensation expense recognized in the Condensed Consolidated Statements of Income in Compensation and benefits (in millions):

	Three months ended				Six months ended
	June 30,				June 30,
	2011		2010		2011		2010
Restricted stock units (“RSUs”)	$	33	$	29	$	78	$	70
Performance plans	10		22		35		41
Stock options	2		5		5		10
Employee stock purchase plans	2		1		3		2
Total stock-based compensation expense	$	47	$	57	$	121	$	123

Stock Awards

In the first six months of 2011, the Company granted approximately 1.2 million shares in connection with the 2008 Leadership Performance Plan cycle, 0.3 million shares related to a 2006 performance plan, and restricted shares of approximately 3.1 million in connection with the Company’s incentive compensation plans.  In the first six months of 2010, the Company granted approximately 1.6 million shares in connection with the completion of the 2007 Leadership Performance Plan cycle and restricted shares of approximately 3.1 million in connection with the Company’s incentive compensation plans.

A summary of the status of Aon’s non-vested stock awards is as follows (shares in thousands):

	Six months ended June 30,
	2011				2010
	Shares		Fair Value (1)		Shares		Fair Value (1)
Non-vested at beginning of period	10,674		$	38	12,850		$	36
Granted	4,590		51		4,643		39
Vested	(4,550	)	42		(5,235	)	36
Forfeited	(283	)	40		(248	)	36
Non-vested at end of period	10,431		42		12,010		37

(1) Represents per share weighted average fair value of award at date of grant

Information regarding Aon’s performance-based plans follows (shares in thousands, dollars in millions):

	As of June 30,
	2011		2010
Potential RSUs to be issued based on current performance levels	5,777		5,343
Unamortized expense, based on current performance levels	$	129	$	139

Stock Options

In connection with its incentive compensation plans, in the second quarter of 2011 the Company did not grant any options.  In the first six months of 2011 and 2010, the Company granted 80,000 stock options at $53 per share and 143,000 stock options at $38 per share, respectively.

The weighted average assumptions, the weighted average expected life and estimated fair value of employee stock options are summarized as follows:

	Three months ended June 30,				Six months ended June 30,
	2011	2010			2011			2010
Weighted average volatility	N/A	25.4		%	26.1		%	28.5		%
Expected dividend yield	N/A	1.4		%	1.3		%	1.6		%
Risk-free rate	N/A	3.0		%	2.2		%	3.0		%
Weighted average expected life, in years	N/A	6.1			5.5			6.1
Weighted average estimated fair value per share	N/A	$	10.99		$	10.92		$	10.37

A summary of the status of Aon’s stock options and related information is as follows (shares in thousands):

	Six months ended June 30,
	2011				2010
	Shares		Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price
Outstanding at beginning of period	13,919		$	32	15,937		$	33
Granted	80		53		143		38
Exercised	(3,554	)	32		(1,948	)	31
Forfeited and expired	(216	)	37		(242	)	32
Outstanding at end of period	10,229		32		13,890		33
Exercisable at end of period	8,804		30		9,273		32

The weighted average remaining contractual life, in years, of outstanding options was 3.8 years and 3.9 years at June 30, 2011 and 2010, respectively.

The aggregate intrinsic value represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s closing stock price of $51.30 as of June 30, 2011, which would have been received by the option holders had those option holders exercised their options as of that date.  At June 30, 2011, the aggregate intrinsic value of options outstanding was $198 million, of which $184 million was exercisable.

Other information related to the Company’s stock options is as follows (in millions):

	Three months ended				Six months ended
	June 30,				June 30,
	2011		2010		2011		2010
Aggregate intrinsic value of stock options exercised	$	24	$	6	$	65	$	21
Cash received from the exercise of stock options	39		28		121		60
Tax benefit realized from the exercise of stock options	5		3		12		4

Unamortized deferred compensation expense, which includes both options and awards, amounted to $321 million as of June 30, 2011, with a remaining weighted-average amortization period of approximately 2.1 years.