Stock-based Compensation

9 Months Ended

Sep. 30, 2012

Stock-based Compensation

10. Stock-based Compensation

Compensation cost and the related tax benefits were as follows:

	Three Months Ended September 30,								Nine Months Ended September 30,
(in millions)	2012				2011				2012				2011
Stock-based compensation expense		$	3.5			$	3.5			$	9.8			$	9.5
Tax benefit			(1.2	)			(1.2	)			(3.4	)			(3.3	)
Stock-based compensation expense, net of taxes		$	2.3			$	2.3			$	6.4			$	6.2

Stock Options

Information on the Company’s stock option plan activity is summarized as follows:

	Nine Months Ended September 30,
	2012						2011
(in whole shares and dollars)	Shares			Weighted Average Exercise Price			Shares			Weighted Average Exercise Price
Outstanding, beginning of period		2,715,430			$	38.57		2,843,909			$	39.22
Granted		517,500				36.81		297,000				46.47
Exercised		(56,874	)			29.33		(118,014	)			33.13
Forfeited or cancelled		(90,574	)			41.84		(23,665	)			39.92
Expired		(159,850	)			44.05		(256,250	)			57.00
Outstanding, end of period		2,925,632				38.06		2,742,980				38.60

Restricted Stock Units

The following tables summarize activity information about employee restricted stock units:

	Nine Months Ended September 30,
	2012						2011
(in whole shares and dollars)	Shares			Weighted Average Grant Date Fair Value			Shares			Weighted Average Grant Date Fair Value
Time-based restricted stock units:
Outstanding, beginning of period		768,529			$	40.17		838,129			$	40.93
Granted		172,691				36.99		179,319				42.85
Vested		(127,966	)			35.66		(196,238	)			45.08
Forfeited		(43,105	)			40.35		(23,194	)			41.19
Outstanding, end of period		770,149				40.19		798,016				40.33
Performance and market-based restricted stock units:
Outstanding, beginning of period		69,500			$	45.37		101,680			$	39.62
Granted		94,000				36.75		42,500				46.47
Vested		-				-		(25,055	)			45.21
Forfeited		(1,125	)			41.16		-				-
Outstanding, end of period		162,375				40.34		119,125				40.89

Performance based restricted stock units are based upon the achievement of the performance metrics at 100%. These units have the potential to range from 0% to 133% of the shares disclosed, which varies based on individual participation level. Increases above the 100% target level are reflected as granted in the period in which the performance-based stock unit goals are achieved. Decreases below the 100% target level are reflected as forfeited.

In the first three months of 2012, the Company granted 94,000 market-based awards to certain members of senior management, which are included in the table above as performance and market-based restricted stock activity. The attainment of these stock units is based on the relative total shareholder return (“TSR”) of the Company. This metric is based on a three-year average relative TSR as compared to a Property and Casualty Index of peer companies. The fair value of market based awards was estimated at the date of grant using a valuation model. These units have the potential to range from 0% to 150% of the shares disclosed.