EQUITY BASED COMPENSATION

The Company adopted the RGA Flexible Stock Plan (the “Plan”) in February 1993, as amended, and the Flexible Stock Plan for Directors (the “Directors Plan”) in January 1997, as amended, (collectively, the “Stock Plans”). The Stock Plans provide for the award of benefits (collectively “Benefits”) of various types, including stock options, stock appreciation rights (“SARs”), restricted stock, performance shares, cash awards, and other stock-based awards, to key employees, officers, directors and others performing significant services for the benefit of the Company or its subsidiaries. As of December 31, 2015, shares authorized for the granting of Benefits under the Plan and the Directors Plan totaled 13,360,077 and 212,500 respectively. The Company uses treasury shares or shares made available from authorized but unissued shares to support the future exercise of options or settlement of awards granted under its stock plans.

Equity-based compensation expense of $16.0 million, $24.4 million, and $20.3 million related to grants or awards under the Stock Plans was recognized in 2015, 2014 and 2013, respectively. Equity-based compensation expense is principally related to the issuance of stock options, performance contingent restricted units, stock appreciation rights and restricted stock.

In general, options granted under the Plan become exercisable over vesting periods ranging from one to five years while options granted under the Directors Plan become exercisable after one year. Options are generally granted with an exercise price equal to the stock’s fair value at the date of grant and expire 10 years after the date of grant. Information with respect to grants under the Stock Plans follows.

Stock Options

The following table presents a summary of stock option activity:



	Number of Options		Weighted-Average Exercise Price		Aggregate Intrinsic Value (in millions)
Outstanding December 31, 2014	2,978,733		$	55.41
Granted	506,344		$	91.65
Exercised	(652,015	)	$	51.43
Forfeited	(7,622	)	$	57.29
Outstanding December 31, 2015	2,825,440		$	62.82	$	81.5
Options exercisable	2,087,712		$	56.12	$	74.2

The intrinsic value of options exercised was $26.2 million, $17.0 million, and $11.3 million for 2015, 2014 and 2013, respectively.



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding as of 12/31/2015	Weighted-Average Remaining Contractual Life (years)	Weighted- Average Exercise Price		Number Exercisable as of 12/31/2015	Weighted-Average Exercise Price
$25.00 - $44.99	208,347	3.0	$	32.20	208,347	$	32.20
$45.00 - $54.99	267,249	3.8	$	47.11	267,249	$	47.11
$55.00 +	2,349,844	6.6	$	67.32	1,612,116	$	60.71
Totals	2,825,440	6.1	$	62.82	2,087,712	$	56.12

The following table presents the weighted average assumptions used to determine the fair value of stock options issued:



For the years ended December 31,	2015			2014			2013
Dividend yield	1.47		%	1.53		%	1.63		%
Risk-free rate of return	2.04		%	2.27		%	1.36		%
Expected volatility	35.0		%	35.7		%	35.4		%
Expected life (years)	7.0			7.0			6.8
Weighted average exercise price of stock options granted	$	91.65		$	78.48		$	58.77
Weighted average fair value of stock options granted	$	30.05		$	26.76		$	18.58

The Black-Scholes model was used to determine the fair value recognized in the financial statements of stock options that have been granted. The Company used daily historical volatility when calculating stock option values. The benchmark rate is based on observed interest rates for instruments with maturities similar to the expected term of the stock options. Dividend yield is determined based on historical dividend distributions compared to the price of the underlying common stock as of the valuation date and held constant over the life of the stock options. The Company estimated expected life using the historical average years to exercise or cancellation.

Performance Shares

Performance shares, also referred to as performance contingent units (“PCUs”), are units that, if they vest, are multiplied by a performance factor to produce a number of final PCUs which are paid in the Company’s common stock. Each PCU represents the right to receive up to two shares of Company common stock, depending on the results of certain performance measures over a three-year period. The compensation expense related to the PCUs is recognized ratably over the requisite performance period. Performance shares are accounted for as equity awards, but are not credited with dividend-equivalents for actual dividends paid on the Company’s common stock during the performance period.

Restricted Stock Units

In general, restricted stock units ("RSUs") become payable at the end of a three- or ten-year vesting period. Each RSU, if they vest, represents the right to receive one share of Company common stock. RSUs awarded under the plan generally have no strike price and are included in the Company's shares outstanding.

The following table presents a summary of Performance Share and Restricted Stock Unit activity:



	Performance Contingent Units		Restricted Stock Units
Outstanding December 31, 2014	692,663		36,065
Granted	185,783		37,078
Paid	(192,725	)	—
Forfeited	(54,399	)	(2,256	)
Outstanding December 31, 2015	631,322		70,887

During 2015, the Company issued 185,783 PCUs to key employees at a weighted average fair value per unit of $90.15. In May 2015 and May 2014, the board approved a 0.820 and 0.529 share payout for each PCU granted in 2012 and 2011, resulting in the issuance of 192,725 and 103,358 shares of common stock from treasury, respectively.

As of December 31, 2015, the total compensation cost of non-vested awards not yet recognized in the financial statements was $30.5 million. It is estimated that these costs will vest over a weighted average period of 2.1 years.

The majority of the awards granted each year under the board-approved incentive compensation package and Directors Plan are made in the first quarter of each year.