Financial Services Execs Drowning in Underwater Stock Options

    NEW YORK, March 20 /PRNewswire/ -- Senior executives in the financial
 services industry, along with the rank and file, are sharing the pain with
 stockholders as market prices decline and accumulated values evaporate. A
 survey conducted by executive compensation consultants Steven Hall &
 Partners reveals that over 50 percent of the Fortune 500 financial services
 and insurance companies have stock options that are underwater. Just two
 years ago, the number was 10 percent. Stock options are underwater when the
 current stock price is below the exercise price of the option.
 
     Thirty-three of the 60 (55%) financial services and insurance companies
 in the Fortune 500 currently have underwater options. The financial
 services company hardest hit by recent stock price declines is Bear Stearns
 whose stock price was $4.81 (on March 17, 2008), 95 percent below the
 weighted average exercise price of the 19,492,436 stock options outstanding
 at year end. Second in line is Countrywide Financial with a stock price
 that is 86 percent below the weighted average exercise price of its
 outstanding options. In all, 63 percent of all financial services companies
 studied are underwater by an average of 44 percent.
 
     Financial services firms are not the only ones with underwater options.
 Within the universe of financial services firms, seventy-four percent of
 the companies in the banking / savings and loan sector also have current
 stock prices below the most recently disclosed weighted average exercise
 prices. On average, the current stock prices of this sector are 32 percent
 below the weighted average exercise prices.
 
     Despite what may seem like all gloom and doom, not all stock options at
 major investment banking firms are underwater -- at Goldman Sachs, the
 current stock price is 42 percent above the weighted average exercise price
 of the 39,229,629 options outstanding.
 
     "These are very tough times for people employed in financial services
 firms -- many have been laid off and others have seen the value of their
 stock holdings plummet," said Steve Hall, Managing Director, Steven Hall &
 Partners. "Those in the insurance sector have certainly faired better," he
 added. Of the twenty-five insurance companies in the study group, 64
 percent of them have weighted average exercise prices in the money. Leading
 the way, at W.R. Berkley, the current stock price is 206 percent above the
 weighted average exercise price of the company's 8,384,422 outstanding
 options. And, at Progressive, the current stock price is 102 percent above
 the weighted average exercise price. On average, insurance companies have
 stock prices 16 percent above the weighted average exercise prices -- the
 only industry in the study to post a positive average.
 
     In addition to mass layoffs, corporations may find that executives will
 affect their own repricing by jumping ship to new firms where they can take
 advantage of new options offered at today's bargain-basement prices.
 
     Steven Hall & Partners is an independent executive compensation
 consulting firm serving as outside counsel to Boards, Compensation
 Committees and management. The firm focuses solely on executive
 compensation, Director remuneration and related corporate governance
 matters. Prior to forming Steven Hall & Partners in September 2005, the
 firm's principals, Pearl Meyer, Steven E. Hall and Steven Root, served as
 Chair, President and Managing Director, respectively, of Pearl Meyer &
 Partners which they founded in 1989. For more information please visit
 www.shallpartners.com.
 
 
* Study based on a comparison of weighted average exercise prices for outstanding options disclosed in the most recently filed 10-K and current stock price. It was conducted in March, 2008. STEVEN HALL & PARTNERS Underwater Options at Financial Services & Insurance Fortune 500 Companies* Fortune Company Rank Industry Region Bear Stearns 138 Diversified Finan Serv Northeast Countrywide Financial 91 Diversified Finan Serv West Washington Mutual 81 Savings&Loans West CIT Group 335 Diversified Finan Serv Northeast National City Corp. 188 Banks Midwest Conseco 493 Insurance Midwest Fifth Third Bancorp 299 Banks Midwest Citigroup 8 Diversified Finan Serv Northeast SLM 284 Diversified Finan Serv Southeast SAIC 298 Insurance Midwest Wachovia Corp. 46 Banks Southeast American Intl. Group 10 Insurance Northeast Unum Group 236 Insurance Southeast Comerica 487 Banks Midwest Regions Financial 312 Banks Southeast KeyCorp 319 Banks Midwest Marsh & McLennan 207 Insurance Northeast Sovereign Bancorp 479 Savings&Loans Northeast Morgan Stanley 20 Diversified Finan Serv Northeast Merrill Lynch 22 Diversified Finan Serv Northeast Marshall & Ilsley Corp. 441 Banks Midwest Capital One Financial 154 Diversified Finan Serv Southeast SunTrust Banks 183 Banks Southeast Genworth Financial 227 Insurance Southeast Safeco 363 Insurance West BB&T Corp. 265 Banks Southeast M&T Bank Corp. 496 Banks Northeast Bank of America Corp. 9 Banks Southeast Lehman Brothers Holdings 47 Diversified Finan Serv Northeast Lincoln National 277 Insurance Midwest J.P. Morgan Chase & Co. 11 Diversified Finan Serv Northeast Allstate 61 Insurance Midwest PNC Financial Services Group 231 Banks Northeast First American Corp. 289 Insurance West Cincinnati Financial 484 Insurance Midwest Wells Fargo 41 Banks West Bank of New York Co. 209 Banks Northeast Travelers Cos. 89 Insurance Midwest American Express 79 Diversified Finan Serv Northeast Charles Schwab 389 Diversified Finan Serv West Fidelity National Financial 264 Insurance Southeast Principal Financial 250 Insurance Midwest Hartford Financial Services 82 Insurance Northeast U.S. Bancorp 123 Banks Midwest Nationwide 104 Insurance Midwest Cigna 139 Insurance Northeast Northern Trust Corp. 490 Banks Midwest Ameriprise Financial 297 Diversified Finan Serv Midwest Aon 247 Insurance Midwest Prudential Financial 66 Insurance Northeast Loews 135 Insurance Northeast Goldman Sachs Group 24 Diversified Finan Serv Northeast Chubb 176 Insurance Northeast MetLife 37 Insurance Northeast State St. Corp. 263 Banks Northeast AFLAC 164 Insurance Southeast Progressive 159 Insurance Midwest Host Hotels & Resorts 452 REITS Northeast Franklin Resources 445 Diversified Finan Serv West W.R. Berkley 423 Insurance Northeast Percent Underwater (-) or Options Last FY Stock In-the- Under- Options Price Money Water Company WAEP Out. 03/17/2008 (+) ? Bear Stearns $86.75 19,492,436 $4.81 -94.5% Yes Countrywide Financial 28.45 49,693,066 4.09 -85.6% Yes Washington Mutual 41.72 43,670,533 9.24 -77.9% Yes CIT Group 42.94 12,262,634 11.03 -74.3% Yes National City Corp. 28.90 46,193,101 7.52 -74.0% Yes Conseco 20.76 4,217,000 8.76 -57.8% Yes Fifth Third Bancorp 49.07 23,645,000 21.12 -57.0% Yes Citigroup 43.08 172,767,122 18.62 -56.8% Yes SLM 35.14 25,357,909 16.54 -52.9% Yes SAIC 34.27 28,000,000 17.67 -48.4% Yes Wachovia Corp. 41.09 128,971,000 25.60 -37.7% Yes American Intl. Group 63.83 36,363,769 39.80 -37.6% Yes Unum Group 32.81 7,703,000 20.98 -36.1% Yes Comerica 56.55 19,172,482 36.74 -35.0% Yes Regions Financial 29.71 48,044,207 19.50 -34.4% Yes KeyCorp 31.11 31,139,643 21.31 -31.5% Yes Marsh & McLennan 34.20 58,809,779 24.07 -29.6% Yes Sovereign Bancorp 13.30 11,916,398 9.56 -28.1% Yes Morgan Stanley 48.22 118,100,000 36.38 -24.6% Yes Merrill Lynch 54.00 112,809,074 41.18 -23.7% Yes Marshall & Ilsley Corp. 27.70 30,950,155 22.21 -19.8% Yes Capital One Financial 58.90 25,504,000 47.46 -19.4% Yes SunTrust Banks 65.79 16,058,146 54.57 -17.1% Yes Genworth Financial 24.79 12,706,000 20.59 -16.9% Yes Safeco 50.02 777,142 42.40 -15.2% Yes BB&T Corp. 36.61 38,042,742 31.94 -12.8% Yes M&T Bank Corp. 88.95 11,034,465 80.13 -9.9% Yes Bank of America Corp. 39.49 228,660,049 35.96 -8.9% Yes Lehman Brothers Holdings 34.39 65,605,543 31.75 -7.7% Yes Lincoln National 48.45 12,632,742 46.59 -3.8% Yes J.P. Morgan Chase & Co. 41.70 325,931,000 40.31 -3.3% Yes Allstate 47.54 23,163,000 45.97 -3.3% Yes PNC Financial Services Group 62.15 14,326,000 61.60 -0.9% Yes First American Corp. 30.27 4,141,000 30.29 0.1% No Cincinnati Financial 36.86 10,480,000 37.32 1.2% No Wells Fargo 28.37 262,995,485 28.78 1.4% No Bank of New York Co. 38.82 84,109,703 39.82 2.6% No Travelers Cos. 44.33 34,499,327 45.97 3.7% No American Express 39.93 85,206,000 41.71 4.5% No Charles Schwab 17.30 63,000,000 18.77 8.5% No Fidelity National Financial 14.57 18,008,834 16.10 10.5% No Principal Financial 43.31 8,800,000 48.57 12.1% No Hartford Financial Services 55.48 5,592,000 66.05 19.1% No U.S. Bancorp 27.22 91,211,464 32.59 19.7% No Nationwide 39.05 4,700,000 46.98 20.3% No Cigna 32.69 11,430,000 39.43 20.6% No Northern Trust Corp. 52.53 17,966,619 64.83 23.4% No Ameriprise Financial 38.62 13,200,000 49.00 26.9% No Aon 31.00 26,479,000 39.68 28.0% No Prudential Financial 53.62 15,028,488 68.79 28.3% No Loews 28.09 4,787,041 39.19 39.5% No Goldman Sachs Group 106.63 39,229,629 151.02 41.6% No Chubb 33.99 8,107,931 48.90 43.9% No MetLife 38.83 24,430,547 56.51 45.5% No State St. Corp. 48.94 16,368,000 74.71 52.7% No AFLAC 34.46 16,577,000 61.55 78.6% No Progressive 7.76 12,367,315 15.64 101.5% No Host Hotels & Resorts 7.00 400,000 15.78 125.4% No Franklin Resources 37.92 3,754,000 89.45 135.9% No W.R. Berkley 8.84 8,384,422 27.05 206.0% No Average -0.6% Number Above 27 Average 40.8% Number Below 33 Average -34.4%

SOURCE Steven Hall & Partners

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