Share-based Compensation

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

Argo Group’s 2019 Omnibus Incentive Plan

In May 2019, our shareholders approved the 2019 Omnibus Incentive Plan (the “2019 Plan”), which provides equity-based and cash-based performance-related incentives to key employees, non-employee directors and other service providers. The intent of the 2019 Plan is to encourage and provide for the acquisition of an ownership interest in Argo Group, enabling us to attract and retain qualified and competent persons to serve as members of our management team and the Board of Directors. The 2019 Plan authorizes 1,885,000 common shares to be granted as equity-based awards. No further grants will be made under any prior plan; however, any awards under a prior plan that are outstanding as of the effective date shall remain subject to the terms and conditions of, and be governed by, such prior plan.

Awards granted under the 2019 Plan may be in the form of stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards, other stock-based awards or other cash-based awards. Awards may be granted either alone or in addition to or in tandem with other awards authorized under the 2019 Plan. Awards that are settled in stock will count as one share for the purposes of reducing the share reserve under the 2019 Plan. Shares issued under this plan may be shares that are authorized and unissued or shares that we reacquired, including shares purchased on the open market.

Stock options and stock appreciation rights are required to have an exercise price that is not less than the fair market value on the date of grant. The term of these awards is not to exceed ten years.

Restricted Shares

A summary of restricted share activity as of September 30, 2020 and changes during the nine months then ended is as follows:


	Shares	Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2020	471,271	$	60.09
Granted	399,578	$	32.53
Vested and issued	(175,321)	$	51.22
Expired or forfeited	(134,676)	$	52.00
Outstanding at September 30, 2020	560,852	$	43.61

The restricted shares vest over one to four years. Expense recognized under this plan for the restricted shares was $1.7 million and $6.9 million for the three and nine months ended September 30, 2020, respectively, as compared to $3.2 million and $10.5 million for the three and nine months ended September 30, 2019, respectively. Compensation expense for all share-based compensation awards is included in “Underwriting, acquisition and insurance expenses” in the accompanying Consolidated Statements of (Loss) Income. As of September 30, 2020, there was $18.4 million of total unrecognized compensation cost related to restricted share compensation arrangements granted by Argo Group.

Stock-Settled SARs

A summary of stock-settled SARs activity as of September 30, 2020 and changes during the nine months then ended is as follows:


	Shares	Weighted-Average Exercise Price
Outstanding at January 1, 2020	625,368	$	33.60
Exercised	(418,702)	$	32.25
Expired or forfeited	(15,031)	$	—
Outstanding at September 30, 2020	191,635	$	36.21

As of September 30, 2020, all stock-settled SARs are fully vested. Upon exercise of the stock-settled SARs, the employee is entitled to receive common shares equal to the appreciation of the stock as compared to the exercise price. There was no expense recognized for the three and nine months ended September 30, 2020 for stock-settled SARs. There was no expense recognized for the three months ended September 30, 2019. For the nine months ended September 30, 2019, expense recognized for the stock-settled SARs was $0.4 million. As of September 30, 2020, there was no unrecognized compensation cost related to stock-settled SARs outstanding.