Share-based Compensation

3 Months Ended

Mar. 31, 2022

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 incentives to key employees and non-employee directors. 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 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, 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 have 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 non-vested restricted share activity as of March 31, 2022 and changes during the three months then ended is as follows:


	Shares	Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2022	278,430	$	49.57
Granted	240,677	41.00
Reclassed from performance shares	14,373	32.61
Vested and issued	(83,101)	46.32
Expired or forfeited	(13,379)	48.72
Outstanding at March 31, 2022	437,000	$	44.58

The restricted shares vest over one to four years. Expense recognized under this plan for the restricted shares was $2.2 million and $1.5 million for the three months ended March 31, 2022 and 2021, respectively. Compensation expense for all share-based compensation awards is included in Underwriting, acquisition and insurance expenses in the accompanying Condensed Consolidated Statements of Income (Loss). As of March 31, 2022, there was $18.0 million of total unrecognized compensation cost related to restricted share compensation arrangements granted by Argo Group.

Performance Shares

We have issued to certain key employees non-vested restricted stock awards whose vesting is subject to the achievement of certain performance measures. The non-vested performance share awards vest over three to four years. Non-vested performance share awards are valued based on the fair market value as of the grant date. Vesting of the awards is subject to the achievement of defined performance measures and the number of shares vested may be adjusted based on the achievement of certain targets. We evaluate the likelihood of the employee achieving the performance condition and include this estimate in the determination of the forfeiture factor for these grants.

A summary of non-vested performance share activity as of March 31, 2022 and changes during the three months then ended is as follows:


	Shares	Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2022	200,564	$	47.52
Granted	125,074	41.00
Reclassed to restricted shares	(14,373)	32.61
Vested and issued	(1,831)	68.27
Expired or forfeited	(17,398)	59.03
Outstanding at March 31, 2022	292,036	$	44.64

Expense recognized under this plan for the performance shares was $0.5 million and $0.7 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, there was $8.5 million of total unrecognized compensation cost related to performance share compensation arrangements granted by Argo Group.