EMPLOYEE BENEFIT PLANS

The Company implemented the Allied World Assurance Company Holdings, AG 2012 Omnibus Incentive Compensation Plan (the “2012 Omnibus Plan”). Under the 2012 Omnibus Plan, up to 4,500,000 common shares may be issued, subject to adjustment. The 2012 Omnibus Plan provides for the grant of options intended to qualify as incentive stock options under the Internal Revenue Code, non-qualified stock options, stock appreciation rights, restricted shares, RSUs, deferred share units, cash incentive awards, performance-based compensation awards and other equity-based and equity-related awards. These awards generally vest pro rata over four years from the date of grant, except for the performance-based awards that will generally vest over a three-year period based on the achievement of certain performance conditions.

The Allied World Assurance Company Holdings, AG Third Amended and Restated 2001 Employee Stock Option Plan (the “Plan”), the Allied World Assurance Company Holdings, AG Third Amended and Restated 2004 Stock Incentive Plan and the and the Allied World Assurance Company Holdings, AG Third Amended and Restated Long-Term Incentive Plan (the “LTIP”) were automatically terminated, replaced and superseded by the 2012 Omnibus Plan on May 3, 2012, except that any outstanding awards granted under such plans remain in effect pursuant to their terms.

a) Employee option plan

Options under the Plan are exercisable in certain limited conditions, expire after 10 years, and generally vest pro-rata over four years from the date of grant. The exercise price of options issued were approved by the Compensation Committee but were not less than the fair market value of the common shares of Allied World Switzerland on the date the option award is granted. The Company has not granted stock options since 2011.

The following table summarizes the activity related to options granted and exercised:



	Year Ended December 31,
	2014			2013			2012
Options granted	—			—			—
Weighted average grant date fair value	$	—		$	—		$	—
Options exercised	(479,831		)	(674,187		)	(801,810		)
Total intrinsic value of options exercised	$	10,313		$	12,212		$	9,650
Proceeds from option exercises	$	10,027		$	12,137		$	10,527

The activity related to the Company’s stock options is as follows:



	Year Ended December 31, 2014
	Options		Weighted Average Exercise Price			Weighted Average Contractual Term	Aggregate Intrinsic Value
Outstanding at beginning of year	2,928,312		$	16.07
Granted	—		$	—
Exercised	(479,831	)	$	(14.25	)
Forfeited	(15,096	)	$	(20.50	)
Expired	(6,711	)	$	(16.35	)
Outstanding at end of year	2,426,674		$	16.40		4.7 years	$	52,212
Exercisable at end of year	2,151,790		$	15.88		4.5 years	$	47,424

As of December 31, 2014, there was remaining $299 of total unrecognized compensation expense related to unvested options granted under the Plan. This expense is expected to be recognized over a weighted-average period of 0.1 years.

b) Restricted stock units and performance-based equity awards

The RSUs vest pro-rata over four years from the date of grant. The compensation expense for the RSUs is based on the fair market value of Allied World Switzerland’s common shares at the date of grant. The Company estimates the expected forfeitures of RSUs at the date of grant and recognizes compensation expense only for those awards that the Company expects to vest. The forfeiture assumption is ultimately adjusted to the actual forfeiture rate.

Each award for the performance-based RSUs represents the right to receive a number of shares in the future, based upon the achievement of established performance criteria during the applicalbe performance period. The compensation expense for the performance-based RSUs is based on the fair market value of Allied World Switzerland's common shares at the time of grant. For the performance-based RSUs granted in 2014, 2013 and 2012, the Company anticipates that the performance goals are likely to be achieved. Based on the performance goals, the performance-based RSUs granted in 2014, 2013 and 2012 are expensed at 100%, 110% and 135%, respectively, of the fair market value of Allied World Switzerland’s common shares on the date of grant. The expense is recognized over the performance period.

The activity related to the Company’s RSUs awards is as follows:



	Year Ended December 31, 2014
	Number of Awards		Weighted Average Grant Date Fair Value			Aggregate Intrinsic Value
Outstanding at beginning of year	143,697		$	21.69
RSUs granted	454,176		33.56
RSUs forfeited	(16,386	)	(31.22		)
RSUs fully vested	(78,981	)	(21.76		)
Outstanding at end of year	502,506		$	32.10		$	19,055

As of December 31, 2014, there was remaining $12,057 of total unrecognized compensation expense related to 502,506 unvested RSUs awarded. This expense is expected to be recognized over a weighted-average period of 1.9 years.

The activity related to the Company’s performance-based equity awards is as follows:



	Year Ended December 31, 2014
	Number of Awards		Weighted Average Grant Date Fair Value			Aggregate Intrinsic Value
Outstanding at beginning of year	804,519		$	23.21
Performance-based equity awards granted	166,302		33.56
Additional awards granted due to achievement of performance criteria	104,895		20.50
Performance-based equity awards forfeited	(4,635	)	(25.20		)
Performance-based equity awards fully vested	(454,440	)	(20.50		)
Outstanding at end of year	616,641		$	27.52		$	23,383

As of December 31, 2014, there was remaining $5,814 of total unrecognized compensation expense related to 616,641 unvested performance-based equity awarded. This expense is expected to be recognized over a weighted-average period of 1.6 years.

The RSUs and performance-based equity awards vested in 2014, 2013 and 2012 had aggregate intrinsic values of $14,366, $28,836 and $13,947 at the time of vesting, respectively.

c) Cash-equivalent stock awards

As part of the Company’s annual year-end compensation awards, the Company granted both stock-based awards and cash-equivalent stock awards. The cash-equivalent awards were granted to employees who received RSU and performance-based awards and were granted in lieu of granting the full award as a stock-based award. The cash-equivalent RSU awards vest pro-rata over four years from the date of grant. The cash-equivalent performance-based awards vest after a three-year performance period. As the cash-equivalent awards are settled in cash, the Company establishes a liability equal to the product of the fair market value of Allied World Switzerland’s common shares as of the end of the reporting period and the total awards outstanding. At December 31, 2014, the liability was $51,343, and payments for awards vesting in the period are typically settled within the first three months of the year. The liability is included in “accounts payable and accrued expenses” in the consolidated balance sheets and changes in the liability are recorded in “general and administrative expenses” in the consolidated income statements.

The activity related to the Company's cash-equivalent RSUs and performance-based equity awards is as follows:



	RSU's					Performance-based Awards
Year Ended December 31, 2014	Number of Awards		Weighted Average Grant Date Fair Value			Number of Awards		Weighted Average Grant Date Fair Value
Outstanding at beginning of year	2,049,084		$	24.69		1,031,961		23.67
Granted	438,162		33.56			249,438		33.56
Additional awards granted due to achievement of performance criteria	—		—			104,895		20.50
Forfeited	(77,322	)	(27.12		)	(6,948	)	(25.20		)
Fully vested	(755,860	)	(22.51		)	(454,440	)	(20.50		)
Outstanding at end of year	1,654,064		$	27.99		924,906		$	27.52

d) Total Stock-Related Compensation Expense

The following table shows the total stock-related compensation expense relating to the stock options, RSUs, LTIP and cash equivalent awards.



	Year Ended December 31,
	2014		2013		2012
Stock options	$	1,949	$	3,269	$	4,256
RSUs and performance-based equity awards	12,295		10,700		13,010
LTIP	—		—		376
Cash-equivalent stock awards	37,790		50,878		32,760
Total	$	52,034	$	64,847	$	50,402

e) Pension Plans

The Company provides defined contribution retirement plans for its employees and officers. Contributions are made by the Company, and in some locations, these contributions are supplemented by the local plan participants. Contributions are based on a percentage of the participant’s base salary depending upon competitive local market practice and vesting provisions meeting legal compliance standards. The amount that an individual employee or officer can contribute may also be subject to regulatory requirements relating to the country of which the individual is a citizen. The Company incurred expenses for these defined contribution arrangements of $10,648, $9,287 and $6,602 for the years ended December 31, 2014, 2013 and 2012, respectively.

f) Employee Share Purchase Plan

Under the Allied World Assurance Company Holdings, AG Amended and Restated 2008 Employee Share Purchase Plan (“ESPP”), eligible employees of the Company may purchase common shares of the Company at a 15% discount from the fair market value of one common share on the last trading day of each offering period. Employees purchase a variable number of common shares through payroll deductions elected as of the beginning of the offering period. The Company may sell up to 3,000,000 common shares to eligible employees under the ESPP.