Employee Benefits

6 Months Ended

Jun. 30, 2011

Employee Benefits [Abstract]

EMPLOYEE BENEFITS

10.   EMPLOYEE BENEFITS

The Company’s share-based compensation plans provide for the grant of various awards to its employees and to members of the board of directors. These are described in Note 14 to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. The information below includes both the employee and director components of the Company’s share-based compensation.

(a)   Employee share plans

Employee stock awards for the six months ended June 30, 2011 are summarized as follows:

				Weighted
				Average Fair
	Number of			Value of
	Shares			the Award
Nonvested — January 1, 2011		153,930		$	13,019
Granted		69,003			5,736
Vested		(19,003	)		(1,686	)
Nonvested — June 30, 2011		203,930		$	21,309

(i)   2006-2010 Annual Incentive Compensation Program, 2011-2015 Annual Incentive Compensation Program and 2006 Equity Incentive Plan

For the six months ended June 30, 2011 and 2010, 16,328 and 78,664 shares were awarded to directors, officers and employees under the 2006 Equity Incentive Plan. The total value of the awards for the six months ended June 30, 2011 and 2010 was $1.5 million and $5.4 million, respectively, and was charged against the 2006-2010 Annual Incentive Compensation Program (the “2006 Program”) accrual established for the years ended December 31, 2010 and 2009, respectively. The 2006 Program ended effective December 31, 2010. On February 23, 2011, the Company adopted the Enstar Group Limited 2011-2015 Annual Incentive Compensation Program (the “2011 Program”).

In addition, for the six months ended June 30, 2011 and 2010, 50,000 and 153,930 restricted shares were awarded to certain employees under the 2006 Equity Incentive Plan. The total unrecognized compensation cost related to the Company’s non-vested share awards as at June 30, 2011 and 2010 was $11.8 million and $9.9 million, respectively. This cost is expected to be recognized over the next 4.2 years. Compensation costs of $0.7 million and $1.2 million relating to these share awards were recognized in the Company’s statement of earnings for the three and six months ended June 30, 2011, respectively, as compared to $0.4 million and $0.6 million, respectively, for the three and six months ended June 30, 2010.

The accrued expense relating to the 2011 Program for the three and six months ended June 30, 2011 was $0.9 million and $1.1 million, respectively as compared to $2.2 million and $5.0 million, respectively, for three and six months ended June 30, 2010 relating to the 2006 Program.

(ii)   Enstar Group Limited Employee Share Purchase Plan

Compensation costs of less than $0.1 million and $0.2 million, respectively, relating to the shares issued have been recognized in the Company’s statement of earnings for both the three and six months ended June 30, 2011 and 2010. As at June 30, 2011, 16,829 shares have, in total, been issued to employees under the Amended and Restated Enstar Group Limited Employee Share Purchase Plan.

(b)   Options

				Weighted
				Average		Intrinsic
	Number of			Exercise		Value of
	Shares			Price		Shares
Outstanding — January 1, 2011		152,015		$	34.55	$	7,606
Granted		—			—		—
Exercised		(49,037	)		19.63		(3,709	)
Forfeited		—			—		—
Outstanding — June 30, 2011		102,978		$	41.65	$	6,471

Stock options outstanding and exercisable as of June 30, 2011 were as follows:

Ranges of					Weighted Average
Exercise	Number of		Weighted Average		Remaining
Prices	Options		Exercise Price		Contractual Life
$40 - $60		102,978	$	41.65		2.2 years

(c)   Deferred Compensation and Stock Plan for Non-Employee Directors

For the six months ended June 30, 2011 and 2010, 2,407 and 3,134 restricted share units, respectively, were credited to the accounts of Non-Employee Directors under the Enstar Group Limited Deferred Compensation and Ordinary Share Plan for Non-Employee Directors (the “Deferred Compensation Plan”).

Following J. Christopher Flowers’ resignation from the Board of Directors, 3,610 restricted share units previously credited to his account under the Deferred Compensation Plan were converted into the same number of the Company’s ordinary shares on May 24, 2011, with fractional shares paid in cash. Also on May 24, 2011, 4,515 restricted stock units previously credited to Mr. Flowers’ account under a deferred compensation plan assumed in the Company’s merger with Enstar USA, Inc., now a wholly-owned subsidiary of the Company, were converted into the same number of the Company’s ordinary shares.

(d)   Pension plan

The Company provides pension benefits to eligible employees through various plans sponsored by the Company. All pension plans, except as disclosed below, are structured as defined contribution plans. Pension expense for the three and six months ended June 30, 2011 was $1.0 million and $2.1 million, respectively, as compared to $1.0 million and $1.8 million, respectively, for three and six months ended June 30, 2010.

The Company acquired, as part of the acquisition of PW Acquisition Company (“PWAC”) on July 20, 2010, a noncontributory defined benefit pension plan (the “PWAC Plan”) that covers substantially all PWAC employees hired before April 1, 2003 and provides pension and certain death benefits. Effective April 1, 2004, PWAC froze the PWAC Plan. As at the date of acquisition of PWAC by the Company, the PWAC Plan had an unfunded liability of $6.7 million that had been accrued by PWAC. Subsequent to acquisition, an actuarial review was performed of the PWAC Plan which determined that the PWAC Plan’s unfunded liability was $8.1 million. As at June 30, 2011, PWAC had an accrued liability of $7.9 million for the unfunded PWAC Plan liability.

The Company recorded pension expense relating to the PWAC Plan, for the three and six months ended June 30, 2011, of $0.2 million and $0.3 million, respectively.