EMPLOYEE BENEFITS



	2015		2014		2013
Salaries and benefits	$	181,416	$	154,638	$	83,563
Annual incentive compensation	32,030		36,482		32,107
Share-based compensation under the 2006 Equity Incentive Plan	14,882		10,885		2,923
Pension plans	10,260		9,217		6,023
Total salaries and benefits	$	238,588	$	211,222	$	124,616

Share-based compensation under the 2006 Equity Incentive Plan

Employee share awards are granted under the 2006 Equity Incentive Plan (the "Equity Plan").

Non-vested Share Awards

The following table summarizes the non-vested share award activity during 2015:



	Number of Shares		Weighted- Average Share Price of Award
Nonvested — January 1	101,181		$	152.89
Granted	66,238		142.50
Vested	(62,996	)	143.11
Forfeited	(8,368	)	149.73
Nonvested — December 31	96,055		150.04

Compensation costs of $6.1 million, $3.9 million and $2.9 million relating to these share awards were recognized in our statement of earnings for the years ended December 31, 2015, 2014 and 2013, respectively. The unrecognized compensation cost related to our non-vested share awards as at December 31, 2015 was $5.5 million. This cost is expected to be recognized over the next 1.7 years, which is the weighted average contractual life of the awards.

Cash-Settled Stock Appreciation Rights

Cash-settled stock appreciation right awards ("SARs") give the holder the right, upon exercise, to receive in cash the difference between the market price per share of our ordinary shares at the time of exercise and the exercise price of the SARs. The exercise price of each SAR is equal to the market price of our ordinary shares on the date of the grant. Vested SARs are exercisable for periods not to exceed either 4 years or 10 years from the date of grant.

The following table summarizes the SAR activity during 2015:



	Number of SARs		Weighted- Average Exercise Price of SARs		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value⁽¹⁾
Balance, beginning of year	1,068,001		$	140.53
Granted	195,000		140.28
Exercised	(32,933	)	136.16
Forfeited	(69,240	)	142.19
Balance, end of year	1,160,828		140.51		1.43	$	11,063

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(1)	The aggregate intrinsic value is calculated as the pre-tax difference between the exercise price of the underlying share awards and the closing price per share of our ordinary shares of $150.04 on December 31, 2015.

Compensation expense for SARs is based on the estimated fair value on the date of grant using the Black-Scholes valuation model, which requires the use of subjective assumptions related to the expected stock price volatility, expected term, expected dividend yield and risk-free interest rate. SARs are liability-classified awards for which compensation expense and the liability are re-measured using the then-current Black Scholes assumptions at each interim reporting date based upon the portion of the requisite service period rendered. Compensation costs of $8.9 million and $7.0 million relating to these share awards were recognized in our statement of earnings for the years ended December 31, 2015 and 2014, respectively. We did not grant any SARs during the year ended December 31, 2013. The unrecognized compensation cost related to our SARs as at December 31, 2015 was $13.6 million. This cost is expected to be recognized over the next 1.53 years, which is the weighted-average contractual life of the awards.

The following table sets forth the assumptions used to estimate the fair value of the SARs using the Black-Scholes option valuation model as at December 31, 2015 and 2014:



	2015			2014
Weighted-average fair value per SAR	$	29.02		$	37.63
Weighted-average volatility	22.08		%	21.24		%
Weighted-average risk-free interest rate	1.29		%	0.81		%
Dividend yield	0.00		%	0.00		%

Other share-based compensation plans

Northshore Incentive Plan

Our subsidiary, Northshore, has long-term incentive plans that award time-based restricted shares of Northshore to certain Atrium employees. Shares generally vest over two to three years, although certain awards began vesting in 2014. These share awards have been classified as liability awards. For the years ended December 31, 2015 and 2014, compensation costs of $3.9 million and $5.2 million relating to the long-term incentive plans were recorded in our consolidated statement of earnings. The unrecognized compensation cost related to the Northshore incentive plan at December 31, 2015 was $3.5 million. This cost is expected to be recognized over the next 2.89 years, which is the weighted average contractual life of the awards.

Deferred Compensation and Ordinary Share Plan for Non-Employee Directors

For the years ended December 31, 2015, 2014 and 2013, 5,174, 3,716 and 3,566 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"). Expense related to the restricted share units for the years ended December 31, 2015, 2014 and 2013, was $1.0 million, $0.5 million and $0.5 million, respectively.

During 2015, 2,393 restricted share units previously credited to the accounts of two directors under the Deferred Compensation Plan were converted into ordinary shares following their resignations.

During 2014, 11,749 restricted share units previously credited to the accounts of two directors under the Deferred Compensation Plan were converted into ordinary shares following their end of service as directors. Also in 2014, 14,922 restricted stock units previously credited to one of the retiring director's account under a previous deferred compensation plan were converted into the same number of our ordinary shares.

Employee Share Purchase Plan

For the years ended December 31, 2015, 2014 and 2013, compensation costs relating to the shares issued under the Amended and Restated Enstar Group Limited Employee Share Purchase Plan ("Share Plan") of $0.3 million, $0.1 million and $0.1 million, respectively, were recorded as salaries and benefits in our consolidated statement of earnings. For the years ended December 31, 2015, 2014 and 2013, 11,998, 6,031 and 4,959 shares, respectively, were issued to employees under the Share Plan.

Pension Plans

We provide retirement benefits to eligible employees through various plans that we sponsor.

Defined Contribution Plans

Pension expense relating to defined contribution plans for the years ended December 31, 2015, 2014 and 2013 was $10.3 million, $9.2 million and $6.0 million, respectively. The increase for 2015 over the same periods in 2014 and 2013 was attributable to the increase in employee headcount as a result of our acquisitions described in Note 3 - "Acquisitions."

Defined Benefit Plan

We have a noncontributory defined benefit pension plan that was acquired in the Providence Washington transaction in 2010. Pension expense relating to this defined benefit plan was $0.6 million, $0.5 million and $0.7 million for the years ended December 31, 2015, 2014 and 2013, respectively. During 2015, an actuarial review was performed, which determined that the plan’s unfunded liability, as at December 31, 2015, was $12.1 million as compared to $12.6 million as at December 31, 2014. As at December 31, 2015 and 2014, we had an accrued liability of $12.1 million and $12.6 million, respectively, for this plan.