Employee Share-Based Incentive Compensation Plans

3 Months Ended

Mar. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Employee Share-Based Incentive Compensation Plans

Employee Share-Based Incentive Compensation Plans

OneBeacon's share-based compensation plans include performance shares and restricted shares, which are designed to maximize shareholder value over long periods of time by aligning the financial interests of its management with those of its owners. Performance shares are payable only upon achievement of pre-defined business goals and are valued based on the market value of OneBeacon's common shares at the time awards are earned. Performance shares are typically paid in cash, though, in some instances, they may be paid in common shares or may be deferred in accordance with the terms of OneBeacon's deferred compensation plan. OneBeacon expenses the full cost of all its share-based compensation over the requisite service period. For the three months ended March 31, 2014 and 2013, the Company recognized expense of $1.4 million and $1.2 million, respectively, related to its share-based compensation plans.

Performance Shares

The following summarizes performance share activity for OB Performance Shares for the three months ended March 31, 2014 and 2013:

	Three months ended March 31,
	2014					2013
	Target OB Performance Shares outstanding		Accrued expense			Target OB Performance Shares outstanding		Accrued expense
	($ in millions)
Beginning of period	493,421		$	4.0		563,190		$	1.2
Payments and deferrals(1)	(142,138	)	(1.0		)	(238,658	)	—
New awards	165,800		—			179,000		—
Forfeitures and net change in assumed forfeitures	(4,145	)	—			(13,665	)	—
Expense recognized	—		0.6			—		0.4
End of period	512,938		$	3.6		489,867		$	1.6

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⁽¹⁾  Performance share payments in 2014 for the 2011-2013 performance cycle were based upon a performance factor of 37.1%. No payments were made in 2013 for the 2010-2012 performance cycle as the performance factor was zero.

The following summarizes performance shares outstanding and accrued performance share expense at March 31, 2014 for each performance cycle:

	Target OB Performance Shares outstanding		Accrued expense
	($ in millions)
Performance cycle:
2012 - 2014	181,290		$	2.3
2013 - 2015	179,000		1.2
2014 - 2016	165,800		0.2
Subtotal	526,090		3.7
Assumed forfeitures	(13,152	)	(0.1		)
Total at March 31, 2014	512,938		$	3.6

If 100% of the outstanding performance shares had been vested on March 31, 2014, the total additional compensation cost to be recognized would have been $4.7 million, based on current accrual factors (common share price, accumulated dividends and payout assumptions) at March 31, 2014.

All performance shares earned and paid were settled in cash or by deferral into OneBeacon's deferred compensation plan.

Restricted Shares

On March 1, 2012, OneBeacon issued shares of restricted stock to certain employees, of which 142,500 shares vested on February 28, 2014, with the remaining 140,000 shares outstanding as of March 31, 2014 scheduled to vest on February 28, 2015. On May 25, 2011, OneBeacon issued 630,000 shares of restricted stock to its CEO, of which 157,500 shares vested on February 22, 2014, with the remaining 472,500 shares scheduled to vest in equal installments on February 22, 2015, 2016 and 2017. The restricted shares contain dividend participation features and therefore are considered participating securities.

The following summarizes restricted shares activity for the three months ended March 31, 2014 and 2013:

	Three months ended March 31,
	2014					2013
	Restricted Shares		Unamortized Issue Date Fair Value			Restricted Shares		Unamortized Issue Date Fair Value
	($ in millions)
Beginning of period	915,000		$	6.5		927,000		$	9.6
New awards	—		—			—		—
Forfeitures	(2,500	)	—			—		—
Vested	(300,000	)	—			(9,000	)	—
Expense recognized	—		(0.8		)	—		(0.8		)
End of period	612,500		$	5.7		918,000		$	8.8

Restricted shares that vested during the three months ended March 31, 2014 and 2013 had a grant date fair value of $4.3 million and $0.1 million, respectively. As of March 31, 2014, unrecognized compensation expense of $5.7 million related to restricted stock awards is expected to be recognized over a weighted-average period of 2.5 years.