Stock-Based Compensation

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

In 2013, Essent Group's Board of Directors adopted, and Essent Group's shareholders approved, the Essent Group Ltd. 2013 Long-Term Incentive Plan (the "2013 Plan"), which was effective upon completion of the initial public offering. The types of awards available under the 2013 Plan include nonvested shares, nonvested share units, non-qualified share options, incentive stock options, share appreciation rights, and other share-based or cash-based awards. Nonvested shares and nonvested share units granted under the 2013 Plan have rights to dividends, which entitle the holders to the same dividend value per share as holders of common shares in the form of dividend equivalent units ("DEUs"). DEUs are subject to the same vesting and other terms and conditions as the corresponding nonvested shares and nonvested share units. DEUs vest when the underlying shares or share units vest and are forfeited if the underlying share or share units forfeit prior to vesting. The maximum number of shares and share units available for issuance is 7.5 million under the 2013 Plan. As of December 31, 2020, there were 3.7 million common shares available for future grant under the 2013 Plan.

In September 2013, certain members of senior management were granted nonvested common shares under the 2013 Plan that were subject to time-based and performance-based vesting. The time-based share awards granted in September 2013 vested in four equal installments on January 1, 2015, 2016, 2017 and 2018. The performance-based share awards vested based upon our compounded annual book value per share growth percentage during a three-year performance period that commenced on January 1, 2014. The September 2013 performance-based share awards vested on the one-year anniversary of the completion of the performance period.

In May 2015, nonvested common shares were granted to an employee in connection with an employment agreement that were subject to time-based and performance-based vesting. The time-based share award vested in four equal installments on July 1, 2016, 2017, 2018 and 2019. The performance-based share award vested based upon our compounded annual book value per share growth percentage during a three-year performance period that commenced on January 1, 2015 and vested on July 1, 2019.

In February of each year, 2015 through 2020, certain members of senior management were granted nonvested common shares under the 2013 Plan that were subject to time-based and performance-based vesting. The time-based share awards vest in three equal yearly installments commencing on March 1 of the year following the grant year. The performance-based share awards vest based upon our compounded annual book value per share growth percentage during a three-year performance period that commences on January 1 of the grant year and vest on March 1 following the end of the performance period.

The portion of the nonvested performance-based share awards that will be earned based upon the achievement of compounded annual book value per share growth is as follows:


	2017 Performance-Based Grants				2016 Performance-Based Grants				2013, 2014 and 2015 Performance-Based Grants
Performance level	Compounded Annual Book Value Per Share Growth		Nonvested Common Shares Earned		Compounded Annual Book Value Per Share Growth		Nonvested Common Shares Earned		Compounded Annual Book Value Per Share Growth		Nonvested Common Shares Earned
	<16	%	0	%	<13	%	0	%	<11	%	0	%
Threshold	16	%	25	%	13	%	25	%	11	%	10	%
	17	%	50	%	14	%	50	%	12	%	36	%
	18	%	75	%	15	%	75	%	13	%	61	%
									14	%	87	%
Maximum	≥19	%	100	%	≥16	%	100	%	≥15	%	100	%


	2020 Performance-Based Grants				2019 Performance-Based Grants				2018 Performance-Based Grants
Performance level	Compounded Annual Book Value Per Share Growth		Nonvested Common Shares Earned		Compounded Annual Book Value Per Share Growth		Nonvested Common Shares Earned		Compounded Annual Book Value Per Share Growth		Nonvested Common Shares Earned
	<13	%	0	%	<14	%	0	%	<15	%	0	%
Threshold	13	%	10	%	14	%	10	%	15	%	25	%
	14	%	35	%	15	%	35	%	16	%	50	%
	15	%	60	%	16	%	60	%	17	%	75	%
	16	%	85	%	17	%	85	%
Maximum	≥17	%	100	%	≥18	%	100	%	≥18	%	100	%

In the event that the compounded annual book value per share growth falls between the performance levels shown above, the nonvested common shares earned will be determined on a straight-line basis between the respective levels shown. The compounded annual book value per share growth for each of the 2013, 2014, 2015, 2016 and 2017 performance-based grants exceeded the maximum performance level and have vested or will vest at 100%.

In January 2017, time-based share units were issued to all vice president and staff level employees that vested in three equal installments in January 2018, 2019 and 2020. In January 2020, time-based share units were issued to all vice president and staff level employees that vested in three equal installments in January 2021, 2022 and 2023. In connection with our incentive program covering bonus awards for performance years 2014 through 2019, in February following each performance year, time-based share awards and share units were issued to certain employees that vest in three equal yearly installments commencing on March 1 of the year following the grant year.

In May of each year, 2017 through 2020, time-based share units were granted to non-employee directors that vest one year from the date of grant.

The following tables summarize nonvested common share, nonvested common share unit and DEU activity for the year ended December 31:


	2020
	Time and Performance- Based Share Awards			Time-Based Share Awards			Share Units			DEUs
(Shares in thousands)	Number of Shares	Weighted Average Grant Date Fair Value		Number of Shares	Weighted Average Grant Date Fair Value		Number of Share Units	Weighted Average Grant Date Fair Value		Dividend Equivalent Units	Weighted Average Grant Date Fair Value
Outstanding at beginning of year	394	$	42.02	169	$	41.31	351	$	39.78	5	$	51.11
Granted	109	51.52		69	51.52		350	48.75		19	35.42
Vested	(140)	36.29		(85)	40.47		(192)	37.76		(3)	49.79
Forfeited	—	N/A		—	N/A		(17)	50.04		—	33.86
Outstanding at end of year	363	$	47.09	153	$	46.34	492	$	46.59	21	$	37.66


	2019
	Time and Performance- Based Share Awards			Time-Based Share Awards			Share Units			DEUs
(Shares in thousands)	Number of Shares	Weighted Average Grant Date Fair Value		Number of Shares	Weighted Average Grant Date Fair Value		Number of Share Units	Weighted Average Grant Date Fair Value		Dividend Equivalent Units	Weighted Average Grant Date Fair Value
Outstanding at beginning of year	482	$	29.49	207	$	32.82	449	$	34.35	—	N/A
Granted	141	45.32		90	40.98		143	42.08		5	$	51.09
Vested	(229)	17.69		(128)	27.37		(232)	30.85		—	48.63
Forfeited	—	N/A		—	N/A		(9)	35.53		—	49.27
Outstanding at end of year	394	$	42.02	169	$	41.31	351	$	39.78	5	$	51.11


	2018
	Time and Performance- Based Share Awards			Time-Based Share Awards			Share Units
(Shares in thousands)	Number of Shares	Weighted Average Grant Date Fair Value		Number of Shares	Weighted Average Grant Date Fair Value		Number of Share Units	Weighted Average Grant Date Fair Value
Outstanding at beginning of year	1,595	$	17.03	410	$	21.12	536	$	29.13
Granted	113	45.02		73	45.02		161	42.19
Vested	(1,226)	14.71		(276)	18.67		(238)	28.02
Forfeited	—	N/A		—	N/A		(10)	31.59
Outstanding at end of year	482	$	29.49	207	$	32.82	449	$	34.35

Quoted market prices are used for the valuation of common shares granted subsequent to our initial public offering. For nonvested common shares granted in September 2013, prior to our IPO, the valuation estimate was based on analysis provided by the underwriters regarding the estimated fair value of Essent and the estimated IPO price range. Factors considered in determining the IPO price range and common share valuation included prevailing market conditions, estimates of the Company's business potential and earnings prospects, the Company's historical operating results, market valuations of companies deemed comparable to the Company and an assessment of risks and opportunities.

The total fair value of nonvested shares, share units or DEUs that vested was $18.5 million, $25.5 million and $75.9 million for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, there was $24.2 million of total unrecognized compensation expense related to nonvested shares or share units outstanding at December 31, 2020 and we expect to recognize the expense over a weighted average period of 1.8 years.

In connection with our incentive program covering bonus awards for performance year 2020, in February 2021, 86,058 nonvested common share units were issued to certain employees and are subject to time-based vesting. In February 2021, 373,552 nonvested common shares were granted to certain members of senior management and are subject to time-based and performance-based vesting. In February 2021, the performance-based share awards granted in 2019 and 2020 to certain members of senior management were amended to provide that such awards will no longer be subject to the achievement of the compounded annual book value per share growth metrics and will be subject to only service-based vesting. As a result, the unvested shares subject to the amended 2019 and 2020 awards will vest on March 1, 2022 and March 1, 2023, respectively, subject to the continued service requirements and other terms and conditions set forth in the applicable award agreements, without taking into consideration any performance metrics. Compensation expense related to amending these awards will be recognized over the remaining vesting period.

Employees have the option to tender shares to Essent Group to pay the minimum employee statutory withholding taxes associated with shares upon vesting. Common shares tendered by employees to pay employee withholding taxes totaled 141,801, 208,947 and 718,726 in 2020, 2019 and 2018, respectively. The tendered shares were recorded at cost and included in treasury stock. All treasury stock has been cancelled as of December 31, 2020 and 2019.

Compensation expense, net of forfeitures, and related tax effects recognized in connection with nonvested shares and share units were as follows for the years ended December 31:


(In thousands)	2020		2019		2018
Compensation expense	$	18,462	$	16,588	$	15,073
Income tax benefit	3,511		3,125		2,805