Stock-Based Compensation

On February 6, 2009, Essent Group adopted the 2009 Restricted Share Plan. In connection with the IPO in 2013, Essent Group's Board of Directors amended and restated the 2009 Restricted Share Plan, effective immediately prior to the initial public offering. In addition, 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. The 2013 Plan authorized a total of 14.7 million Common Shares, which will be increased on the first day of each of the Company's fiscal years beginning with fiscal year 2014, in an amount equal to the lesser of (i) 1.5 million Common Shares, (ii) 2% of the Company's outstanding Common Shares on the last day of the immediately preceding fiscal year, or (iii) such number of Common Shares as determined by the Company's Board of Directors. The maximum number of common shares that may be issued in respect of incentive share options is 14.7 million. As of December 31, 2015, there were 14.5 million Common Shares available for future grant under the 2013 Plan.

Class B-2 common share and per share data in all periods presented has been restated for the 2 for 3 share split and the 1 for 1 conversion rate to Common Shares that was effective immediately prior to the closing of the initial public offering. Class A common share and per share data has not been restated because the conversion to Common Shares in connection with the initial public offering was considered a value-for-value exchange of equity interests at the point of the transaction that resulted in a change in shareholder rights and rank before and after the transaction. There were no changes to the terms of these share grants.

In September 2013 and February 2014, 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 vest in four equal installments on January 1, 2015, 2016, 2017 and 2018. The time-based share awards granted in February 2014 vest in three equal installments on March 1, 2015, 2016 and 2017. The performance-based share awards vest 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 vest on the one-year anniversary of the completion of the performance period, and the February 2014 performance-based share awards vest on March 1, 2017.

In February 2015, 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 February 2015 vest in three equal installments on March 1, 2016, 2017 and 2018. The performance-based share awards granted in February 2015 vest based upon our compounded annual book value per share growth percentage during a three-year performance period that commenced on January 1, 2015 and vest on March 1, 2018.

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

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:



Performance level	Compounded Annual Book Value Per Share Growth		Nonvested Common Shares Earned
	<11	%	0	%
Threshold	11	%	10	%
	12	%	36	%
	13	%	61	%
	14	%	87	%
Maximum	≥15	%	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.

Certain of the Company's employees who were not granted nonvested Common Shares were granted nonvested share units in November 2013 that will be settled with Common Shares, subject to time-based vesting, and will vest and settle in equal annual installments during the three-year period commencing January 1, 2014. In connection with our incentive program covering bonus awards for performance year 2014, in February 2015, time-based share awards and share units were issued to certain employees that vest in three equal installments on March 1, 2016, 2017 and 2018.

In May 2014, time-based share units were issued to non-employee directors that vest one year from the date of grant. The portion of the grant that relates to director compensation for the period from our initial public offering through April 2014 vested on November 1, 2014 and the portion of the grant that relates to director compensation from May 2014 through April 2015 vested on May 6, 2015. In May 2015, 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 and nonvested Common Share unit activity for the year ended December 31:



	2015
	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	1,290		$	14.83	1,472		$	9.04	664		$	18.32
Granted	50		24.58		109		24.51		129		24.47
Vested	—		N/A		(644	)	6.67		(239	)	18.18
Forfeited	(46	)	16.40		(47	)	15.50		(10	)	17.89
Outstanding at end of year	1,294		$	15.15	890		$	12.31	544		$	19.84



	2014
	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	1,238	$	14.50	2,839		$	4.82	528		$	17.03
Granted	52	22.68		82		23.47		188		21.95
Vested	—	N/A		(1,434	)	1.57		(26	)	19.00
Forfeited	—	N/A		(15	)	2.70		(26	)	17.83
Outstanding at end of year	1,290	$	14.83	1,472		$	9.04	664		$	18.32

Under the 2009 Restricted Share Plan, certain members of management were granted nonvested Class B-2 common shares upon their employment. The shares vest based on a formula that considers the amount of capital funded under the Amended Subscription Agreement and the period of employment of the respective employee. One-third of Class B-2 shares vest on the third, fourth and fifth anniversary of the employee's date of hire multiplied by the "Investment Percentage." The Investment Percentage is defined as the percentage equal to (i) the aggregate amount of equity capital actually invested in Essent Group pursuant to the Amended Subscription Agreement as of any applicable vesting date, divided by (ii) $750,000. The vesting period starts upon the respective employee's date of hire.

The following table summarizes nonvested Class B-2 common share activity for the year ended December 31:



	2013
(Shares in thousands)	Number of Shares		Weighted Average Grant Date Fair Value
Outstanding at beginning of year	5,461		$	0.11
Granted	96		1.80
Vested	(1,209	)	0.10
Forfeited	(2,614	)	0.13
Converted to Common Shares	(1,734	)	0.17
Outstanding at end of year	—		N/A

Under the terms of certain employment contracts and other agreements, a portion of certain employees' annual incentive bonus were paid in Class A common shares which vest over periods of up to 3 years.

The following table summarizes nonvested Class A common share activity for the year ended December 31:



	2013
(Shares in thousands)	Number of Shares		Weighted Average Grant Date Fair Value
Outstanding at beginning of year	199		$	10.08
Granted	239		10.92
Vested	—		N/A
Forfeited	(9	)	10.59
Converted to Common Shares	(429	)	8.01
Outstanding at end of year	—		N/A

In addition to the nonvested share activity above, 17,158 Common Shares were issued in 2014 under the 2013 Plan that vested upon issuance with a weighted average fair market value at date of grant of $24.71 per share. In 2013, 57,349 Class A common shares were issued that vested upon issuance with an estimated fair market value of $10.92 per share.

Prior to our IPO, independent appraisals were obtained in connection with the valuation of Class A and Class B-2 common shares. For nonvested Common Shares granted in September 2013, 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. For nonvested Common Share units granted in October 2013, the initial public offering price of Common Shares was used. Subsequent to our initial public offering, quoted market prices were used for the valuation of Common Shares.

The total fair value of nonvested shares or share units that vested was $22.4 million, $32.7 million and $4.0 million for the years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2015, there was $21.1 million of total unrecognized compensation expense related to nonvested shares or share units outstanding at December 31, 2015 and we expect to recognize the expense over a weighted average period of 1.9 years.

In connection with our incentive program covering bonus awards for performance year 2015, in February 2016, 181,159 nonvested Common Shares and 153,658 nonvested Common Share units were issued to certain employees and are subject to time-based vesting. In February 2016, 209,076 nonvested Common Shares were granted to certain members of senior management and are subject to time-based and performance-based vesting.

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 201,553 and 105,317 in 2015 and 2014, respectively. Class A common shares tendered by employees to pay employee withholding taxes totaled 17,644 in 2013. Class B-2 shares tendered by employees to pay employee withholding taxes totaled 1,714 in 2013. The tendered shares were recorded at cost and included in treasury stock.

In 2013, Essent Group exercised its right to purchase 1,135 vested Class A common shares at fair value of $10.92 per share and 4,990 vested Class B-2 common shares at fair value of $1.80 per share from former employees. The repurchased shares were recorded at cost and included in treasury stock. All treasury stock has been cancelled as of December 31, 2015 and 2014.

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



(In thousands)	2015		2014		2013
Compensation expense	$	13,633	$	12,520	$	3,597
Income tax benefit	4,378		4,382		1,259