Stock-based compensation

On July 27, 2016, the Kinsale Capital Group, Inc. 2016 Omnibus Incentive Plan (the "2016 Incentive Plan") became effective. The 2016 Incentive Plan provides for grants of stock options, stock appreciation rights, restricted stock, other stock-based awards and other cash-based awards to directors, officers and other employees, as well as independent contractors or consultants providing consulting or advisory services to the Company. The number of shares of common stock available for issuance under the 2016 Incentive Plan may not exceed 2,073,832. The compensation cost that has been charged against income for share-based compensation arrangements was $0.6 million and $0.3 million for the six months ended June 30, 2018 and 2017, respectively.

Restricted Stock Awards

During the six months ended June 30, 2018, the Board of Directors approved, and the Company granted, restricted stock awards under the 2016 Incentive Plan. The restricted stock awards were valued on the date of grant and will vest over a period of one to four years corresponding to the anniversary date of the grants. The fair value of restricted stock awards was determined based on the closing trading price of the Company’s shares on the grant date or, if no shares were traded on the grant date, the last preceding date for which there was a sale of shares. Except for restrictions placed on the transferability of restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights and the right to receive cash dividends. Unvested shares of restricted stock awards and accrued dividends, if any, are forfeited upon the termination of service to or employment with the Company.

A summary of all restricted stock activity under the equity compensation plans for the six months ended June 30, 2018 is as follows:



	For the Six Months Ended June 30, 2018
	Number of Shares	Weighted Average Grant Date Fair Value per Share
Nonvested outstanding at the beginning of the period	—	$	—
Granted	94,270	$	52.99
Vested	—	$	—
Forfeited	—	$	—
Nonvested outstanding at the end of the period	94,270	$	52.99

As of June 30, 2018, the Company had $4.7 million of total unrecognized stock-based compensation expense expected to be charged to earnings over a weighted-average period of 3.8 years.

Stock Options

On July 27, 2016, the Board of Directors approved, and the Company granted, 1,036,916 stock options with an exercise price equal to the Initial Public Offering price of $16.00 per share and a weighted-average grant-date fair value of $2.71 per share. The options have a maximum contractual term of 10 years and vest in 4 equal annual installments following the date of the grant.

The value of the options granted was estimated at the date of grant using the Black-Scholes pricing model using the following assumptions:



Risk-free rate of return	1.26	%
Dividend yield	1.25	%
Expected share price volatility⁽¹⁾	18.50	%
Expected life in years⁽²⁾	6.3 years


⁽¹⁾	Expected volatility was based on the Company’s competitors within the industry.


⁽²⁾	Expected life was calculated using the simplified method, which was an average of the contractual term of the option and its ordinary vesting period, as the Company did not have sufficient historical data for determining the expected term of our stock option awards.

A summary of option activity as of June 30, 2018, and changes during the period then ended is presented below:



	Number of Shares		Weighted-average exercise price		Weighted-average remaining years of contractual term	Aggregate intrinsic value (in thousands)
Outstanding at January 1, 2018	930,440		$	16.00
Granted	—		—
Forfeited	(8,985	)	16.00
Exercised	(39,027	)	16.00
Outstanding at June 30, 2018	882,428		$	16.00	8.1	$	34,291
Exercisable at June 30, 2018	179,803		$	16.00	8.1	$	6,987

The total intrinsic value of options exercised during the six months ended June 30, 2018 was $1.4 million. There were no options exercised during the six months ended June 30, 2017. As of June 30, 2018, the Company had $1.3 million of total unrecognized stock-based compensation expense expected to be charged to earnings over a weighted-average period of 2.1 years.