Stockholders’ equity

Amendment of Certificate of Incorporation and Reclassification of Common Stock

At January 1, 2016, the Company was authorized to issue 18,333,333 shares of Common Stock, $0.0001 par value per share ("Common Stock"), of which 15,000,000 shares were designated as Class A Common Voting Shares ("Class A Common Stock") and 3,333,333 were designated as Class B Common Non-Voting Shares ("Class B Common Stock"). On July 28, 2016, in connection with the IPO as discussed below, the Company amended and restated its certificate of incorporation to recapitalize the Company’s authorized capital stock to consist of 400,000,000 shares of common stock, par value $0.01 per share, and 100,000,000 shares of preferred stock, par value $0.01 per share. There were no shares of preferred stock issued or outstanding at December 31, 2018 or December 31, 2017.

In addition, the amended and restated certificate of incorporation provided for automatic reclassification of the Company’s Class A Common Stock and Class B Common Stock into a single class of common stock. All shares of Class A Common Stock were equal to the sum of:


•	the number of shares of common stock equal to the amount of accrued and unpaid dividends based on a reclassification date of July 28, 2016, or $90.3 million, divided by the IPO price of $16.00 per share, plus


•	the number of shares of common stock equal to a conversion ratio of 0.65485975, calculated based on the IPO price of $16.00 per share.

All shares of Class B Common Stock were reclassified into shares of common stock equal to a conversion ratio of 0.72095061, calculated based on the IPO price of $16.00 per share.

All fractional shares resulting from the reclassification of Class A Common Stock and Class B Common Stock into a single class of common stock were settled in cash.

Initial Public Offering

On August 2, 2016, the Company completed its IPO of 7,590,000 shares of common stock at a price to the public of $16.00 per share. The Company issued 5,000,000 shares of common stock and the selling stockholders sold 2,590,000 shares of common stock, which included 990,000 shares sold to the underwriters pursuant to the underwriter’s option to purchase additional shares. After underwriter discounts and commissions and offering expenses, the Company received net proceeds from the offering of approximately $72.8 million. The Company did not receive any net proceeds from the sale of shares of common stock by the selling stockholders. The issuance of common stock by the Company and the related net proceeds were recorded in the consolidated financial statements on the closing date of the IPO.

On December 6, 2016, the Company completed a follow-on offering of 3,864,000 shares of common stock at a price of $27.50 per share, which included 504,000 shares sold to the underwriters pursuant to their over-allotment option. All of the shares in the offering were offered by the selling stockholders. The Company did not receive any proceeds from the offering.

On May 17, 2017, the Company completed a second follow-on offering of 4,557,774 shares of common stock at a price of $33.00 per share, which included 594,492 shares sold to the underwriters pursuant to their over-allotment option. All of the shares in the offering were offered by the selling stockholders. The Company did not receive any proceeds from the offering.

Changes in the shares of outstanding common stock were as follows:



	Year Ended December 31,
	2018	2017	2016

Common Stock Outstanding:
Shares at beginning of year	21,036,087	20,968,707	—
Shares issued from stock options	112,952	67,380	—
Shares issued from restricted stock, net	92,465	—	—
Reclassification	—	—	15,968,707
Shares issued from IPO	—	—	5,000,000
Shares at end of year	21,241,504	21,036,087	20,968,707

Class A Common Stock Outstanding:
Shares outstanding at beginning of year	—	—	13,803,183
Share dividend	—	—	8,617,963
Reclassification	—	—	(22,421,146	)
Shares outstanding at end of year	—	—	—

Class B Common Stock Outstanding:
Shares outstanding at beginning of year	—	—	1,513,592
Restricted stock grants vested	—	—	270,266
Reclassification	—	—	(1,783,858	)
Shares outstanding at end of year	—	—	—

Dividend Declaration

On February 12, 2018, the Company’s Board of Directors declared a cash dividend of $0.07 per share of common stock. This dividend was paid on March 15, 2018 to all stockholders of record on February 28, 2018.

On May 24, 2018, the Company’s Board of Directors declared a cash dividend of $0.07 per share of common stock. This dividend was paid on June 15, 2018 to all stockholders of record on June 4, 2018.

On August 9, 2018, the Company’s Board of Directors declared a cash dividend of $0.07 per share of common stock. This dividend was paid on September 14, 2018 to all stockholders of record on August 31, 2018.

On November 14, 2018, the Company’s Board of Directors declared a cash dividend of $0.07 per share of common stock. This dividend was paid on December 14, 2018 to all stockholders of record on November 30, 2018.

On February 14, 2019, the Company’s Board of Directors declared a cash dividend of $0.08 per share of common stock. This dividend is payable on March 14, 2019 to all stockholders of record on February 28, 2019.

Equity-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 Company recognized total equity-based compensation expense of $1.6 million, $0.7 million and $0.5 million for the years ended December 31, 2018, 2017 and 2016, respectively.

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 IPO price of $16.00 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 weighted average grant date fair value of options granted during 2016 was $2.71 per share.

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 under the employee share option plan as of December 31, 2018, and changes during the year then ended is presented below:



	Number of Shares		Weighted-average exercise price		Weighted-average remaining years of contractual life	Aggregate intrinsic value (in thousands)
Outstanding at December 31, 2017	930,440		$	16.00
Granted	—		—
Forfeited	(13,185	)	16.00
Exercised	(112,952	)	16.00
Outstanding at December 31, 2018	804,303		$	16.00	7.6 years	$	31,818
Exercisable at December 31, 2018	339,937		$	16.00	7.6 years	$	13,448

The total intrinsic value of options exercised was $4.7 million during the year ended December 31, 2018 and $1.5 million during the year ended December 31, 2017. As of December 31, 2018, the Company had $1.0 million of unrecognized share-based compensation expense expected to be charged to earnings over a weighted-average period of 1.6 years.

Restricted Stock Awards

During 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 year ended is as follows:



	December 31, 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	(1,805	)	$	53.60
Nonvested outstanding at the end of the period	92,465		$	52.98

As of December 31, 2018, the Company had $3.9 million of total unrecognized stock-based compensation expense expected to be charged to earnings over a weighted-average period of 3.4 years.

Subsequent Event

The Board of Directors granted 7,020 shares of restricted stock on January 1, 2019 under the 2016 Incentive Plan to the Company’s non-employee directors. The restricted stock had a fair value on the date of grant of $55.56 per share and will vest on a straight-line basis over a 1 year period.