Stock-based Compensation

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

On July 27, 2016, the Kinsale Capital Group, Inc. 2016 Omnibus Incentive Plan (the "2016 Incentive Plan") became effective. The 2016 Incentive Plan, which is administered by the Compensation, Nominating and Corporate Governance Committee of the Company’s Board of Directors, provides for grants of stock options, restricted stock, restricted stock units and other stock-based awards to officers, employees, directors, independent contractors and consultants. The number of shares of common stock available for issuance under the 2016 Incentive Plan may not exceed 2,073,832.

The total compensation cost that has been charged against income for share-based compensation arrangements was $1.5 million and $1.0 million for the three months ended March 31, 2022 and 2021, respectively.

Restricted Stock Awards

During the three months ended March 31, 2022, 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 1 to 4 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 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 restricted stock activity under the 2016 Incentive Plan for the three months ended March 31, 2022 is as follows:


	For the Three Months Ended March 31, 2022
	Number of Shares	Weighted Average Grant Date Fair Value per Share
Non-vested outstanding at the beginning of the period	95,984	$	131.94
Granted	52,863	$	211.86
Vested	(10,696)	$	188.46
Forfeited	(833)	$	171.33
Non-vested outstanding at the end of the period	137,318	$	158.07

Employees surrender shares to pay for withholding tax obligations resulting from any vesting of restricted stock awards. During the three months ended March 31, 2022, shares withheld for taxes in connection with the vesting of restricted stock awards totaled 2,459.

The weighted average grant-date fair value per share of the Company's restricted stock awards granted during the three months ended March 31, 2022 and 2021 was $211.86 and $185.00, respectively. The fair value of restricted stock awards that vested during the three months ended March 31, 2022 and 2021 was $2.3 million and $0.9 million, respectively. As of March 31, 2022, the Company had $18.7 million of total unrecognized stock-based compensation expense expected to be charged to earnings over a weighted-average period of 3.2 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 vested 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 March 31, 2022, 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, 2022	325,433	$	16.00
Granted	—	—
Forfeited	—	—
Exercised	(23,600)	16.00
Outstanding at March 31, 2022	301,833	$	16.00	4.3	$	63,995
Exercisable at March 31, 2022	301,833	$	16.00	4.3	$	63,995

The total intrinsic value of options exercised was $4.5 million and $3.6 million during the three months ended March 31, 2022 and 2021, respectively.