Employee Share-Based Incentive Compensation Plans

White Mountains’s Long-Term Incentive Plan (the “WTM Incentive Plan”) provides for grants of various types of share-based and non share-based incentive awards to key employees of White Mountains. As of March 31, 2018, White Mountains’s share-based compensation incentive awards consist of performance shares and restricted shares.

Performance Shares

Performance shares are conditional grants of a specified maximum number of common shares or an equivalent amount of cash. Awards generally vest at the end of a three-year period, are subject to the attainment of pre-specified performance goals, and are valued based on the market value of common shares at the time awards are approved for payment.

The following table presents the performance share activity for the three months ended March 31, 2018 and 2017 for performance shares granted under the WTM Incentive Plan:



	Three Months Ended March 31,
	2018					2017
Millions, except share amounts	Target Performance Shares Outstanding		Accrued Expense			Target Performance Shares Outstanding		Accrued Expense
Beginning of period	50,515		$	45.8		80,353		$	42.4
Shares paid ⁽¹⁾	(23,186	)	(28.4		)	(30,167	)	(20.8		)
New grants	14,105		—			16,460		—
Forfeitures and cancellations⁽²⁾	(818	)	.3			(9,841	)	(5.7		)
Expense recognized	—		3.3			—		8.1
End of period⁽³⁾	40,616		$	21.0		56,805		$	24.0

⁽¹⁾WTM performance share payments in 2018 for the 2015-2017 performance cycle, which were paid in March 2018, ranged from 145% to 147% of target. WTM performance share payments in 2017 for the 2014-2016 performance cycle, which were paid in March 2017, ranged from 34% to 76% of target.

⁽²⁾Amounts include changes in assumed forfeitures, as required under GAAP.

⁽³⁾Outstanding performance share awards as of March 31, 2017 excludes 2,195 performance share awards granted to employees of Sirius Group.

For performance shares earned in the 2015-2017 and 2014-2016 performance cycles, all performance shares earned were settled in cash. If all the outstanding WTM performance shares had vested on March 31, 2018, the total additional compensation cost to be recognized would have been $26.1 million, based on accrual factors (common share price and payout assumptions) at March 31, 2018.

The following table presents performance shares outstanding and accrued expense for performance shares awarded under the WTM Incentive Plan at March 31, 2018 for each performance cycle:



	Three Months Ended March 31, 2018
Millions, except share amounts	Target Performance Shares Outstanding		Accrued Expense
Performance cycle:
2016 – 2018	13,715		$	12.7
2017 – 2019	14,070		7.7
2018 – 2020	13,450		.9
Sub-total	41,235		21.3
Assumed forfeitures	(619	)	(.3		)
March 31, 2018	40,616		$	21.0

Restricted Shares

The following table presents the unrecognized compensation cost associated with the outstanding restricted share awards for the three months ended March 31, 2018 and 2017:



	Three Months Ended March 31,
	2018					2017
Millions, except share amounts	Restricted Shares		Unamortized Issue Date Fair Value			Restricted Shares		Unamortized Issue Date Fair Value
Non-vested,
Beginning of period	53,755		$	14.3		70,620		$	19.7
Issued	14,105		11.4			16,735		15.8
Vested	(25,381	)	—			(22,015	)	—
Forfeited	(969	)	(.2		)	(5,200	)	(2.8		)
Expense recognized	—		(3.3		)	—		(3.6		)
End of period⁽¹⁾	41,510		$	22.2		60,140		$	29.1

⁽¹⁾Restricted share awards outstanding as of March 31, 2017 includes 2,195 restricted shares issued to employees of Sirius Group, which was accounted for as discontinued operations.

During the first quarter of 2018, White Mountains issued 13,450 restricted shares that vest on January 1, 2021, 290 restricted shares that vest on January 1, 2020 and 365 restricted shares that vest on January 1, 2019. During the first quarter of 2017, White Mountains issued 16,735 restricted shares that vest on January 1, 2020. The unamortized issue date fair value at March 31, 2018 is expected to be recognized ratably over the remaining vesting periods.

Non-Qualified Options

As of January 20, 2017, the 125,000 Non-Qualified options issued to the Company’s former Chairman and CEO were exercised. During the first quarter of 2017, 40,000 Non-Qualified Options, with an intrinsic value of $4.4 million, were exercised in exchange for 5,142 common shares with an equal total market value. The intrinsic value represents the difference between the market price of the Company’s common shares at the date of exercise and the fixed strike price of $742 per common share. The Non-Qualified Options were fully amortized as of 2011.

MediaAlpha Class B Unit Awards

MediaAlpha has issued Class B unit awards to certain employees. The units entitle the award recipient to participate in distributions from MediaAlpha, subject to a cumulative distribution threshold, which is a performance condition, and a service period. The grant date fair value of the awards is determined when it is deemed probable that the distribution threshold will be met. The service period ranges from 36 months to 48 months. For the three months ended March 31, 2018, MediaAlpha recognized $6.4 million of compensation expense for the vested portion of the awards for which achievement of the performance award is now probable, and $0.6 million of unearned compensation expense for unvested awards, which will be recognized over the remaining service periods of the awards.