Employee Share-Based Incentive Compensation Plans

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

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 September 30, 2020, White Mountains’s share-based compensation incentive awards consist of performance shares and restricted shares.

Performance Shares

Performance shares are designed to reward employees for meeting company-wide performance targets. 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 service 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 paid. Performance shares earned under the WTM Incentive Plan are typically paid in cash but may be paid in common shares. Compensation expense is recognized for the vested portion of the awards over the related service periods. The level of payout ranges from zero to two times the number of shares initially granted, depending on White Mountains’s financial performance. Performance shares become payable at the conclusion of a performance cycle (typically 3 years) if pre-defined financial targets are met. The performance measures used for determining performance share payouts are growth in White Mountains’s adjusted book value per share and intrinsic value per share. Intrinsic value per share is generally calculated by adjusting adjusted book value per share for differences between the adjusted book value of certain assets and liabilities and White Mountains’s estimate of their underlying intrinsic values.

The following table presents the performance share activity for the three and nine months ended September 30, 2020 and 2019 for performance shares granted under the WTM Incentive Plan:



	Three Months Ended September 30,							Nine Months Ended September 30,
	2020				2019			2020					2019
Millions, except share amounts	Target Performance Shares Outstanding	Accrued Expense			Target Performance Shares Outstanding	Accrued Expense		Target Performance Shares Outstanding		Accrued Expense			Target Performance Shares Outstanding		Accrued Expense
Beginning of period	42,458	$	15.8		42,473	$	30.8	42,473		$	43.7		40,616		$	31.7
Shares paid ⁽¹⁾	—	—			—	—		(14,070	)	(27.7		)	(13,715	)	(18.1		)
New grants	—	—			—	—		14,055		—			15,600		—
Forfeitures and cancellations⁽²⁾	—	(.3		)	—	—		—		.1			(28	)	—
Expense recognized	—	13.6			—	5.6		—		13.0			—		22.8
End of period	42,458	$	29.1		42,473	$	36.4	42,458		$	29.1		42,473		$	36.4

⁽¹⁾WTM performance share payments in 2020 for the 2017-2019 performance cycle, which were paid in cash in March 2020, ranged from 174% to 180% of target. WTM performance share payments in 2019 for the 2016-2018 performance cycle, which were paid in cash in March 2019, ranged from 139% to 166% of target.

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

During the nine months ended September 30, 2020, White Mountains granted 14,055 performance shares for the 2020-2022 performance cycle. During the nine months ended September 30, 2019, White Mountains granted 15,600 performance shares for the 2019-2021 performance cycle.

For performance shares earned in the 2017-2019 and 2016-2018 performance cycles, all performance shares earned were settled in cash. If all the outstanding WTM performance shares had vested on September 30, 2020, the total additional compensation cost to be recognized would have been $19.4 million, based on accrual factors (common share price and payout assumptions) as of September 30, 2020.

The following table presents performance shares outstanding and accrued expense for performance shares awarded under the WTM Incentive Plan as of September 30, 2020 for each performance cycle:



	Nine Months Ended September 30, 2020
Millions, except share amounts	Target Performance Shares Outstanding		Accrued Expense
Performance cycle:
2018 – 2020	13,450		$	15.4
2019 – 2021	15,600		10.6
2020 – 2022	14,055		3.6
Sub-total	43,105		29.6
Assumed forfeitures	(647	)	(.5		)
September 30, 2020	42,458		$	29.1

Restricted Shares

Restricted shares are grants of a specified number of common shares that generally vest at the end of a three-year service period. The following table presents the unrecognized compensation cost associated with the outstanding restricted share awards for the three and nine months ended September 30, 2020 and 2019:



	Three Months Ended September 30,								Nine Months Ended September 30,
	2020				2019				2020					2019
Millions, except share amounts	Restricted Shares	Unamortized Issue Date Fair Value			Restricted Shares	Unamortized Issue Date Fair Value			Restricted Shares		Unamortized Issue Date Fair Value			Restricted Shares		Unamortized Issue Date Fair Value
Non-vested,
Beginning of period	43,105	$	23.0		43,395	$	21.9		43,395		$	16.7		41,510		$	12.5
Issued	—	—			—	—			14,055		15.1			15,600		14.5
Vested	—	—			—	—			(14,345	)	—			(13,715	)	—
Forfeited	—	—			—	—			—		—			—		—
Expense recognized	—	(3.6		)	—	(2.6		)	—		(12.4		)	—		(7.7		)
End of period	43,105	$	19.4		43,395	$	19.3		43,105		$	19.4		43,395		$	19.3

During the nine months ended September 30, 2020, White Mountains issued 14,055 restricted shares that vest on January 1, 2023. During the nine months ended September 30, 2019, White Mountains issued 15,600 restricted shares that vest on January 1, 2022. The unamortized issue date fair value as of September 30, 2020 is expected to be recognized ratably over the remaining vesting periods.