Employee Share-Based Incentive Compensation Plans

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Employee Share-Based Incentive Compensation Plans

White Mountains’s share-based incentive compensation plans are designed to incentivize key employees to maximize shareholder value over long periods of time. White Mountains believes that this is best pursued by utilizing a pay-for-performance program that closely aligns the financial interests of management with those of its shareholders while rewarding appropriate risk taking. White Mountains accomplishes this by emphasizing variable long-term compensation that is contingent on performance over a number of years rather than fixed entitlements. White Mountains expenses all of its share-based compensation. As a result, White Mountains’s calculation of its owners’ returns includes the expense of all outstanding share-based compensation awards.

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 and directors of White Mountains. As of September 30, 2023 and 2022, White Mountains’s share-based incentive compensation 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 three 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, 2023 and 2022 for performance shares granted under the WTM Incentive Plan:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
$ in Millions	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	37,031	$	44.6	39,449	$	41.2	39,449	$	67.5	40,828	$	42.2
Shares paid (1)	—	—		—	—		(13,350)	(40.8)		(14,625)	(26.4)
New grants	—	—		—	—		10,895	—		13,225	—
Forfeitures and cancellations (2)	—	—		—	(.1)		37	.2		21	(.2)
Expense recognized	—	10.5		—	11.9		—	28.2		—	37.4
End of period	37,031	$	55.1	39,449	$	53.0	37,031	$	55.1	39,449	$	53.0

(1) WTM performance share payments in 2023 for the 2020-2022 performance cycle, which were paid in March 2023 at 200% of target. WTM performance share payments in 2022 for the 2019-2021 performance cycle, which were paid in March 2022 at 172% of target.

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

During the nine months ended September 30, 2023, White Mountains granted 10,895 performance shares for the 2023-2025 performance cycle. During the nine months ended September 30, 2022, White Mountains granted 13,225 performance shares for the 2022-2024 performance cycle.

For the 2020-2022 performance cycle, all performance shares earned were settled in cash. For the 2019-2021 performance cycle, the Company issued common shares for 750 performance shares earned, and all other performance shares earned were settled in cash. If the outstanding performance shares had vested on September 30, 2023, the total additional compensation cost to be recognized would have been $32.9 million, based on accrual factors as of September 30, 2023 (common share price and payout assumptions).

The following table presents performance shares outstanding and accrued expense for performance shares awarded under the WTM Incentive Plan as of September 30, 2023 for each performance cycle:


	September 30, 2023
$ in Millions	Target Performance Shares Outstanding	Accrued Expense
Performance cycle:
2021 – 2023	13,475	$	30.4
2022 – 2024	13,225	22.1
2023 – 2025	10,895	3.4

Sub-total	37,595	55.9
Assumed forfeitures	(564)	(.8)
Total	37,031	$	55.1

Restricted Shares

Restricted shares are grants of a specified number of common shares that generally vest at the end of a 34-month service period. The following table presents the unrecognized compensation cost associated with the outstanding restricted share awards under the WTM Incentive Plan for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
$ in Millions	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	37,595	$	24.3	38,350	$	23.0	38,350	$	15.5	37,850	$	15.9
Issued	—	—		—	—		10,895	16.0		13,225	13.8
Vested	—	—		—	—		(11,650)	—		(12,725)	—
Forfeited	—	—		—	—		—	—		—	—
Expense recognized	—	(4.1)		—	(3.8)		—	(11.3)		—	(10.5)
End of period	37,595	$	20.2	38,350	$	19.2	37,595	$	20.2	38,350	$	19.2

During the nine months ended September 30, 2023, White Mountains issued 10,895 restricted shares that vest on January 1, 2026. During the nine months ended September 30, 2022, White Mountains issued 13,225 restricted shares that vest on January 1, 2025. The unamortized issue date fair value as of September 30, 2023 is expected to be recognized ratably over the remaining vesting periods.