Long-term Equity-based Compensation Plans

6 Months Ended

Jun. 30, 2011

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 6 - Long-term Equity-based Compensation Plans

On May 4, 2011 Unitrin's shareholders approved the 2011 Omnibus Equity Plan (“Omnibus Plan”). The Omnibus Plan replaced the Company's previous employee stock option plans, director stock option plan and restricted stock plan (collectively, the “Prior Plans”). Awards previously granted under the Prior Plans remain outstanding in accordance with their original terms. Beginning May 4, 2011, equity-based compensation awards may only be granted under the Omnibus Plan. A maximum number of 10,000,000 shares of Unitrin common stock may be issued under the Omnibus Plan (the "Share Authorization"). As of June 30, 2011, there were 9,950,000 common shares available for future grants under the Omnibus Plan, of which 528,600 shares related to performance-based restricted stock awards outstanding under the Prior Plans were reserved for future grants.

The design of the Omnibus Plan provides for fungible use of shares to determine the number of shares available for future grants, with a fungible conversion factor of 3 to 1, such that the Share Authorization will be reduced at two different rates, depending upon the type of award granted. Each share of Unitrin common stock issued upon the exercise of stock options or stock appreciation rights will reduce the number of shares available for future grant under the Share Authorization by one share, while each share of Unitrin common stock issued pursuant to “full value awards” will reduce the number of shares available for future grant under the Share Authorization by three shares. “Full value awards” are awards, other than stock options or stock appreciation rights, that are settled by the issuance of shares of Unitrin common stock and include restricted stock, restricted stock units, performance shares, performance units, if settled with stock, and other stock-based awards.

Share-based compensation expense for all of the Company’s long-term equity-based compensation plans was $2.9 million and $2.5 million for the six months endedJune 30, 2011 and 2010, respectively. Total unamortized compensation expense related to nonvested awards of such plans at June 30, 2011 was $7.2 million, which is expected to be recognized over a weighted-average period of 1.5 years.

The Company uses the Black-Scholes option pricing model to estimate the fair value of each option on the date of grant. The assumptions used in the Black-Scholes pricing model for options granted during the six months endedJune 30, 2011 and 2010 were as follows:

	Six Months Ended
	Jun 30, 2011				Jun 30, 2010
Range of Valuation Assumptions
Expected Volatility	41.34	%	-	55.16%	40.55	%	-	50.51%
Risk-free Interest Rate	1.30		-	2.87	1.91		-	3.20
Expected Dividend Yield	3.15		-	3.38	3.25		-	3.39
Weighted-Average Expected Life (in Years)
Employee Grants	3.5		-	7	4		-	7
Director Grants	6				6

Note 6 - Long-term Equity-based Compensation Plans (continued)

Option and stock appreciation right activity for the six months endedJune 30, 2011 is presented below:

	Shares Subject to Options		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value ($ in Millions)
Outstanding at Beginning of the Year	4,004,546		$	42.34
Granted	308,750		28.10
Exercised	(12,000	)	19.43
Forfeited or Expired	(467,494	)	46.72
Outstanding at End of Period	3,833,802		$	40.73	4.55	$	6.3
Vested and Expected to Vest at End of Period	3,796,343		$	40.87	4.51	$	6.2
Exercisable at End of Period	3,082,926		$	44.44	3.53	$	2.6

The weighted-average grant-date fair value of options granted during the six months endedJune 30, 2011 and 2010 were $9.12 per option and $7.70 per option, respectively. Total intrinsic value of stock options exercised was $0.1 million for the six months endedJune 30, 2011. Cash received from option exercises and the total tax benefits realized for tax deductions from option exercises were insignificant for both the six months endedJune 30, 2011 and 2010.

Recipients of restricted stock are entitled to full dividend and voting rights on the same basis as all other outstanding shares of Unitrin common stock, and all awards are subject to forfeiture until certain restrictions have lapsed. The grant-date fair values of time-based restricted stock awards are determined using the closing price of Unitrin common stock on the date of grant. The grant-date fair values of the performance-based restricted stock awards are determined using the Monte Carlo simulation method.

Activity related to nonvested restricted stock for the six months endedJune 30, 2011 is presented below:

	Restricted Shares		Weighted- Average Grant-Date Fair Value Per Share
Nonvested Balance at Beginning of the Year	218,156		$	23.72
Granted	123,075		33.25
Forfeited	(613	)	22.07
Nonvested Balance at End of Period	340,618		$	27.17

Restricted stock granted during the six months endedJune 30, 2011 includes 57,600 shares of time-vested restricted stock and 65,475 shares of performance-based restricted stock. The nonvested balance of restricted stock at June 30, 2011 was comprised of 164,418 shares of time-vested restricted stock and 176,200 shares of performance-based restricted stock. The number of additional shares that would be granted if the Company were to meet or exceed the maximum performance levels related to the outstanding performance-based shares was 176,200 shares (as "full value awards," the equivalent of 528,600 shares under the Share Authorization) at June 30, 2011. No restricted stock vested during the six months endedJune 30, 2011.