rates, depending on the type of award granted. Each share of Kemper common stock issuable 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 Kemper 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 Kemper common stock and include time-based restricted stock units (collectively “RSUs”), PSUs and deferred stock units (“DSUs”).

Outstanding equity-based compensation awards at December 31, 2020 consisted of tandem stock option and stock appreciation rights (“Tandem Awards”), RSUs, PSUs and DSUs. RSUs, PSUs and DSUs give the recipient the right to receive one share of Kemper common stock for each RSU, PSU or DSU issued. Recipients of DSUs receive full dividend equivalents on the same basis as all other outstanding shares of Kemper common stock, but do not receive voting rights until such shares are issued.

For grants under the 2020 Omnibus Plan, and for grants under the 2011 Plan beginning in November 2017, recipients of RSUs and PSUs receive dividend equivalents on the same basis as all other outstanding shares of Kemper common stock only if, to the extent, and at the time that they vest and on subsequent dividend payment dates after they vest until the awards are settled, and do not receive voting rights until such shares are issued.

For grants under the 2011 Plan prior to November 2017, recipients of RSUs and PSUs receive full dividend equivalents on the same basis as all other outstanding shares of Kemper common stock, but do not receive voting rights until such shares are issued. Except as described below for certain equity-based compensation awards granted to each member of the Board of Directors who is not employed by the Company (“Non-employee Directors”), all outstanding awards are subject to forfeiture until certain restrictions have lapsed.

For awards subject to a performance condition, the Company recognizes compensation expense based upon the probable outcome of the performance condition, which on the grant date reflects an estimate of attaining 100% of the performance units granted. The estimate is revised if the actual number of PSUs expected to vest is likely to differ from the previous estimate. Compensation expense for awards is recognized on a straight-line basis over the requisite service period. For equity-based compensation awards with a graded vesting schedule, the Company recognizes compensation expense on a straight-line basis over the requisite service period for each separately-vesting portion of the awards as if each award were, in substance, multiple awards. Compensation expense is recognized only for those awards expected to vest, with forfeitures estimated at the date of grant based on the Company’s historical experience and future expectations. Equity-based compensation expense was $24.9 million, $25.3 million and $18.6 million for the years ended December 31, 2020, 2019 and 2018, respectively. Total unamortized compensation expense related to unvested awards at December 31, 2020 was $24.6 million, which is expected to be recognized over the next three years ending December 31, 2021, 2022 and 2023.

Human Resources and the Compensation Committee of the Board of Directors, or the Board’s authorized designee, has sole discretion to determine the persons to whom awards under the 2020 Omnibus Plan are granted, and the material terms of the awards. For Tandem Awards, material terms include the number of shares covered by such awards and the exercise price, vesting and expiration dates of such awards. Tandem Awards are non-transferable. The exercise price of Tandem Awards is the fair value of Kemper’s common stock on the date of grant. Tandem Awards and RSU awards granted to employees generally vest in three equal annual installments over a period of three years, with the Tandem Awards expiring ten years from the date of grant. Employee PSU awards generally vest over a period of three years, subject to performance results and other restrictions.

Under the Non-employee Director compensation program in effect for 2020, each Non-employee Director elected at the 2020 annual shareholder meeting received an annual RSU award with an aggregate grant date fair value of $130,000 (“Director RSUs”) at the conclusion of the meeting, and new Non-employee Directors who joined the Board received an initial award of Director RSUs valued at the percentage of the full grant date fair $130,000 value that represents the number of quarterly Board meetings the new director was expected to attend during the remaining portion of the then-current annual compensation period that ends on the date of the next annual shareholder meeting. The Director RSUs vest over a period of one year, enable the award holder to make an election to defer the conversion to shares of common stock in accordance with applicable deferral

Director elected at the 2018 annual shareholder meeting received an annual DSU award with an aggregate grant date fair value of $110,000 at the conclusion of the meeting, under the Non-employee Director compensation program in effect for the applicable year. The DSUs granted to Non-employee Directors are fully vested on the date of grant and include the right to receive full dividend equivalents on the same basis as all other outstanding shares of Kemper common stock. Conversion of the DSUs into shares of Kemper’s common stock is deferred until the date a director’s board service terminates.

The Company uses the Black-Scholes option pricing model to estimate the fair value of each Tandem Award on the date of grant. The expected terms of Tandem Awards are developed by considering the Company’s historical Tandem Award exercise experience, demographic profiles, historical share retention practices of employees and assumptions about their propensity for early exercise in the future. Expected volatility is estimated using weekly historical volatility. The Company believes that historical volatility is currently the best estimate of expected volatility. The dividend yield in 2020, 2019 and 2018 was calculated by taking the natural logarithm of the annualized yield divided by the Kemper common stock price on the date of grant. The risk-free interest rate was the yield on the grant date of U.S. Treasury zero coupon issues with a maturity comparable to the expected term of the option.


	2020					2019					2018
RANGE OF VALUATION ASSUMPTIONS
Expected Volatility	29.22	%	-	37.27	%	28.97	%	-	33.78	%	27.31	%	-	32.15	%
Risk-free Interest Rate	0.17		-	1.46		1.35		-	2.60		2.44		-	3.00
Expected Dividend Yield	1.19		-	1.48		1.05		-	1.38		1.16		-	1.72
WEIGHTED-AVERAGE EXPECTED LIFE IN YEARS
Employee Grants	4		-	6		4		-	6		4		-	6


	Shares Subject to Awards	Weighted- average Exercise Price Per Share ($)		Weighted- average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value ($ In Millions)
Outstanding at Beginning of the Year	1,808,815	$	56.53
Granted	375,534	75.91
Exercised	(215,700)	45.64
Forfeited or Expired	(67,692)	73.88
Outstanding at December 31, 2020	1,900,957	60.97		7.11	$	30.6
Vested and Expected to Vest at December 31, 2020	1,823,133	$	60.47	7.06	$	30.3
Exercisable at December 31, 2020	1,045,250	$	50.78	6.06	$	27.4

The weighted-average grant-date fair values of Tandem Awards granted during 2020, 2019 and 2018 were $19.24, $20.99 and $15.14, respectively. Total intrinsic value of Tandem Awards exercised was $7.1 million, $7.7 million and $3.9 million for the years ended December 31, 2020, 2019 and 2018, respectively. Cash received from exercises of Tandem Awards was $5.0 million, $2.4 million and $0.9 million for the years ended December 31, 2020, 2019 and 2018, respectively. Total tax benefit realized for tax deductions from exercises of Tandem Awards was $1.5 million, $1.6 million and $0.8 million for the years ended December 31, 2020, 2019 and 2018, respectively.


					Outstanding				Exercisable
Range of Exercise Prices ($)					Shares Subject to Awards	Weighted- average Exercise Price Per Share ($)		Weighted- average Remaining Contractual Life (in Years)	Shares Subject to Awards	Weighted- average Exercise Price Per Share ($)

$	20.01	-	$	30.00	108,562	$	27.79	5.03	108,562	$	27.79
30.01		-	40.00		128,727	34.65		4.42	128,727	34.65
40.01		-	50.00		354,641	42.47		5.75	354,641	42.47
50.01		-	60.00		375,420	59.88		6.89	231,918	59.87
60.01		-	70.00		77,132	66.62		7.26	40,295	66.90
70.01		-	80.00		812,286	76.34		8.44	165,104	76.28
80.01		-	90.00		44,189	84.78		7.97	16,003	85.24



20.01		-	90.00		1,900,957	60.97		7.11	1,045,250	50.78


	Time-based Restricted Stock Unit Awards
		Number of Restricted Stock Units	Weighted- average Grant-date Fair Value Per Unit
Nonvested Balance at Beginning of the Year		182,188	$	71.12
Granted		68,325	68.38
Vested		(106,807)	68.54
Forfeited		(11,680)	65.37
Nonvested Balance at December 31, 2020		132,026	$	72.30

The initial number of PSUs awarded to each participant represents the number of Kemper common shares that would vest and be issued if the performance level attained were to be at the “target” performance level. For performance above the target level, each participant would receive a grant of additional shares of stock up to a maximum of 100% of the initial number of PSUs awarded to the participant. The final payout of these awards, and any forfeitures of PSUs for performance below the “target” performance level, will be determined based on the Company’s performance. If, at the end of the applicable performance period, the Company’s performance:

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 PSU awards for the 2020, 2019 and 2018 three-year performance periods was 248,890 common shares, 134,858 common shares and 127,638 common shares, respectively, (as “full value awards,” the equivalent of 746,670 shares, 404,574 shares, and 382,914 shares, respectively, under the Share Authorization) at December 31, 2020.

The grant date fair values of the PSU awards with a market performance condition are determined using the Monte Carlo simulation method. The Monte Carlo simulation model produces a risk-neutral simulation of the daily returns on the common stock of Kemper and each of the other companies included in the peer group. Returns generated by the simulation depend on the risk-free interest rate used and the volatilities of, and the correlation between, these stocks. The model simulates stock prices and dividend payouts to the end of the three-year performance period. Total shareholder returns are generated for each of these stocks based on the simulated prices and dividend payouts. The total shareholder returns are then ranked, and Kemper’s simulated ranking is converted to a payout percentage based on the terms of the PSU awards. The payout percentage is applied to the simulated stock price at the end of the performance period, reinvested dividends are added back, and the total is discounted to the valuation date at the risk-free rate. This process is repeated approximately ten thousand times, and the grant date fair value is equal to the average of the results from these trials.

Sixty-seven percent of the PSU awards granted to employees in 2020, and fifty percent of the PSU awards granted to employees in 2019 and 2018 are measured using a market performance condition. Fair value for these awards was estimated using the Monte Carlo simulation method described above. Final payout for these awards, and any forfeitures of units for performance below the “target” performance level, will be based on Kemper’s total shareholder return, relative to a peer group comprised of all the companies in the S&P Supercomposite Insurance Index, over a three-year performance period. The three-year performance periods for the 2020, 2019 and 2018 awards end on January 31, 2023, January 31, 2022 and January 31, 2021, respectively. Compensation cost for these awards is recognized ratably over the requisite service period. In the event that the market performance condition is not satisfied, previously recognized compensation cost would not reverse, but it would reverse if the requisite service period is not met.

Thirty-three percent of the PSU awards granted to employees in 2020, and fifty percent of the PSU awards granted to employees in 2019 and 2018 are measured solely using a Company-specific metric. Final payout for these awards, and any forfeitures of shares for performance below the “target” performance level, will be determined based on Kemper’s adjusted return on equity over a three-year performance period. The three-year performance periods for the 2020, 2019 and 2018 awards end on December 31, 2022, December 31, 2021 and December 31, 2020, respectively. Fair value for these awards was determined using the closing price of Kemper common stock on the date of grant. Accruals of compensation cost for these awards are estimated based on the probable outcome of the performance condition.

The total fair value of RSUs and PSUs that vested during the year ended December 31, 2020 was $20.4 million. The tax benefits for tax deductions realized from such awards was $4.3 million. The total fair value of RSUs and PSUs that vested during the year ended December 31, 2019 was $24.8 million. The tax benefits for tax deductions realized from such awards was $5.2 million. The total fair value of RSUs and PSUs that vested during the year ended December 31, 2018 was $8.7 million. The tax benefits for tax deductions realized from such awards was $1.8 million.

The grant-date fair values of DSU awards granted to Non-employee Directors are determined using the closing price of Kemper common stock on the date of grant. The total fair value of DSUs that vested during the years ended December 31, 2020, 2019, and 2018 was $0.0 million, $0.0 million and $1.0 million, respectively.