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Stock Incentive Compensation and Employee Benefit Plans
 12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
Stock Incentive Compensation and Employee Benefit Plans STOCK INCENTIVE COMPENSATION AND EMPLOYEE BENEFIT PLANS
Stock Incentive Compensation Plans and Awards
The Company is authorized to issue restricted stock awards, restricted stock units, performance share awards, stock options and other share-based awards to its employees and directors pursuant to various stock incentive compensation plans.
On May 16, 2016, the Company’s shareholders approved the Company’s 2016 Long-Term Incentive Plan (the “2016 Long-Term Incentive Plan”). Pursuant to the 2016 Long-Term Incentive Plan, the Company is authorized to issue up to 1,625,000 common shares plus the number of shares that were subject to awards outstanding under the Company’s 2001 Stock Incentive Plan, as amended (the “2001 Stock Incentive Plan”) and the Company’s 2010 Performance-Based Equity Incentive Plan, as amended (the “2010 Performance Plan”) as of the effective date of the 2016 Long-Term Incentive Plan that are forfeited, canceled, settled in cash, or otherwise terminated without delivery after the effective date. The 2016 Long-Term Incentive Plan permits the grant of restricted stock awards, restricted stock units, performance share awards (including cash-based performance awards), stock options and other share-based awards to employees, officers, non-employee directors and consultants or advisors of the Company and its affiliates.
The 2001 Stock Incentive Plan, which permitted the grant of stock options, restricted stock awards and other share-based awards to employees of RenaissanceRe and its subsidiaries, expired in accordance with its terms on February 6, 2016 and no additional awards may be made under this plan. All outstanding awards made under the 2001 Stock Incentive Plan will vest no later than March 1, 2020. The 2010 Performance Plan, pursuant to which the Company granted performance share awards, was terminated on May 16, 2016 upon approval of the 2016 Long-Term Incentive Plan, and no additional awards will be made under this plan. All outstanding awards made under the 2010 Performance Share Plan vested no later than February 7, 2018. The terms and conditions of outstanding awards granted under the 2001 Share Incentive Plan and the 2010 Performance Plan were not affected by the respective expiration and termination of these plans.
In 2010, the Company instituted a cash settled restricted stock unit (“CSRSU”) plan, the 2010 Restricted Stock Unit Plan, which allowed for the issuance of equity awards in the form of CSRSUs. In November 2016, the 2010 Restricted Stock Plan was terminated and replaced with a new cash settled restricted stock unit plan, the 2016 Restricted Stock Unit Plan. The terms and conditions of CSRSU awards outstanding under the 2010 Restricted Stock Unit Plan at the time of termination were not affected, but no additional awards will be made under the 2010 Restricted Stock Unit Plan. All outstanding awards made under the 2010 Restricted Stock Unit Plan will vest no later than March 1, 2020.
Stock Options
The Company has not granted stock options since 2008. Stock options were granted pursuant to the 2001 Stock Incentive Plan and allowed for the purchase of RenaissanceRe common shares at a price that was equal to, or not less than, the fair market value of RenaissanceRe common shares as of the effective grant date. Stock options generally vested over 4 years and expired 10 years from the grant date. The final stock options outstanding were exercised during the year ended December 31, 2018.
Restricted Stock Awards
Restricted stock awards granted periodically under the 2001 Stock Incentive Plan and the 2016 Long-Term Incentive Plan generally vest ratably over a four year period. The Company has also granted restricted stock awards to non-employee directors, which generally vest ratably over a three year period.
Performance Share Awards
Performance share awards have been granted periodically to certain of the Company’s executive officers pursuant to the 2010 Performance Plan, 2001 Share Incentive Plan and 2016 Long-Term Incentive Plan. Outstanding performance share awards are subject to vesting conditions based on both continued service and the attainment of pre-established performance goals. If performance goals are achieved, the performance share awards will vest up to a maximum of 250% of target. Performance share awards generally cliff vest at the end of a three-year vesting period based on the attainment of annual performance goals over the vesting period. The performance share awards granted prior to May 2018 have a market condition, which is the Company’s total shareholder return relative to its peer group. The performance share awards granted in May 2018 and March 2019 have a performance condition, which is the percentage change in the Company’s tangible book value per common share plus accumulated dividends, or, in the event of a change in control, a market condition, which is the Company’s total shareholder return relative to its peer group. Total shareholder return is calculated in accordance with the terms of the applicable award agreement and is generally based on the average closing share price over the 20 trading days preceding and including the start and end of the annual performance period. The percentage change in tangible book value per share plus accumulated dividends is calculated in accordance with the terms of the applicable award agreement.
Cash Settled Restricted Stock Units
CSRSUs are liability awards with fair value measurement based on the fair market value of the Company’s common shares at the end of each reporting period. CSRSUs granted periodically pursuant to the 2010 Restricted Stock Unit Plan and 2016 Restricted Stock Unit Plan generally vest ratably over 4 years.
Valuation Assumptions
Performance Share Awards Granted Prior to May 2018
The fair value of performance share awards granted prior to May 2018 is measured on the grant date using a Monte Carlo simulation model which requires the following inputs: share price; expected volatility; expected term; expected dividend yield; and risk-free interest rates. The following are the weighted average-assumptions used to estimate the fair value for all performance share awards issued in each respective year.
 
 
 
 
 
 
 
 
Performance Share Awards
 
 
Year ended December 31,
2019
 
2018
 
 
Expected volatility (1)
n/a
 
15.8%
 
 
Expected term (in years)
n/a
 
n/a
 
 
Expected dividend yield
n/a
 
n/a
 
 
Risk-free interest rate (1)
n/a
 
1.85% - 2.36%
 
 
 
 
 
 
 
(1)
The expected volatility and risk-free interest rate applied are specific to each tranche of performance share awards.
Expected volatility: The expected volatility is estimated by the Company based on RenaissanceRe’s historical stock volatility.
Expected term: The expected term is not applicable as the length of the performance periods are fixed and not subject to future employee behavior. Each tranche of the performance share awards has a one year period during which performance is measured.
Expected dividend yield: The expected dividend yield is not applicable to performance share awards as dividends are paid at the end of the vesting period and do not affect the value of the performance shares.
Risk-free interest rate: The risk free rate is estimated based on the yield on a U.S. treasury zero-coupon issued with a remaining term equal to the vesting period of the performance share awards.
For performance share awards granted before May 2018, the total cost of the performance share awards is determined on the grant date based on the fair value calculated by the Monte Carlo simulation model. The Company recognizes cost equal to fair value per performance share award multiplied by the target number of performance share awards on the grant date. The cost is then amortized as an expense over the requisite service period. The Company has elected to recognize forfeitures as they occurred rather than estimating service-based forfeitures over the requisite service period.
Performance Share Awards Granted in May 2018 and March 2019
For performance share awards granted in May 2018 and March 2019, the performance metric relates to the percentage change in tangible book value per share plus accumulated dividends which is classified as a performance condition under FASB ASC Topic Compensation - Stock Compensation. As a result, the fair value of the performance share awards is determined based on the fair market value of RenaissanceRe’s common shares on the grant date. The estimated fair value of performance share awards is amortized as an expense over the requisite service period.
Restricted Stock Awards
The fair value of restricted stock awards is determined based on the fair market value of RenaissanceRe’s common shares on the grant date. The estimated fair value of restricted stock awards is amortized as an expense over the requisite service period. The Company has elected to recognize forfeitures as they occurred rather than estimating service-based forfeitures over the requisite service period.
Cash Settled Restricted Stock Units
CSRSUs are revalued at the end of each quarterly reporting period based on the then fair market value of RenaissanceRe’s common shares. The total cost is adjusted each quarter for unvested CSRSUs to reflect the current share price, and this total cost is amortized as an expense over the requisite service period. The
Company has elected to recognize forfeitures as they occurred rather than estimating service-based forfeitures over the requisite service period.
Summary of Stock Compensation Activity
The following is a summary of activity under the Company’s stock compensation plans.
Stock Options
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted
options
outstanding
 
Weighted
average
exercise price
 
Weighted
average
remaining
contractual
 life
 
Aggregate
intrinsic
value
 
Range of exercise prices
 
 
Balance, December 31, 2016
206,795

 
$
53.17

 
0.9
 
$
17,174

 
$50.71 - $59.66

 
 
Options granted
—

 
—

 
 
 
 
 
—

 
 
Options forfeited
—

 
—

 
 
 
 
 
 
 
 
Options expired
—

 
—

 
 
 
 
 
 
 
 
Options exercised
(174,794
)
 
53.04

 
 
 
$
15,945

 
$50.71 - $59.66
 
 
Balance, December 31, 2017
32,001

 
$
53.86

 
0.2
 
$
2,295

 
$
53.86

 
 
Options granted
—

 
—

 
 
 
 
 
—

 
 
Options forfeited
—

 
—

 
 
 
 
 
 
 
 
Options expired
—

 
—

 
 
 
 
 
 
 
 
Options exercised
(32,001
)
 
53.86

 
 
 
$
2,320

 
$
53.86

 
 
Balance, December 31, 2018
—

 
$
—

 
0.0
 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 

Cash Settled Restricted Stock Units
 
 
 
 
 
 
Number of
shares
 
 
Nonvested at December 31, 2016
308,344

 
 
Awards granted
98,067

 
 
Awards vested
(122,088
)
 
 
Awards forfeited
(21,993
)
 
 
Nonvested at December 31, 2017
262,330

 
 
Awards granted
—

 
 
Awards vested
(108,344
)
 
 
Awards forfeited
(7,069
)
 
 
Nonvested at December 31, 2018
146,917

 
 
Awards granted
—

 
 
Awards vested
(80,012
)
 
 
Awards forfeited
(3,161
)
 
 
Nonvested at December 31, 2019
63,744

 
 
 
 
 

Performance Share Awards
 
 
 
 
 
 
 
 
Number of
shares (1)
 
Weighted
average 
grant-date fair value
 
 
Nonvested at December 31, 2016
211,381

 
$
44.63

 
 
Awards granted
64,947

 
$
65.27

 
 
Awards vested
(62,499
)
 
$
43.51

 
 
Awards forfeited
(46,156
)
 
 
 
 
Nonvested at December 31, 2017
167,673

 
$
53.11

 
 
Awards granted
83,475

 
$
60.69

 
 
Awards vested
(16,456
)
 
$
53.79

 
 
Awards forfeited
(82,241
)
 
 
 
 
Nonvested at December 31, 2018
152,451

 
$
57.21

 
 
Awards granted
58,050

 
$
146.10

 
 
Awards vested
(21,730
)
 
$
49.90

 
 
Awards forfeited
(43,924
)
 
 
 
 
Nonvested at December 31, 2019
144,847

 
$
94.70

 
 
 
 
 
 
 
(1)
For performance share awards, the number of shares is stated at the maximum number that can be attained if the performance conditions are fully met. Forfeitures represent shares forfeited due to vesting below the maximum attainable as a result of the Company not fully meeting the performance conditions.
Restricted Stock Awards
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee
restricted stock awards
 
Non-employee director
restricted stock awards
 
Total
restricted stock awards
 
 
 
Number of
shares
 
Weighted
average grant
date fair 
value
 
Number of
shares
 
Weighted
average grant
date fair 
value
 
Number of
shares
 
Weighted
average grant
date fair 
value
 
 
Nonvested at December 31, 2016
402,170

 
$
103.34

 
25,545

 
$
107.95

 
427,715

 
$
103.61

 
 
Awards granted
116,345

 
148.66

 
12,193

 
150.05

 
128,538

 
148.79

 
 
Awards vested
(185,478
)
 
100.17

 
(17,612
)
 
110.66

 
(203,090
)
 
101.08

 
 
Awards forfeited
—

 
—

 
—

 
—

 
—

 
—

 
 
Nonvested at December 31, 2017
333,037

 
$
120.93

 
20,126

 
$
131.09

 
353,163

 
$
121.51

 
 
Awards granted
255,799

 
132.70

 
12,169

 
127.29

 
267,968

 
132.79

 
 
Awards vested
(139,454
)
 
112.70

 
(9,761
)
 
123.59

 
(149,215
)
 
113.41

 
 
Awards forfeited
(1,642
)
 
134.38

 
—

 
—

 
(1,642
)
 
134.38

 
 
Nonvested at December 31, 2018
447,740

 
$
130.37

 
22,534

 
$
132.29

 
470,274

 
$
130.46

 
 
Awards granted
242,832

 
146.92

 
11,444

 
147.43

 
254,276

 
146.94

 
 
Awards vested
(165,245
)
 
124.71

 
(12,972
)
 
131.88

 
(178,217
)
 
125.23

 
 
Awards forfeited
(14,467
)
 
136.16

 
—

 
—

 
(14,467
)
 
136.16

 
 
Nonvested at December 31, 2019
510,860

 
$
139.91

 
21,006

 
$
140.79

 
531,866

 
$
139.94

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

There were 1.3 million shares available for issuance under the 2016 Long-Term Incentive Plan at December 31, 2019 and no shares available for issuance under the 2001 Stock Incentive Plan or 2010 Performance Share Plan at December 31, 2019.
The aggregate fair value of restricted stock awards, performance share awards and CSRSUs vested during 2019 was $41.6 million (2018 – $37.2 million, 2017 – $56.9 million). Cash in the amount of $Nil was received from employees as a result of employee stock option exercises during 2019 (2018 – $Nil, 2017 –
$Nil). In connection with share vestings and option exercises, there was a $0.2 million excess windfall tax benefit realized by the Company in 2019 (2018 – $Nil, 2017 – $Nil). RenaissanceRe issues new shares upon the exercise of an option.
The total stock compensation expense recognized in the Company’s consolidated statements of operations during 2019 was $41.4 million (2018 – $35.7 million, 2017 – $37.2 million). As of December 31, 2019, there was $52.6 million of total unrecognized compensation cost related to restricted stock awards, $5.4 million related to CSRSUs and $7.7 million related to performance share awards, which will be recognized, on a weighted average basis, during the next 1.7, 0.9 and 1.4 years, respectively.
All of the Company’s employees are eligible for defined contribution pension plans. Contributions are primarily based upon a percentage of eligible compensation. The Company contributed $4.9 million to its defined contribution pension plans in 2019 (2018 – $4.1 million, 2017 – $4.4 million).