SHARE-BASED COMPENSATION PLANS

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement, Noncash Expense [Abstract]

The Company has a 2020 Stock Incentive Plan (“2020 Employee Plan”), a 2009 Non-Employee Director Stock Option and Restricted Stock Plan (“2009 Director Plan”) and a 2003 Non-Employee Director Equity Compensation Plan (“2003 Director Plan”).

The 2020 Employee Plan was established in June 2020. Under the 2020 Employee Plan, 1,400,000 common shares have been authorized to be granted as non-qualified share options, share appreciation rights, restricted share awards or performance share unit awards to officers and key employees of the Company. At December 31, 2023, there were 783,579 remaining shares available to be granted under the 2020 Employee Plan. Through December 31, 2023, only non-qualified share options, restricted share awards and performance share unit awards had been granted under the employee plans. Under the 2009 Director Plan, 37,439 common shares have been authorized to be granted as share options or restricted share awards to non-employee directors of the Company. At December 31, 2023, there were 34,617 remaining shares available to be granted under the 2009 Director Plan. Under the 2003 Director Plan, 500,000 common shares have been authorized to be granted as share options or share awards to non-employee directors of the Company. At December 31, 2023 there were 271,245 remaining shares available to be granted under the 2003 Director Plan.

Options and restricted shares granted under the 2020 Employee Plan vest at the earliest of 20% per year over five years or in accordance with any applicable employment agreement. Options and restricted shares granted under the 2003 Director Plan generally vest at 33% per year over three years, unless an alternate vesting period is authorized by the Board. Options and restricted shares granted under the 2009 Director Plan will vest as provided in the award agreement. All options are exercisable at fair market value of the stock at the date of grant and expire ten years after the date of grant.

Performance Share Unit awards granted under the 2020 Employee Plan will vest 100% after three years. The Performance Share Unit awards represent the right to receive between 0 and 1.75 shares of stock for each unit awarded depending upon performance in relation to certain metrics. The performance share unit valuation will be based partly on growth in book value per share over the three year vesting period, compared to designated peer companies. The remaining portion of the performance share valuation will be based upon operating return on equity for each of the separate operating years within the vesting period.

For share options, restricted shares and performance share units granted under the 2020 Employee Plan, the 2009 Director Plan and the 2003 Director Plan, share-based compensation expense recognized in the consolidated statements of operations and comprehensive income (loss) was $49 million, $45 million and $43 million for the years ended December 31, 2023, 2022 and 2021, respectively. The corresponding income tax benefit recorded in the consolidated statements of operations and comprehensive income (loss) for share-based compensation was $7 million, $4 million and $8 million for the years ended December 31, 2023, 2022 and 2021, respectively.

For the year ended December 31, 2023, a total of 181,646 restricted shares were granted on February 23, 2023, May 18, 2023, September 8, 2023 and November 8, 2023, with a fair value of $382.385, $372.9050, $369.15 and $383.2200 per share, respectively. Additionally, 14,975 performance share units were awarded on February 23, 2023, with a fair value of $382.3850 per unit. No share options were granted during the year ended December 31, 2023. For share options granted during previous years, the fair value per option was calculated on the date of the grant using the Black-Scholes option valuation model.

The Company recognizes, as an increase to additional paid-in capital, a realized income tax benefit from dividends, charged to retained earnings and paid to employees on equity classified non-vested equity shares. In addition, the amount recognized in additional paid-in capital for the realized income tax benefit from dividends on those awards is included in the pool of excess tax benefits available to absorb tax deficiencies on share-based payment awards. For the years ended December 31, 2023, 2022 and 2021, the Company recognized $0.5 million, $0.6 million and $0.6 million, respectively, of additional paid-in capital due to tax benefits from dividends on restricted shares.

A summary of the option activity under the Company’s shareholder approved plans as of December 31, 2022 and 2021, and changes during the year then ended is presented in the following tables:


(Aggregate Intrinsic Value in millions; Shares in whole amounts)	Shares	Weighted- Average Exercise Price/Share		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Options
Outstanding at January 1, 2022	49,028	$	88.52
Granted	—	—
Exercised	49,028	88.52
Forfeited/Cancelled/Expired	—	—
Outstanding at December 31, 2022	—	—		0	$	—
		.
Exercisable at December 31, 2022	—	—		0	$	—


(Aggregate Intrinsic Value in millions; Shares in whole amounts)	Shares	Weighted- Average Exercise Price/Share		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Options
Outstanding at January 1, 2021	116,871	$	87.87
Granted	—	—
Exercised	67,843	87.39
Forfeited/Cancelled/Expired	—	—
Outstanding at December 31, 2021	49,028	88.52		0.2	$	9
		.
Exercisable at December 31, 2021	49,028	88.52		0.2	$	9

There have been no stock options granted since 2012. As of December 31, 2023, there were no stock options outstanding. Any remaining stock options were exercised in 2022. The aggregate intrinsic value (market price less exercise price) of options exercised during the years ended December 31, 2022 and 2021 was $10 million and $11 million, respectively. The cash received from the exercised share options for the years ended December 31, 2022 and 2021 were $4 million and $6 million, respectively. The tax benefit realized from the options exercised for the years ended December 31, 2022 and 2021 were $2 million and $3 million, respectively.

The following table summarizes the status of the Company’s restricted non-vested shares and changes for the periods indicated:


	Years Ended December 31,
	2023			2022			2021
Restricted (non-vested) Shares	Shares	Weighted- Average Grant Date Fair Value		Shares	Weighted- Average Grant Date Fair Value		Shares	Weighted- Average Grant Date Fair Value
Outstanding at January 1,	479,630	$	268.82	496,094	$	247.76	483,427	$	246.60
Granted	181,646	382.01		203,598	300.38		213,901	243.51
Vested	155,110	261.60		162,579	246.41		158,735	238.67
Forfeited	44,629	297.23		57,483	262.28		42,499	247.02
Outstanding at December 31,	461,537	313.05		479,630	268.82		496,094	247.76

As of December 31, 2023, there was $108 million of total unrecognized compensation cost related to non-vested share-based compensation expense. That cost is expected to be recognized over a weighted-average period of 3.3 years. The total fair value of shares vested during the years ended December 31, 2023, 2022 and 2021, was $41 million, $40 million and $38 million, respectively. The tax benefit realized from the shares vested for the years ended December 31, 2023, 2022 and 2021 were $11 million, $9 million and $8 million, respectively.

In addition to the 2020 Employee Plan, the 2009 Director Plan and the 2003 Director Plan, Group issued 447 common shares in 2023, 774 common shares in 2022 and 506 common shares in 2021 to the Company’s non-employee directors as compensation for their service as directors. These issuances had aggregate values of $0.2 million, $0.2 million and $0.1 million in 2023, 2022 and 2021.

The Company acquired 56,832, 69,833 and 79,308 common shares at a cost of $22 million, $21 million and $18 million in 2023, 2022 and 2021, respectively, from employees who chose to pay required withholding taxes and/or the exercise cost on option exercises or restricted share vestings by withholding shares.

The following table summarized the status of the Company’s non-vested performance share unit awards and changes for the period indicated:


	Years Ended December 31,
	2023			2022			2021
Performance Share Unit Awards	Shares	Weighted- Average Grant Date Fair Value		Shares	Weighted- Average Grant Date Fair Value		Shares	Weighted- Average Grant Date Fair Value
Outstanding at January 1,	54,861	$	—	50,495	$	—	38,891	$	—
Granted	14,975	382.39		18,340	301.54		22,205	242.24
Increase/(Decrease) on vesting units due to performance	-4,063	—		3,028	—		(800)	—
Vested	14,023	340.44		15,919	274.37		9,801	242.24
Forfeited	750	—		1,083	—		0	—
Outstanding at December 31,	51,000	—		54,861	—		50,495	—

The Company acquired 6,117, 6,175 and 3,104 common shares at a cost of $2.1 million, $1.7 million and $0.8 million in 2023, 2022 and 2021, respectively, from employees who chose to pay required withholding taxes on performance shares units settlements by withholding shares.