STOCK INCENTIVE COMPENSATION AND EMPLOYEE BENEFIT PLANS

2001 Stock Incentive Plan and Non-Employee Director Stock Incentive Plan

The Company’s 2001 Stock Incentive Plan, as amended (the “2001 Stock Incentive Plan”), which expired on February 6, 2016, had 5,400,000 shares reserved for issuance and permitted the grant of stock options, restricted stock awards and other share-based awards to employees of RenaissanceRe and its subsidiaries. The Company has also established a Non-Employee Director Stock Incentive Plan under which 1,050,000 shares were reserved for issuance. Pursuant to the Non-Employee Director Stock Incentive Plan, the Company may issue stock options and restricted stock awards to RenaissanceRe’s non-employee directors. Stock options granted pursuant to the 2001 Stock Incentive Plan and Non-Employee Director Stock Incentive Plan allow for the purchase of RenaissanceRe common shares at a price that is equal to, or not less than, the fair market value of RenaissanceRe common shares as of the effective grant date. Stock options granted periodically by the Board of Directors, generally vested over four years and expire 10 years from the date of grant. We have not granted stock options since 2008. Restricted stock awards granted periodically by the Board of Directors under the 2001 Stock Incentive Plan generally vest ratably over a four year period. Restricted stock awards granted under the Non-Employee Director Stock Incentive Plan generally vest ratably over a three year period. For purposes of determining the number of shares reserved for issuance under the 2001 Stock Incentive Plan, shares tendered to or withheld by the Company in connection with certain option exercises were again available for issuance.

Premium Option Plan

RenaissanceRe’s 2004 Stock Option Incentive Plan (the “Premium Option Plan”), under which 6,000,000 common shares were reserved for issuance, was terminated on August 15, 2007 with respect to future option grants. Options outstanding at the time of the termination remained outstanding and unmodified until they expired. The Premium Option Plan expired on May 20, 2014 and at December 31, 2014 and 2015, there were no options outstanding under the Premium Option Plan.

2010 Cash Settled Restricted Stock Unit Plan

In 2010, the Company instituted a cash settled restricted stock unit plan (the “2010 Cash Settled Restricted Stock Unit Plan”). The 2010 Cash Settled Restricted Stock Unit Plan allows for the issuance of equity awards in the form of CSRSUs which vest ratably over four years. CSRSUs are liability awards with fair value measurement based on the fair market value of RenaissanceRe common shares at the end of each reporting period. CSRSUs are granted periodically by the Board of Directors.

2010 Performance-Based Equity Incentive Plan

In May 2010, RenaissanceRe’s shareholders approved the 2010 Performance-Based Equity Incentive Plan (“2010 Performance Plan”) under which 750,000 shares have been reserved (the “Performance Shares”). Performance Share awards have been made periodically to certain of the Company’s executive officers pursuant to the 2010 Performance Plan. These 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 Shares will vest up to a maximum of 250% of target. Grants under this plan 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 Shares have a market condition which is the Company’s total shareholder return relative to its peer group. Total shareholder return is based on the average closing share price over the 20 trading days preceding and including the start and end of the annual performance period.

In 2012 and 2013, the Chief Executive Officer received certain special equity awards relating to promotions. The special equity awards were issued in the form of restricted stock awards and Performance Shares. The conditions attached to these awards are identical to the conditions under the 2001 Stock Incentive Plan and the 2010 Performance Plan except that the awards vest over a period of four years.

Valuation Assumptions

Performance Shares

The fair value of the Performance Shares is measured on the date of grant using a Monte Carlo simulation model which requires certain of the same inputs underlying the Black-Scholes methodology, that being: 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 Shares issued in each respective year.




	Performance Shares
Year ended December 31,	2015	2014
Expected volatility (1)	14.3% - 14.4%	14.5% - 18.6%
Expected term (in years)	n/a	n/a
Expected dividend yield	n/a	n/a
Risk-free interest rate (1)	0.07% - 1.02%	0.08% - 1.65%


(1)	The expected volatility and risk-free interest rate applied are specific to each tranche of Performance Shares.

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 Shares has a one year period during which performance is measured.

Expected dividend yield: The expected dividend yield is not applicable to Performance Shares 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 Shares.

The total cost of the Performance Shares 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 multiplied by the target number of Performance Shares on the grant date. The cost is then amortized as an expense over the requisite service period net of estimated service-based forfeitures. When estimating forfeitures, the Company considers its historical forfeitures as well as expectations about employee behavior. For 2015, the Company used a 0% forfeiture rate for performance shares (2014 - 0%).

Restricted Stock Awards

The fair value of restricted stock awards is determined based on the fair market value of RenaissanceRe common shares on the grant date. The estimated fair value of restricted stock awards, net of estimated forfeitures, is amortized as an expense over the requisite service period net of estimated service-based forfeitures. When estimating forfeitures, the Company considers its historical forfeitures as well as expectations about employee behavior. For 2015, the Company used a 0% forfeiture rate for restricted stock awards (2014 - 2%).

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, net of estimated forfeitures. When estimating forfeitures, the Company considers its historical forfeitures as well as expectations about employee behavior. For 2015, the Company used a 13% forfeiture rate for its CSRSUs (2014 - 11%).

Summary of Stock Compensation Activity

The following is a summary of activity under the Company’s existing stock compensation plans.

2001 Stock Incentive and Non-Employee Director Stock Incentive Plans




	Weighted options outstanding		Weighted average exercise price		Weighted average remaining contractual life	Aggregate intrinsic value		Range of exercise prices
Balance, December 31, 2012	1,732,639		$	47.61	3.7	$	58,305	$37.51 - $59.66
Options granted	—		—					—
Options forfeited	—		—
Options expired	—		—
Options exercised	(904,547	)	46.55			$	36,800
Balance, December 31, 2013	828,092		$	48.77	2.9	$	40,221	$37.51 - $59.66
Options granted	—		—					—
Options forfeited	—		—
Options expired	—		—
Options exercised	(60,262	)	49.52			$	2,900
Balance, December 31, 2014	767,830		$	48.71	2.0	$	37,246	$37.51 - $59.66
Options granted	—		—					—
Options forfeited	—		—
Options expired	—		—
Options exercised	(359,618	)	$	45.09		$	21,205
Balance, December 31, 2015	408,212		$	51.90	1.6	$	25,020	$42.66 - $59.66
Total options exercisable at December 31, 2015	408,212		$	51.90	1.6	$	25,020	$42.66 - $59.66

Premium Option Plan




	Weighted options outstanding		Weighted average exercise price		Weighted average remaining contractual life	Aggregate intrinsic value		Range of exercise prices
Balance, December 31, 2012	842,000		$	73.82		$	6,265	$73.06 - $74.24
Options granted	—		—
Options forfeited	—		—
Options expired	—		—
Options exercised	(270,000	)	74.24			4,921
Balance, December 31, 2013	572,000		$	73.62		$	13,567	$73.06 - $74.24
Options granted	—		—
Options forfeited	—		—
Options expired	—		—
Options exercised	(572,000	)	73.62			13,414
Balance, December 31, 2014	—		$	—		$	—	$	—
Options granted	—		—
Options forfeited	—		—
Options expired	—		—
Options exercised	—		—			—
Balance, December 31, 2015	—		$	—	0.0	$	—	$	—
Total options exercisable at December 31, 2015	—		$	—	0.0	$	—	$	—

2010 Cash Settled Restricted Stock Unit Plan and 2010 Performance-Based Equity Incentive Plan




	Cash Settled Restricted Stock Units		Performance Shares (1)
	Number of shares		Number of shares		Weighted average grant-date fair value
Nonvested at December 31, 2012	493,556		359,520		$	29.46
Awards granted	149,760		134,358		$	33.46
Awards vested	(176,265	)	(24,606	)
Awards forfeited	(72,906	)	(109,729	)
Nonvested at December 31, 2013	394,145		359,543		$	30.55
Awards granted	119,382		102,668		$	46.45
Awards vested	(159,094	)	—
Awards forfeited	(16,110	)	(213,639	)
Nonvested at December 31, 2014	338,323		248,572		$	39.62
Awards granted	160,817		103,024		$	44.98
Awards vested	(144,440	)	—
Awards forfeited	(28,622	)	(121,325	)
Nonvested at December 31, 2015	326,078		230,271		$	41.40

(1) For Performance Shares, 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, 2012	646,748		$	61.63	35,923		$	66.83	682,671		$	61.90
Awards granted	241,071		87.85		17,162		87.40		258,233		87.82
Awards vested	(311,334	)	55.63		(21,599	)	66.06		(332,933	)	56.31
Awards forfeited	(6,993	)	58.14		—		—		(6,993	)	58.14
Nonvested at December 31, 2013	569,492		$	76.11	31,486		$	78.57	600,978		$	76.24
Awards granted	215,054		95.79		14,455		95.06		229,509		95.74
Awards vested	(332,725	)	73.74		(15,886	)	74.96		(348,611	)	73.79
Awards forfeited	(99	)	55.80		—		—		(99	)	55.80
Nonvested at December 31, 2014	451,722		$	87.29	30,055		$	88.41	481,777		$	87.36
Awards granted	195,337		102.17		14,575		102.90		209,912		102.22
Awards vested	(168,019	)	82.75		(17,744	)	86.37		(185,763	)	83.10
Awards forfeited	—		—		—		—		—		—
Nonvested at December 31, 2015	479,040		$	94.95	26,886		$	97.61	505,926		$	95.09

Shares available for issuance under the Company’s 2001 Stock Incentive Plan, Non-Employee Director Stock Incentive Plan and 2010 Performance Share Plan totaled 3.0 million in the aggregate at December 31, 2015. The total fair value of shares and share units vested during 2015 was $34.0 million (2014 – $48.7 million, 2013 – $47.0 million). Cash in the amount of $0.1 million was received from employees as a result of employee stock option exercises during 2015 (2014 – $0.5 million, 2013 – $1.6 million). In connection with share vestings and option exercises, there was no excess windfall tax benefit realized by the Company due to its net operating loss position in the taxable jurisdictions in which it operates. 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 2015 was $38.3 million (2014 – $37.6 million, 2013 – $43.4 million). As of December 31, 2015, there was $34.2 million of total unrecognized compensation cost related to restricted stock awards, $24.6 million related to CSRSUs and $5.0 million related to performance shares, which will be recognized, on a weighted average basis, during the next 1.7, 1.7 and 1.7 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 $4.3 million to its defined contribution pension plans in 2015 (2014 – $3.6 million, 2013 – $3.5 million).