In May 2007, our shareholders approved the establishment of the AXIS Capital Holdings Limited 2007 Long-Term Equity Compensation Plan (“2007 Plan”). The 2007 Plan provides for, among other things, the grant of restricted stock, restricted stock units, non-qualified and incentive stock options, and other equity-based awards to our employees and directors. The 2007 Plan authorized the issuance of a total of 5,000,000 shares. In May of 2009 and 2012, our shareholders approved amendments to the 2007 Plan to increase the number of common shares authorized for issuance by 4,000,000 and 6,000,000 respectively, to bring the total number of common shares authorized for issuance to 15,000,000. As a result of the adoption of the 2007 Plan, the 2003 Long-Term Equity Compensation and 2003 Directors Long-Term Equity Compensation Plan were terminated, except that all related outstanding awards will remain in effect.

We currently issue restricted stock and restricted stock units to our employees with service conditions, vesting generally over a period of 3 or 4 years. The 3 year awards are subject to cliff vesting at the end of the 3 year period. With the 4 year awards, 25% of the award vests annually. We also grant performance-based stock awards to certain employees in order to promote long-term growth and profitability. Performance-based awards represent the right to receive a specified number of common shares in the future, based upon the achievement of established performance criteria during the applicable performance period. Some awards have a scaled performance metric, but the actual award could be higher or lower than target. At December 31, 2014, we anticipate that the established performance based criterion for these awards are likely to be achieved.

Grants provided under the 2007 Plan generally allow for accelerated vesting provisions upon the employee’s death, permanent disability, or certain terminations following a change in control of the Company occurring within two years of the change in control event. Notwithstanding these vesting provisions, the Compensation Committee of our Board has broad authority to accelerate vesting at its own discretion.

At December 31, 2014, 5,868,286 equity-based awards remained available for grant under the 2007 Plan. Between January 1, 2015 and February 11, 2015, a total of 977,253 service-based restricted stock units and 78,441 performance-based restricted stock units were approved for grant by the board of directors. Included in the total restricted stock awards approved for grant subsequent to December 31, 2014 were 485,784 awards which will be settled in cash upon vesting.

The total fair value of restricted stock and cash settled awards vested during 2014 was $68 million (2013: $70 million; 2012: $43 million). At December 31, 2014, we had unrecognized compensation costs of $112 million (2013: $98 million) which are expected to be recognized over the weighted average period of 2.3 years (2013: 2.4 years).

We have granted stock options under the 2003 Plans; however, none have been issued since 2005. All outstanding stock options are fully vested and exercisable, and expire ten years from the date of the grant. All outstanding options were exercised on or before January 12, 2015.


a)	Restricted Stock

The following table provides a reconciliation of the beginning and ending balance of nonvested restricted stock (including restricted stock units) for the year ended December 31, 2014:




	Performance-based Stock Awards				Service-based Stock Awards
	Number of Restricted Stock		Weighted Average Grant Date Fair Value		Number of Restricted Stock		Weighted Average Grant Date Fair Value

Nonvested restricted stock - beginning of year	283		$	35.74	3,430		$	34.72
Granted	68		44.33		1,053		44.47
Vested	—		—		(1,474	)	33.83
Forfeited	(4	)	44.33		(241	)	36.96
Nonvested restricted stock - end of year	347		$	37.34	2,768		$	38.70

(1) Fair value is based on the closing price of our common shares on the New York Stock Exchange on the day of the grant.

During 2014, we granted 1,121,066 restricted stock awards (2013: 1,007,425; 2012: 2,447,700) to our employees with a weighted average grant-date fair value per share of $44.46 (2013: $39.52; 2012: $32.20).

During 2014, we incurred a compensation cost of $73 million (2013: $57 million; 2012: $68 million) in respect of all restricted stock, restricted stock units, and cash awards, and recorded tax benefits thereon of $14 million (2013: $10 million; 2012: $8 million). Compensation costs incurred in 2012 includes $20 million of accelerated and incremental expenses associated with the transition in our senior leadership. The retirement of one senior leader resulted in the modification of that leader's outstanding restricted stock awards to eliminate the previously existing service condition. The unanticipated termination without cause of another senior officer lead to the early satisfaction of employment obligations and resulted in the service condition associated with that officer's outstanding restricted stock awards being fully satisfied.


b)	Cash-settled Awards

During 2014, we also granted 1,018,083 restricted stock units that will settle in cash rather than shares when the awards ultimately vest (2013: 847,425). At December 31, 2014, the compensation expense recorded in the income statement, and corresponding liability for cash-settled awards, included in other liabilities on the Consolidated Balance Sheets, was $21 million (2013: $9 million).


c)	Stock options

The following is a summary of stock options outstanding and exercisable at December 31, 2014 and related activity for the year ended:




	Number of Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value⁽¹⁾

Outstanding and exercisable - beginning of year	213		$	27.98
Granted	—		—
Exercised	(193	)	27.97
Expired	—		—
Outstanding and exercisable - end of year	20		$	28.02	0.0	$	461


(1)	The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between our closing stock price at December 31, 2014 and the exercisable price, multiplied by the number of in-the-money-options) that would have been received by the stock option holder had all stock option holders exercised their stock options on December 31, 2014.

The total intrinsic value of stock options exercised during 2014 was $4 million (2013: $10 million) and we received proceeds of $5 million (2013: $17 million). For these exercised stock options, we issued new shares from the authorized share capital pool rather than from our treasury pool.