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Stock-Based Compensation | 9 Months Ended
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Sep. 30, 2023
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation In 2013, Essent Group's Board of Directors adopted, and Essent Group's shareholders approved, the Essent Group Ltd. 2013 Long-Term Incentive Plan (the "2013 Plan"), which was effective upon completion of the initial public offering. The 2013 Plan was most recently amended effective upon shareholder approval in May 2023 to increase the number of shares available for issuance under the 2013 Plan by 2 million shares. The types of awards available under the 2013 Plan include nonvested shares, nonvested share units, non-qualified share options, incentive stock options, share appreciation rights, and other share-based or cash-based awards. Nonvested shares and nonvested share units granted under the 2013 Plan have rights to dividends, which entitle holders to the same dividend value per share as holders of common shares in the form of dividend equivalent units ("DEUs"). DEUs are subject to the same vesting and other terms and conditions as the corresponding nonvested shares and nonvested share units. DEUs vest when the underlying shares or share units vest and are forfeited if the underlying share or share units forfeit prior to vesting. The maximum number of shares and share units available for issuance is 5.6 million under the 2013 Plan, as amended. As of September 30, 2023, there were 3.8 million common shares available for future grant under the 2013 Plan. The following table summarizes nonvested common share, nonvested common share unit and DEU activity for the nine months ended September 30, 2023:
|  | Time and Performance- Based Share Awards |  | Time-Based Share Awards |  | Share Units |  | DEUs
(Shares in thousands) |  | Number of Shares |  | Weighted Average Grant Date Fair Value |  | Number of Shares |  | Weighted Average Grant Date Fair Value |  | Number of Share Units |  | Weighted Average Grant Date Fair Value |  | Dividend Equivalent Units |  | Weighted Average Grant Date Fair Value
Outstanding at beginning of year |  | 647 |  |  | $ | 20.99 |  |  | 138 |  |  | $ | 45.94 |  |  | 350 |  |  | $ | 45.51 |  |  | 37 |  |  | $ | 40.86 |
Granted |  | 300 |  |  | 12.66 |  |  | 75 |  |  | 43.51 |  |  | 561 |  |  | 40.74 |  |  | 29 |  |  | 44.18 |
Vested |  | (103) |  |  | 51.52 |  |  | (64) |  |  | 46.65 |  |  | (162) |  |  | 47.83 |  |  | (15) |  |  | 40.29 |
Forfeited |  | — |  |  | — |  |  | — |  |  | — |  |  | (15) |  |  | 39.19 |  |  | — |  |  | 41.30 |
Outstanding at September 30, 2023 |  | 844 |  |  | $ | 14.29 |  |  | 149 |  |  | $ | 44.40 |  |  | 734 |  |  | $ | 41.47 |  |  | 51 |  |  | $ | 42.92 |
In February 2023, certain members of senior management were granted nonvested common shares under the 2013 Plan that were subject to time-based and performance-based vesting. The time-based share awards granted in February 2023 vest in three equal installments commencing on March 1 of the year following the grant year. The performance-based share awards granted in February 2023 vest based upon our compounded annual book value per share growth percentage and relative total shareholder return during a three-year performance period that commenced on January 1, 2023 and vest on March 1, 2026. Shares were issued at the maximum 200% of target. The portion of these nonvested performance-based share awards that will be earned is as follows:
|  |  |  | Relative Total Shareholder Return vs. S&P 1500 Financial Services Index
|  |  |  | ≤25th percentile |  | 50th percentile "Target" |  | ≥75th percentile
Three-Year Book Value Per Share CAGR |  | 10% "Target" |  | 100 | % |  | 150 | % |  | 200 | %
| 9% |  | 75 | % |  | 125 | % |  | 175 | %
| 8% |  | 50 | % |  | 100 | % |  | 150 | %
| 6% |  | 25 | % |  | 75 | % |  | 125 | %
| 5% |  | 0 | % |  | 50 | % |  | 100 | %
In the event that the compounded annual book value per share growth or the relative total shareholder return falls between the performance levels shown above, the nonvested common shares earned will be determined on a straight-line basis between the respective levels shown. In January 2023, nonvested common share units were issued to all vice president and staff level employees and are subject to time-based vesting in three equal installments on January 6, 2024, 2025 and 2026. In connection with our incentive program covering bonus awards for performance year 2022, in February 2023, time-based share units were issued to certain employees that vest in three equal installments on March 1, 2024, 2025 and 2026. In August 2023, time-based share units were granted to certain members of senior management that vest in three equal installments on October 1, 2026, 2027 and 2028. Quoted market prices are used for the valuation of common shares granted that do not contain a market condition under ASC 718. The performance-based share awards granted in February 2021, 2022 and 2023 contain a market condition and were valued based on analysis provided by a third-party valuation firm using a risk neutral simulation taking into effect the vesting conditions of the grant. In February 2021, the performance-based share awards granted in 2019 and 2020 to certain members of senior management were amended to provide that such awards will no longer be subject to the achievement of the compounded annual book value per share growth metrics and will be subject to only service-based vesting. As a result, the shares subject to the amended 2019 and 2020 awards vested on March 1, 2022 and March 1, 2023, respectively. The total fair value on the vesting date of nonvested shares, share units or DEUs that vested was $14.6 million and $17.3 million for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, there was $31.2 million of total unrecognized compensation expense related to nonvested shares or share units outstanding at September 30, 2023 and we expect to recognize the expense over a weighted average period of 2.6 years. Employees have the option to tender shares to Essent Group to pay the minimum employee statutory withholding taxes associated with shares upon vesting. Common shares tendered by employees to pay employee withholding taxes totaled 114,471 in the nine months ended September 30, 2023. The tendered shares were recorded at cost and included in treasury stock. All treasury stock has been cancelled as of September 30, 2023. Compensation expense, net of forfeitures, and related tax effects recognized in connection with nonvested shares was as follows:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Compensation expense |  | $ | 4,479 |  |  | $ | 4,702 |  |  | $ | 13,939 |  |  | $ | 13,707 |
Income tax benefit |  | 888 |  |  | 930 |  |  | 2,767 |  |  | 2,715 |

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