Share-Based Payments

The Company has issued options and other equity incentives under three arrangements: the employee share incentive plan, the employee share purchase plans and the non-employee director stock incentive plan. When options are exercised or other equity awards (excluding phantom shares) vest, new ordinary shares are issued as the Company does not hold treasury shares. Phantom shares are settled in cash in lieu of ordinary shares upon vesting.


(a)	Employee Equity Incentives

The total number of ordinary shares that may be issued under the Company’s 2013 Share Incentive Plan is 2,845,683 ordinary shares.

Restricted Share Units. Restricted share units (“RSUs”) granted to employees typically vest over a three-year period subject to the employee’s continued service. RSUs granted to employees vest on the anniversary of the date of grant or when the Compensation Committee of the Board of Directors agrees to deliver them. Holders of RSUs will be paid one ordinary share for each RSU that vests as soon as practicable following the vesting date. Holders of RSUs generally will not be entitled to any rights of a holder of ordinary shares, including the right to vote, unless and until their RSUs vest and ordinary shares are issued but they are entitled to receive dividend equivalents. Dividend equivalents are denominated in cash and paid in cash if and when the underlying RSUs vest.

The fair value of the RSUs is based on the closing price on the date of the grant less a deduction for illiquidity and is expensed through the income statement evenly over the vesting period. In the nine months ended September 30, 2018, the Company granted 230,766 RSUs (2017 — 200,021) to its employees. Compensation costs charged against income in respect of RSUs granted to employees for the nine months ended September 30, 2018 were $6.8 million (2017 —$7.2 million). The total tax credit recognized by the Company in relation to RSUs in the nine months ended September 30, 2018 was $1.6 million (2017 — $1.7 million).

Performance Shares. Performance share awards are subject to a three-year service vesting period with a separate annual growth in diluted book value per share (“BVPS”) test for each year, adjusted to add back ordinary shares and movements in AOCI to shareholders’ equity. Accordingly, one-third of the award may be earned in each calendar year. Performance share awards are not entitled to dividends before they vest and are subject to the employee’s continued employment. If performance goals are achieved, the performance shares will vest up to a maximum of 200% of target.

Notwithstanding the vesting criteria for each given year, if in any given year the shares eligible for vesting are greater than 100% or the portion of such year’s grant and the average diluted BVPS growth over such year and the preceding year is less than the average of the minimum vesting thresholds for such year and the preceding year, then only 100% (and no more) of the shares that are eligible for vesting in such year shall vest. Notwithstanding the foregoing, if in the judgment of the Compensation Committee the main reason for the BVPS metric in the earlier year falling below the minimum threshold is due to the impact of rising interest rates and bond yields, then the Compensation Committee may, in its discretion, disapply the limitation on 100% vesting.

During the nine months ended September 30, 2018, the Company granted 215,273 performance shares to its employees (2017 — 216,878). The fair value of performance share awards is based on the value of the closing ordinary share price on the date of the grant less a deduction for illiquidity and expected dividends which would not accrue during the vesting period. Net compensation costs charged against income in the nine months ended September 30, 2018 in respect of performance shares were $0.7 million (2017 — $0.4 million). The total tax recognized by the Company in relation to performance shares in the nine months ended September 30, 2018 was a tax credit of $0.1 million (2017 — $0.1 million credit), excluding excess tax benefits.

Phantom Shares. Phantom share awards are subject to a three-year service vesting period with a separate annual growth in diluted BVPS test for each year, adjusted to add back ordinary shares and movements in AOCI to shareholders’ equity. One-third of the award may be earned in each calendar year with the vested amount being paid in cash in lieu of ordinary shares. As ordinary shares are not issued, phantom shares have no dilutive effect.

During the nine months ended September 30, 2018, the Company granted 150,185 phantom shares to its employees (2017 — 173,619). The fair value of the phantom shares is based on the closing share price on the date of the grant less a deduction for illiquidity. The fair value is expensed through the consolidated income statement evenly over the vesting period. As the payment to beneficiaries will ultimately be in cash rather than ordinary shares, an adjustment is required each quarter to revalue the accumulated liability to the balance sheet date fair value. Compensation costs charged against income in the nine months ended September 30, 2018 in respect of phantom shares were $0.1 million (2017 — $0.7 million). The total tax recognized by the Company in relation to phantom shares in the nine months ended September 30, 2018 was $0.1 million (2017 — $0.2 million), excluding excess tax benefits.


(b)	Employee Share Purchase Plans

Employee Share Purchase Plans. On April 30, 2008, the shareholders of the Company approved the Employee Share Purchase Plan, the 2008 Sharesave Scheme and the International Employee Share Purchase Plan (collectively, the “ESPP”) which are implemented by a series of consecutive offering periods as determined by the Board of Directors. In respect of the ESPP, employees can save up to $500 per month over a two-year period, at the end of which they are eligible to purchase the Company’s ordinary shares at a discounted price. In respect of the 2008 Sharesave Scheme, employees can save up to £500 per month over a three-year period, at the end of which they are eligible to purchase the Company’s ordinary shares at a discounted price. Employees can purchase the Company’s ordinary shares at a discounted price equivalent to eighty-five percent (85%) of the fair market value of the ordinary shares on the offering date which may be adjusted upon changes in capitalization of the Company. Under the Merger Agreement, the Company agreed not to commence any offering period to purchase the Company’s ordinary shares that would begin after the end of any offering period in effect as of the date of the Merger Agreement, not accept payroll deductions to be used to purchase ordinary shares under the ESPP after the end of any offering period in effect as of the date of the Merger Agreement and ensure that no new participants be permitted to participate in the ESPP and that existing participants may not increase their elections with respect to any offering period in effect as of the date of the Merger Agreement.

Under the ESPP, 35,098 ordinary shares were exercised and issued during the nine months ended September 30, 2018 (2017 — 10,545). No ESPP options were granted in 2018. Compensation costs charged against income in the nine months ended September 30, 2018 in respect of the ESPP were $0.1 million (2017 — $0.3 million). The total tax credit recognized by the Company in relation to the ESPP in the nine months ended September 30, 2018 was $Nil (2017 — $Nil).

On April 21, 2016, the shareholders of the Company approved the 2016 Stock Incentive Plan for Non-Employee Directors which provides for the granting of options, restricted share units or other share-based awards. The total number of ordinary shares that may be issued under the 2016 Non-Employee Director Plan is 263,695.

Restricted Share Units. RSUs granted to non-employee directors, including the Chairman, vest one-twelfth on each one month anniversary of the date of grant with 100% of the restricted share units becoming vested and issued on the first anniversary of the grant date or on the date of departure of a director for the amount vested through such date. The shares that are eligible to vest following final vesting date in the calendar year of the date of grant is delivered as soon as practical thereafter and the remaining shares under the RSUs are delivered on the first anniversary of the grant date. If a director leaves the Board of Directors for any reason other than “cause” (as defined in the award agreement), then the director would receive shares under the restricted share units that had vested through the date the director leaves the Board.

RSUs entitle the holder to receive one ordinary share unit for each unit that vests. Holders of RSUs are not entitled to any of the rights of a holder of ordinary shares, including the right to vote, unless and until their units vest and ordinary shares are issued but they are entitled to receive dividend equivalents with respect to their units. Dividend equivalents will be denominated in cash and paid in cash if and when the underlying units vest.

The following table summarizes information about RSUs issued to non-employee directors as at September 30, 2018:



	Restricted Share Units
	As at September 30, 2018	As at September 30, 2017
RSU Holder	Amount Granted	Amount Granted
Non-Employee Directors	29,025	22,230
Chairman	12,900	8,892

Compensation costs charged against income in respect of RSUs granted to non-employee directors for the nine months ended September 30, 2018 were $1.1 million (2017 — $1.1 million). The total tax charge recognized by the Company in relation to non-employee RSUs in the nine months ended September 30, 2018 was $Nil (2017 — $Nil).