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Share-Based Compensation Plans

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

19.

Share-Based Compensation Plans

The fair value method of accounting recognizes share-based compensation to employees and non-employee directors in the consolidated statements of operations using the grant-date fair value of the stock options and other equity-based compensation expensed over the requisite service and vesting period.

For the purpose of determining the fair value of stock option awards, the Company uses the Black-Scholes option-pricing model. The Company elected a policy to accrue for compensation cost based on the number of awards that are expected to vest. An estimation of forfeitures is required when recognizing compensation expense which is then adjusted over the requisite service period should actual forfeitures differ from such estimates. Changes in estimated forfeitures are recognized through a cumulative adjustment to compensation in the period of change.

Excess tax benefits and tax deficiencies associated with share-based payment awards are required to be recognized as an income tax benefit or expense in net income (loss) with the corresponding cash flows recognized as an operating activity in the Consolidated Statement of Cash Flow.

In connection with the Redomestication, the 2018 Share Incentive Plan was amended and restated to reflect Global Indemnity Group, LLC’s assumption of the sponsorship of the plan and other changes deemed necessary and appropriate to reflect the completion of the Redomestication.

Options

Award activity for stock options granted under the Plan and the weighted average exercise price per share are summarized as follows:


	Time-Based Options			Performance- Based Options			Total Options			Weighted Average Exercise Price Per Share
Options outstanding at January 1, 2020		600,000			200,000			800,000		$	35.06
Options issued		300,000			—			300,000			52.79
Options forfeited		—			(100,000	)		(100,000	)		38.43
Options exercised		—			—			—			—
Options expired		—			—			—			—
Options purchased by the Company		—			—			—			—
Options outstanding at December 31, 2020		900,000			100,000			1,000,000			40.04
Options issued		—			140,000			140,000			28.70
Options forfeited		(300,000	)		(146,667	)		(446,667	)		47.06
Options exercised		—			—			—			—
Options expired		—			—			—			—
Options purchased by the Company		—			—			—			—
Options outstanding at December 31, 2021		600,000			93,333			693,333			33.23
Options issued		200,000			—			200,000			20.77
Options forfeited		—			(46,666	)		(46,666	)		28.70
Options exercised		—			—			—			—
Options expired		—			—			—			—
Options purchased by the Company		—			—			—			—
Options outstanding at December 31, 2022		800,000			46,667			846,667		$	30.54
Options exercisable at December 31, 2022		50,000			—			50,000		$	20.77

The Company awarded 200,000 time-based options with an average strike price of $20.77 during the year ended December 31, 2022. None of these options were forfeited during the year ended December 31, 2022. See note below under Chief Executive Officer for additional information. The Company awarded 140,000 performance-based options with an average strike price of $28.70 during the year ended December 31, 2021. Of these options, 46,666 options and 46,667 options were forfeited during the years ended December 31, 2022 and 2021, respectively. The Company awarded 300,000 time-based options with an average strike price of $52.79 during the year ended December 31, 2020. These options were forfeited during the year ended December 31, 2021.

The Company recorded $0.3 million, ($1.1) million, and $1.6 million of compensation expense for stock options under the Plan during the years ended December 31, 2022, 2021, and 2020, respectively.

The Company did not receive any proceeds from the exercise of options during 2022, 2021 or 2020 under the Plan.

Compensation expense related to options outstanding under the Plan is anticipated to be $0.6 million in 2023.

Option intrinsic values, which are the differences between the fair value of $23.31 at December 31, 2022 and the weighted average strike price of the option, are as follows:


	Number of Shares		Weighted Average Strike Price		Intrinsic Value
Outstanding		846,667		30.54	$2.1 Million
Exercisable		50,000		20.77	$0.1 Million
Exercised (1)		—		—		—

(1)

The intrinsic value of the exercised options is the difference between the fair market value at time of exercise and the strike price of the option.

The weighted average fair value of options granted under the Plan was $2.98 in 2022, $6.95 in 2021 and $1.92 in 2020 using a Black-Scholes option-pricing model and the following weighted average assumptions.


	2022	2021	2020
Dividend yield	2.0%	2.0%	2.0%
Expected volatility	22.56%	38.64%	38.32%
Risk-free interest rate	4.49%	0.2%	0.4%
Expected option life	2.0 years	3.5 years	3.5 years

The following tables summarize the range of exercise prices of options outstanding at December 31, 2022, 2021, and 2020:


Ranges of Exercise Prices	Outstanding at December 31, 2022		Weighted Average Per Share Exercise Price		Weighted Average Remaining Life
$15.00 - $19.99		300,000	$	17.87	0.0 years
$20.00 - $24.99		200,000	$	20.77	6.8 years
$25.00 - $39.99		46,667	$	28.70	8.1 years
$50.00 - $59.99		300,000	$	50.00	5.0 years
Total		846,667


Ranges of Exercise Prices	Outstanding at December 31, 2021		Weighted Average Per Share Exercise Price		Weighted Average Remaining Life
$15.00 - $19.99		300,000	$	17.87	0.0 years
$25.00 - $39.99		93,333	$	28.70	9.0 years
$50.00 - $59.99		300,000	$	50.00	6.0 years
Total		693,333


Ranges of Exercise Prices	Outstanding at December 31, 2020		Weighted Average Per Share Exercise Price		Weighted Average Remaining Life
$15.00 — $19.99		300,000	$	17.87	0.7 years
$25.00 — $39.99		100,000	$	38.43	4.0 years
$50.00 — $59.99		600,000	$	51.40	8.5 years
Total		1,000,000

Restricted Shares / Restricted Stock Units

In addition to stock option grants, the Plan also provides for the granting of restricted shares and restricted stock units to employees and non-employee Directors. The Company recognized compensation expense for restricted stock of $2.0 million, $2.5 million, and $3.2 million for 2022, 2021, and 2020, respectively. There is no unrecognized compensation expense for the non-vested restricted stock at December 31, 2022. The Company recognized compensation expense for restricted stock units of $1.5 million, $0.9 million, and $3.2 million for 2022, 2021 and 2020, respectively. The total unrecognized compensation expense for the non-vested restricted stock units is $0.7 million at December 31, 2022, which will be recognized over a weighted average life of 1.2 years.

The following table summarizes the restricted stock grants since the 2003 inception of the original share incentive plan:


	Restricted Stock Awards
Year	Employees		Directors		Total
Inception through 2019		1,171,576		639,080		1,810,656
2020		—		108,521		108,521
2021		—		83,199		83,199
2022		—		97,260		97,260
		1,171,576		928,060		2,099,636

The following table summarizes the non-vested restricted shares activity for the years ended December 31, 2022, 2021, and 2020:


	Number of Shares			Weighted Average Price Per Share
Non-vested Restricted Shares at January 1, 2020		62,240			37.00
Shares issued		108,521			24.86
Shares vested		(128,623	)		26.84
Shares forfeited		(6,735	)		27.74
Non-vested Restricted Shares at December 31, 2020		35,403			38.45
Shares issued		83,199			27.24
Shares vested		(101,048	)		29.59
Shares forfeited		(2,915	)		36.58
Non-vested Restricted Shares at December 31, 2021		14,639			36.23
Shares issued		97,260			25.08
Shares vested		(100,975	)		25.49
Shares forfeited		(10,924	)		36.23
Non-vested Restricted Shares at December 31, 2022		—		$	—

The following table summarizes the restricted stock unit grants since the 2003 inception of the original share incentive plan:


	Restricted Stock Unit Awards
Year	Employees		Directors		Total
Inception through 2019		175,498		—		175,498
2020		161,238		41,667		202,905
2021		—		—		—
2022		—		—		—
		336,736		41,667		378,403

The following table summarizes the non-vested restricted stock units activity for the years ended December 31, 2022, 2021, and 2020:


	Number of Restricted Stock Units			Weighted Average Price Per Restricted Stock Unit
Non-vested Restricted Stock Units at January 1, 2020		175,498		$	30.18
Restricted Stock Units issued		202,905			29.02
Restricted Stock Units vested		(41,667	)		24.00
Restricted Stock Units forfeited		(21,710	)		30.06
Non-vested Restricted Stock Units at December 31, 2020		315,026		$	30.26
Restricted Stock Units issued		—			—
Restricted Stock Units vested		(44,245	)		30.08
Restricted Stock Units forfeited		(43,425	)		30.06
Non-vested Restricted Stock Units at December 31, 2021		227,356		$	30.33
Restricted Stock Units issued		—			—
Restricted Stock Units vested		(47,633	)		30.35
Restricted Stock Units forfeited		(51,885	)		29.82
Non-vested Restricted Stock Units at December 31, 2022		127,838		$	30.53

Upon vesting, the restricted stock units are converted to restricted class A common shares. Based on the terms of the restricted share and restricted stock unit grants, all forfeited shares revert back to the Company.

During 2020, the Company granted 202,905 restricted stock units comprised of grants of 161,238 restricted stock units to key employees with a weighted average grant date value of $30.32 per share and a grant of 41,667 restricted stock units to a non-employee director with a weighted average grant date fair value of $24.00 per share.

Of the 161,238 restricted stock units, 3,375 of these restricted stock units vest evenly over three years on January 1, 2021, January 1, 2022 and January 1, 2023.

66,957 of these restricted stock units vest as follows:

•

10.0% vested on June 18, 2021, 20% vested on June 18, 2022, and 30.0% and 40.0% of the restricted stock units will vest on June 18, 2023 and June 18, 2024, respectively.

The remaining 90,906 restricted stock units vest as follows:

•

16.5% vested on January 1, 2021, 16.5% vested on January 1, 2022, and 17.0% of the restricted stock units will vest on January 1, 2023.

•

Subject to Board approval, 50% of restricted stock units will vest 100%, no later than March 15, 2023, following a re-measurement of 2019 results as of December 31, 2022.

The Company did not grant any restricted class A common shares during 2020.

During 2022, 2021, and 2020, the Company granted 97,260, 83,199, and 108,521 class A common shares, respectively, at a weighted average grant date value of $25.08, $27.24, and $24.86 per share, respectively, to non-employee directors of the Company under the Plan. Of these shares granted during 2022, 2021, and 2020, 32,540 shares, 20,392 shares, and 30,172 shares, respectively, are deferred until January 1, 2024 or a change of control, whichever is earlier. The remaining shares granted to non-employee directors of the Company in 2022, 2021, and 2020 were fully vested but subject to certain restrictions.

There was no restricted class A common shares or restricted stock units granted to key employees during the years ended December 31, 2022 or 2021.

Book Value Appreciation Rights (“BVAR”)

In 2021, the Company granted 2,500,000 Penn-Patriot BVARs with an aggregate initial notional value equal to approximately 5% of Penn-Patriot’s book value, which entitled the holder to a payment based on the value of the per-BVAR appreciation in Penn-Patriot’s book value over the initial notional value. These BVARs were forfeited in 2022.

In 2021, the Company also granted 400,000 Penn-Patriot BVARS with an aggregate initial notional value equal to approximately 0.8% of Penn-Patriot’s book value, which entitled the holder to a payment based on the value of the per-BVAR appreciation in Penn-Patriot’s book value over the initial notional value. These BVARs were forfeited in 2022.

There were no BVARs granted during the years ended December 31, 2022 and 2020.

The Company recorded $2.3 million in compensation expense during the year ended December 31, 2021. This expense was reversed in 2022 when the BVARs were forfeited. There was no compensation expense related to BVARs during the year ended 2020. There were no accrued expenses related to BVARs as of December 31, 2022. Accrued expenses related to BVARs was $2.3 million as of December 31, 2021.

Book Value Rights ("BVR")

In 2022, the Company granted 179,096 Penn-Patriot Book Value Rights. Of these BVR, 69,034 BVR have a three year cliff vesting period. 34,463 BVR will vest on December 31, 2024. 20,855 BVR will vest 50% on April 18, 2025 and 50% on April 18, 2027. The remaining 54,745 BVR will vest as follows:

•

16.5% will vest on January 1, 2023, 16.5% will vest on January 1, 2024, and 17.0% of the book value rights will vest on January 1, 2025.

•

Subject to Board approval, 50% of the book value rights will vest 100%, no later than March 15, 2026, following a re-measurement of 2022 results as of December 31, 2025.

In 2021, the Company granted 131,438 Penn-Patriot Book Value Rights. Of these BVR, 97,432 BVR have a three year cliff vesting period. Of the remaining 34,006 BVR, 50% vested on October 26, 2022 and 50% will vest upon Penn-Patriot’s Affiliates reduction of the Total Insured Value of a specified book of premium by 95% which is estimated to occur on approximately October 26, 2023.

There were no book value rights issued during the year ended December 31, 2020.

All of the book value rights are payable in either cash or Global Indemnity Group, LLC's class A common shares at the discretion of Global Indemnity Group, LLC's Board of Directors.

The following table summarizes the non-vested book value rights activity for the years ended December 31, 2022, 2021, and 2020:


	Number of Shares
Non-vested Book Value Rights at January 1, 2020 and 2021		—
BVR issued		131,438
BVR vested		—
BVR forfeited		(5,000	)
Non-vested Book Value Rights at December 31, 2021		126,438
BVR issued		179,096
BVR vested		(17,006	)
BVR forfeited		(59,505	)
Non-vested Book Value Rights at December 31, 2022		229,023

The Company recorded $0.8 million and $0.1 million in compensation expense during the years ended December 31, 2022 and 2021, respectively, and had $0.7 million and $0.1 million accrued as of December 31, 2022 and 2021, respectively, related to the book value rights. There was no compensation expense related to book value rights during the year ended December 31, 2020.

Chief Executive Officer

Effective October 21, 2022, Global Indemnity Group, LLC's Board of Directors appointed Joseph W. Brown as its Chief Executive Officer ("CEO"). The CEO Agreement provides for a grant of 200,000 stock options to acquire GBLI class A common shares with an exercise price equal to the closing price of GBLI’s class A common shares on the date of the grant. The options vest in four equal tranches as follows: 25% on each of November 1, 2022, February 1, 2023, May 1, 2023 and August 1, 2023 (subject to Mr. Brown remaining employed with the Company through each vesting date), and to the extent vested, are exercisable within 7 years of the grant notwithstanding any earlier termination of employment. The stock options are subject to the terms and conditions for stock options as reflected in the Company’s 2018 Share Incentive Plan and written option agreement.

The CEO Agreement provides that GBLI may terminate Mr. Brown’s employment at any time for any reason. If Mr. Brown is terminated without “cause” prior to August 1, 2023, the stock option will accelerate and fully vest.