Essent Group Ltd.ESNT
Essent Group Ltd. Stock Compensation Disclosure
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
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 the 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 7.5 million under the 2013 Plan. As of December 31, 2025, there were 3.0 million common shares available for future grant under the 2013 Plan.
In each of the years 2021 through 2025, certain members of senior management were granted nonvested common shares and units under the 2013 Plan that were subject to time-based and performance-based vesting. The time-based share awards and units granted vest in equal installments commencing on March 1 of the year following the grant year. The performance-based share awards and units granted 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 of each of the years 2021 through 2025, and vest(ed) on March 1 of each of the years 2024 through 2028, respectively. Shares and units were issued at the maximum 200% of target. The portion of these nonvested performance-based share awards and units that will be earned is as follows:
| Relative Total Shareholder Return vs. S&P 1500 Financial Services Index | ||||||||||||||||||||||||||
2021 Awards | ≤25th percentile | 50th percentile "Target" | ≥75th percentile | |||||||||||||||||||||||
| Three-Year Book Value Per Share CAGR | 14% "Target" | 100% | 150% | 200% | ||||||||||||||||||||||
| 12% | 75% | 125% | 175% | |||||||||||||||||||||||
| 10% | 50% | 100% | 150% | |||||||||||||||||||||||
| 8% | 25% | 75% | 125% | |||||||||||||||||||||||
| 6% | 0% | 50% | 100% | |||||||||||||||||||||||
| Relative Total Shareholder Return vs. S&P 1500 Financial Services Index | ||||||||||||||||||||||||||
2022 Awards | ≤25th percentile | 50th percentile "Target" | ≥75th percentile | |||||||||||||||||||||||
| Three-Year Book Value Per Share CAGR | 13% "Target" | 100% | 150% | 200% | ||||||||||||||||||||||
| 11% | 75% | 125% | 175% | |||||||||||||||||||||||
| 9% | 50% | 100% | 150% | |||||||||||||||||||||||
| 7% | 25% | 75% | 125% | |||||||||||||||||||||||
| 5% | 0% | 50% | 100% | |||||||||||||||||||||||
| Relative Total Shareholder Return vs. S&P 1500 Financial Services Index | ||||||||||||||||||||||||||
2023 Awards | ≤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% | |||||||||||||||||||||||
| Relative Total Shareholder Return vs. S&P 1500 Financial Services Index | ||||||||||||||||||||||||||
2024 Awards | ≤25th percentile | 50th percentile "Target" | ≥75th percentile | |||||||||||||||||||||||
| Three-Year Book Value Per Share CAGR | 12% "Target" | 100% | 150% | 200% | ||||||||||||||||||||||
| 11% | 75% | 125% | 175% | |||||||||||||||||||||||
| 10% | 50% | 100% | 150% | |||||||||||||||||||||||
| 8% | 25% | 75% | 125% | |||||||||||||||||||||||
| 7% | 0% | 50% | 100% | |||||||||||||||||||||||
| Relative Total Shareholder Return vs. S&P 1500 Financial Services Index | ||||||||||||||||||||||||||
2025 Awards | ≤25th percentile | 50th percentile "Target" | ≥75th percentile | |||||||||||||||||||||||
| Three-Year Book Value Per Share CAGR | 11% "Target" | 100% | 150% | 200% | ||||||||||||||||||||||
| 10% | 75% | 125% | 175% | |||||||||||||||||||||||
| 9% | 50% | 100% | 150% | |||||||||||||||||||||||
| 7% | 25% | 75% | 125% | |||||||||||||||||||||||
| 6% | 0% | 50% | 100% | |||||||||||||||||||||||
Certain time-and-performance based share awards and units granted in 2022 and subsequent periods include retirement provisions under which the service requirements are considered satisfied when the employee with a required minimum years of continuous service reaches the eligible retirement age. Under these provisions, stock-based compensation is expensed from the grant date through the date that the employee will satisfy these conditions.
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 for the 2025, 2024, 2023, 2022 or 2021 performance-based share awards, the nonvested common shares earned will be determined on a straight-line basis between the respective levels shown.The 2021 performance based awards vested at 133% relative to target on March 1, 2024 and the 2022 performance based awards vested at 168% relative to target on March 1, 2025.
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 beginning in 2021 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 January 2020, time-based share units were issued to all vice president and staff level employees that vested in equal installments in January 2021, 2022 and 2023. In January 2023, time-based share units were issued to all vice president and staff level employees that vested in equal installments in January 2024, 2025 and 2026. In February 2024, nonvested common share units were issued to certain vice president and staff level employees and are subject to time-based vesting in equal installments in January 2025 and 2026. Also in February 2024, time-based share units were granted to certain vice president and staff level employees that vest in equal installments on March 1, 2027, 2028 and 2029.
In connection with our incentive program covering bonus awards for performance years 2020 through 2024, in February following each performance year, time-based share units were issued to certain employees that vest in equal yearly installments commencing on March 1 of the year following the grant year.
In May of each year, 2022 through 2025, time-based share units were granted to non-employee directors that vest one year from the date of grant.
The following tables summarize nonvested common share, nonvested common share unit and DEU activity for the year ended December 31:
| 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time and Performance- Based Share Awards | Time-Based Share Awards | Time and Performance-Based Share Units | Time-Based 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 | Number of Share Units | Weighted Average Grant Date Fair Value | Dividend Equivalent Units | Weighted Average Grant Date Fair Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Outstanding at beginning of year | 837 | $ | 16.09 | 127 | $ | 48.27 | 67 | $ | 19.15 | 763 | $ | 46.88 | 67 | $ | 51.25 | |||||||||||||||||||||||||||||||||||||||||||||||
| Granted | 236 | 23.00 | 53 | 57.11 | 44 | 23.00 | 140 | 58.24 | 33 | 60.18 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vested | (246) | 14.83 | (67) | 47.13 | (4) | 15.35 | (241) | 45.03 | (29) | 49.21 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Forfeited | (47) | 14.83 | — | — | (4) | 20.38 | (118) | 49.84 | (5) | 51.35 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Outstanding at end of year | 780 | $ | 18.66 | 113 | $ | 53.07 | 103 | $ | 20.92 | 544 | $ | 49.96 | 66 | $ | 56.59 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time and Performance- Based Share Awards | Time-Based Share Awards | Time and Performance-Based Share Units | Time-Based 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 | Number of Share Units | Weighted Average Grant Date Fair Value | Dividend Equivalent Units | Weighted Average Grant Date Fair Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Outstanding at beginning of year | 844 | $ | 14.29 | 149 | $ | 44.40 | 24 | $ | 13.23 | 700 | $ | 42.46 | 57 | $ | 44.00 | |||||||||||||||||||||||||||||||||||||||||||||||
| Granted | 244 | 21.84 | 53 | 53.87 | 43 | 22.46 | 307 | 53.40 | 36 | 57.91 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vested | (167) | 15.64 | (75) | 44.50 | — | — | (209) | 41.50 | (20) | 44.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Forfeited | (84) | 15.64 | — | — | — | — | (35) | 48.20 | (6) | 44.35 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Outstanding at end of year | 837 | $ | 16.09 | 127 | $ | 48.27 | 67 | $ | 19.15 | 763 | $ | 46.88 | 67 | $ | 51.25 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time and Performance- Based Share Awards | Time-Based Share Awards | Time and Performance-Based Share Units | Time-Based 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 | 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 | 5 | $ | 15.35 | 345 | $ | 45.95 | 37 | $ | 40.86 | |||||||||||||||||||||||||||||||||||||||||||||||
| Granted | 300 | 12.66 | 75 | 43.51 | 19 | 12.66 | 548 | 41.78 | 37 | 40.55 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vested | (103) | 51.52 | (64) | 46.65 | — | — | (177) | 47.43 | (16) | 40.38 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Forfeited | — | — | — | — | — | — | (16) | 39.12 | (1) | 42.13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Outstanding at end of year | 844 | $ | 14.29 | 149 | $ | 44.40 | 24 | $ | 13.23 | 700 | $ | 42.46 | 57 | $ | 44.00 | |||||||||||||||||||||||||||||||||||||||||||||||
The total fair value of nonvested shares, share units or DEUs that vested was $33.5 million, $25.4 million and $15.3 million for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, there was $17.0
million of total unrecognized compensation expense related to nonvested shares or share units outstanding at December 31, 2025 and we expect to recognize the expense over a weighted average period of 2.2 years.
In connection with our incentive program covering bonus awards for performance year 2025, in February 2026, $47,082 nonvested common share units were issued to certain employees and are subject to time-based vesting. In February 2026, 263,184 nonvested common shares and 164,068 nonvested common share units were granted to certain members of senior management and are subject to time-based and performance-based vesting.
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 210,596, 163,812 and 119,334 in 2025, 2024 and 2023, respectively. The tendered shares were recorded at cost and included in treasury stock. All treasury stock has been cancelled as of December 31, 2025 and 2024.
Compensation expense, net of forfeitures, and related tax effects recognized in connection with nonvested shares and share units were as follows for the years ended December 31:
| (In thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Compensation expense | $ | 20,847 | $ | 24,778 | $ | 18,446 | ||||||||||||||
| Income tax benefit | 4,079 | 4,948 | 3,660 | |||||||||||||||||
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.