Share Compensation and Pension Plans

The Company’s Amended and Restated 2007 Share Incentive Plan (the "Plan"), provides for grants of options, restricted common shares and restricted share units. The total number of common shares currently reserved for issuance under the Plan is 10,000,000. The Plan is administered by the Compensation Committee of the Board of Directors (the "Committee").

Share Options

Exercise prices of options are established at or above the fair market value of the Company’s common shares at the date of grant. Under the Plan, unless otherwise determined by the Committee and provided in an award agreement, 25% of the options will become exercisable on the first anniversary of the grant date, with an additional 6.25% of the options vesting each quarter thereafter based on the grantee’s continued employment over a four-year period, and will expire ten years after grant date.

The fair value of each option grant is separately estimated for each vesting date. The fair value of each option is amortized into compensation expense on a straight-line basis between the grant date for the award and each vesting date. The Company has estimated the fair value of all share option awards on the date of the grant by applying the Black-Scholes-Merton multiple-option pricing valuation model. The application of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense.

14. Share Compensation and Pension Plans (continued)

The key assumptions used in determining the fair value of options granted in 2014, 2013 and 2012 and a summary of the methodology applied to develop each assumption were as follows:



	2014		2013		2012
Assumptions:
Volatility	51.4	%	45.30 – 51.40	%	45.30 – 47.60	%
Risk-free interest rate	1.77	%	0.85 – 1.77	%	0.85 – 1.29	%
Weighted average expected lives in years	6.1 years		6.1 years		6.1 years
Forfeiture rate	3.45	%	1.60 – 3.45	%	1.60	%
Dividend yield rate	3.46	%	3.46 – 3.55	%	3.04 – 3.55	%

Expected Price Volatility — This is a measure of the amount by which a price has fluctuated or is expected to fluctuate. Maiden began trading on May 6, 2008, thus, has a maximum of 6.6 years trading history for estimating historical volatility. Maiden's expected volatility for 2014 of 51.4% was based on the average of its historical volatility, measured over the maximum available term. Prior to 2013, it was not possible to use actual experience to estimate the expected volatility of the price of the common shares in estimating the value of the options granted because the Company's common shares only began trading in May 2008, thus, it does not have enough history over which to calculate an expected volatility representative of the volatility over the expected lives of the options. As a substitute for such estimate, the Company blended its historical volatility with the historical volatilities of a set of comparable companies in the industry in which the Company operates.

Risk-Free Interest Rate — This is based on the yields on U.S. Treasury constant maturity notes with a term equal to the expected life of the option. An increase in the risk-free interest rate will increase compensation expense.

Expected Lives — This is the period of time over which the options granted are expected to remain outstanding giving consideration to vesting schedules, historical exercise and forfeiture patterns. The Company uses the simplified method outlined in SEC Staff Accounting Bulletin Codification Topic 14 (SAB 14) to estimate expected lives for options granted during the period as historical exercise data is not available and the options meet the requirements set out in the Bulletin. Options granted have a maximum term of ten years. An increase in the expected life will increase compensation expense.

Forfeiture Rate — This is the estimated percentage of options granted that are expected to be forfeited or cancelled before becoming fully vested. An increase in the forfeiture rate will decrease compensation expense.

Dividend Yield — This is calculated by dividing the expected annual dividend by the share price of the Company at the valuation date. An increase in the dividend yield will decrease compensation expense.

14. Share Compensation and Pension Plans (continued)

The following table shows all options granted, exercised, expired and exchanged under the Plan for the years ended December 31, 2014, 2013 and 2012:



	Number of Share Options		Weighted Average Exercise Price		Weighted Average Grant-Date Fair Value		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value		Range of Exercise Prices
Outstanding, December 31, 2011	2,916,143		$	6.61			7.55 years	$	6,866	$3.28 – 10.00
Granted	117,000		$	8.89	$	2.65				$8.14 – 9.42
Exercised	(122,519	)	$	3.90				$	616
Expired	(103,847	)	$	9.87
Forfeited	(11,340	)	$	7.54
Outstanding, December 31, 2012	2,795,437		$	6.70			6.75 years	$	7,271	$3.28 – 10.00
Granted	49,000		$	10.61	$	2.80				$9.99 - 11.22
Exercised	(289,614	)	$	6.13				$	1,397
Expired	(691	)	$	7.67
Forfeited	(114,719	)	$	8.51
Outstanding, December 31, 2013	2,439,413		$	6.76			5.75 years	$	10,174	$3.28 - 11.22
Granted	45,000		$	12.01	$	4.28				$11.38 - 12.42
Exercised	(120,596	)	$	4.91				$	930
Expired	—		$	—
Forfeited	(842	)	$	7.74
Outstanding, December 31, 2014	2,362,975		$	6.95			4.86 years	$	13,791	$3.28 - 12.42
Total options exercisable at December 31, 2014	2,276,100		$	6.81			4.72 years	$	13,616	$3.28 - 11.22

The weighted average grant date fair value was $2.11, $2.03 and $2.05 for all options outstanding at December 31, 2014, 2013 and 2012, respectively. There was $235 (2013 - $513) of total unrecognized compensation cost related to non-vested options at December 31, 2014 which will be recognized during the next 4 years. Cash in the amount of $592 was received from employees as a result of employee share option exercises during the year ended December 31, 2014 (2013 – $1,776, 2012 – $478). The Company issues new common shares upon the exercise of an option. In connection with these exercises, there was no tax benefit realized by the Company.

Restricted Shares and Share Units

The fair value of each restricted share or share unit is determined based on the market value of the Company's common shares on the date of grant. The total estimated fair value is amortized as an expense on a straight-line basis over the requisite service period as determined by the Committee.

Performance-Based Restricted Share Units

The Committee approved the formation of a long-term incentive program under the Plan on March 1, 2011. On that date, the Committee determined to award PB-RSUs to certain senior leaders of the Company. The formula for determining the amount of PB-RSUs awarded uses a combination of a percentage of the employee's base salary (based on a benchmarking analysis from our compensation consultant) divided by the closing price on NASDAQ of our common shares on that date. The grants are performance based which require that certain criteria such as operating return on common equity, underwriting performance, revenue growth and operating expense be met during the performance period to attain a payout. Each metric has a corresponding weighted percentage with a target, threshold and maximum level of performance goal set to achieve a payout. All prior, current and future PB-RSUs are paid 50% based on certain criteria stated above, while the other 50% of the payout is based upon the recommendation of the Company's CEO and the Committee's ultimate discretion of individual contribution to business results and strategic success for the performance period. Settlement of the grants can be made in either common shares or cash upon the decision of the Committee and the performance cycles are for three years.

14. Share Compensation and Pension Plans (continued)

Effective March 1, 2012, February 19, 2013 and February 18, 2014, the Committee approved the award of PB-RSUs to certain senior leaders of the Company for the fiscal years 2012-2014, 2013-2015 and 2014-2016, respectively.

CEO Non-Performance-Based Restricted Share Units

On March 1, 2012, the Committee approved an award of NPB-RSUs to the Company's CEO. The award fully vested on December 31, 2013.

On February 19, 2013, the Committee approved an award of NPB-RSUs to the Company's CEO with one-third automatically vested on February 19, 2014, with the next one-third automatically vesting on February 19, 2015, and of which the final one-third will automatically vest on February 19, 2016. The total fair value of the share units vested for the year ended December 31, 2014 was $500 (2013 - $nil).

On February 18, 2014, the Committee approved an award of NPB-RSUs to the Company's CEO with one-third automatically vested on December 31, 2014, with the next one-third automatically vesting on December 31, 2015, and of which the final one-third will automatically vest on December 31, 2016. The total fair value of the share units vested for the year ended December 31, 2014 was $266.

Non-CEO Discretionary Non-Performance-Based Restricted Shares ("NPB-RSs")

On February 19, 2013, pursuant to the Plan, the Committee approved an award of NPB-RSs to certain senior leaders of the Company. 50% of which vested on the first anniversary of the grant date, with an additional 50% due to vest on the second anniversary of the grant date. The total fair value of restricted shares which vested during the year ended December 31, 2014 was $479.

On February 18, 2014, pursuant to the Plan, the Committee approved an award of NPB-RSs to non-CEO named executive officers and senior leaders of the Company, 50% of which will vest on January 1, 2015, with an additional 50% due to vest on January 1, 2016.

The following schedule shows the summary of activity under the Company's restricted awards:



	CEO Non-Performance-Based Restricted Share Units				Non-CEO Non-Performance-Based Restricted Shares				Performance Based Restricted Share Units¹
	Number of Restricted Units		Weighted Average Grant-Date Fair Value		Number of Restricted Shares		Weighted Average Grant-Date Fair Value		Number of Restricted Units		Weighted Average Grant-Date Fair Value
Non-vested at December 2011	—		—		—		—		321,600		$	7.97
Awards granted	86,705		$	8.56	—		—		538,906		$	8.56
Awards vested	—		—		—		—		—		—
Awards forfeited	—		—		—		—		—		—
Non-vested December 31, 2012	86,705		$	8.56	—		—		860,506		$	8.34
Awards granted	149,701		$	10.02	95,590		$	10.02	359,652		$	10.02
Awards vested	(86,705	)	$	8.56	—		—		—		—
Awards forfeited	—		—		—		—		(466,296	)	$	8.31
Non-vested at December 31, 2013	149,701		$	10.02	95,590		$	10.02	753,862		$	9.21
Awards granted	70,298		$	11.38	38,522		$	11.38	396,672		$	11.38
Awards vested	(73,333	)	$	10.45	(47,795	)	$	10.02	(100,308	)	$	8.56
Awards forfeited	—		—		—		—		(242,456	)	$	8.56
Non-vested at December 31, 2014	146,666		$	10.45	86,317		$	10.63	807,770		$	10.51

1) For Performance Shares, the number of shares is stated at the maximum number that can be attained if the performance conditions are met. Forfeitures represent shares forfeited due to vesting below the maximum attainable as a result of the Company not fully meeting the performance conditions.

14. Share Compensation and Pension Plans (continued)

There was $1,102 and $285 of total unrecognized compensation cost related to RSUs and restricted shares at December 31, 2014, which will be recognized during the next 1.6 years and 0.8 years, respectively.

The adoption of ASC Topic 718 "Compensation - Stock Compensation" fair value method has resulted in share-based expense in the amount of $3,334, $2,205 and $1,347 for the years ended December 31, 2014, 2013 and 2012, respectively.

Pension Plans

The Company provides pension benefits to eligible employees principally through various defined contribution plans sponsored by the Company which vary for each subsidiary. The Company’s expenses for its defined contribution plans were $2,809, $2,892 and $2,529 for the years ended December 31, 2014, 2013 and 2012, respectively.