15. Share-Based Compensation

In May 1995, the Company adopted the 1995 Equity Participation Plan (the "1995 Plan") which succeeded a prior plan. In May 2005, the Company adopted the 2005 Plan which succeeded the 1995 Plan. Share-based compensation awards may only be granted under the 2005 Plan. A combined total of 4,944,500 shares of common stock under the 1995 Plan and the 2005 Plan are authorized for issuance upon exercise of options, stock appreciation rights and other awards, or upon vesting of restricted or deferred stock awards. The maximum number of shares that may be issued under the 2005 Plan is 4,944,500. As of December 31, 2011, only options and restricted stock awards have been granted under these plans. Beginning January 1, 2008, options granted, for which the Company has recognized share-based compensation expense become exercisable at a rate of 25% per year beginning one year from the date granted, are granted at the market price on the date of grant, and expire after 10 years. Prior to January 1, 2008, shares became exercisable at a rate of 20% per year.

Cash received from option exercises was $1,951,000, $733,000, and $393,000 during 2011, 2010, and 2009, respectively. Total compensation costs were $439,000, $651,000, and $763,000 during 2011, 2010, and 2009, respectively. The excess tax benefit realized for the tax deduction from option exercises of the share-based payment awards totaled $56,000, 132,000, and $5,000 during 2011, 2010, and 2009, respectively.

No stock options were awarded in 2011 and 2010. In 2009, the fair value of stock option awards was estimated on the date of grant using a closed-form option valuation model (Black-Scholes) based on the following table, which provides the weighted-average values of assumptions used in the calculation of grant-date fair values during the year ended December 31, 2009:


Weighted-average grant-date fair value		$3.45
Expected volatility		23.53%-25.58%
Weighted-average expected volatility		24.79%
Risk-free interest rate		1.98%-2.97%
Expected dividend yield		6.67%-6.94%
Expected term in months		72

Expected volatilities are based on historical volatility of the Company's stock over the term of the options. The Company estimated the expected term of options, which represents the period of time that options granted are expected to be outstanding, by using historical exercise patterns and post-vesting termination behavior. The risk free interest rate is determined based on U.S. Treasury yields with equivalent remaining terms in effect at the time of the grant.

A summary of the stock option activity under the Company's plans as of December 31, 2011 and changes during the year then ended is presented below:


	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in 000's)
Outstanding at January 1, 2011		615,676		$	45.06
Granted		0			0
Exercised		(52,950	)	$	36.84
Cancelled or expired		(18,501	)		0

Outstanding at December 31, 2011		544,225		$	46.09		5.2	$	2,057

Exercisable at December 31, 2011		408,824		$	48.45		4.7	$	972

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company's closing stock price and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all options been exercised on December 31, 2011. The aggregate intrinsic value of stock options exercised was $262,000, $431,000, and $508,000 during 2011, 2010, and 2009, respectively. The total fair value of options vested was $467,000, $498,000, and $763,000 during 2011, 2010, and 2009, respectively.

The following table presents information regarding stock options outstanding at December 31, 2011:


	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number of Options		Weighted-Avg. Remaining Contractual Life (Years)		Weighted- Avg. Exercise Price		Number of Options		Weighted- Avg. Exercise Price
$33.61-40.53		170,525		6.9	$	34.32		78,025	$	34.82
$41.34-51.43		177,700		4.7	$	47.74		147,699	$	47.55
$51.51-58.83		196,000		4.3	$	54.82		183,100	$	54.97

As of December 31, 2011, $306,000 of total unrecognized compensation cost related to non-vested stock options is expected to be recognized over a weighted-average period of 1.1 years.

Under the 2005 Plan, the Compensation Committee of the Company's Board of Directors granted performance vesting restricted stock units to the Company's senior management and key employees in March 2011. The restricted stock units vest at the end of a three-year performance period, and then only if, and to the extent that, the Company's cumulative underwriting income during such three-year performance period ending December 31, 2013 achieves the 2011 defined threshold performance levels established by the Compensation Committee. The aggregate target number of shares of common stock for which the restricted stock units may vest is 80,000. However, the restricted stock units may vest for up to 120,000 shares of common stock based upon the extent to which the Company's three-year performance exceeds the target established by the Compensation Committee. The Compensation Committee granted 55,000 shares of restricted stock and restricted stock units in 2010 which will vest at the end of a three-year performance period ending December 31, 2012 if, and to the extent that, the Company's cumulative underwriting income during the three-year performance period ending December 31, 2012 achieves the 2010 defined threshold performance levels.

The fair value of the restricted stock grant was determined based on the market price on the date of grant. Compensation cost has been recognized based on management's best estimates that performance goals will be achieved. If such goals are not met as of the end of the three-year performance period, no compensation cost would be recognized and any recognized compensation cost would be reversed. Total compensation costs were $460,000 and $161,000 during 2011 and 2010, respectively, and the corresponding income tax benefits recognized in the income statement were $161,000 and $57,000, respectively. As of December 31, 2011, there was $1,491,000 of unrecognized compensation cost that is expected to be recognized over the next two years. A summary of the restricted stock and restricted stock units activity as of December 31, 2011 and 2010, and changes during the years then ended is as follows:


	2011				2010
	Shares		Weighted- Average Fair Value per Share		Shares		Weighted- Average Fair Value per Share
Outstanding at January 1		55,000	$	41.40		0	$	0.00
Granted		80,000		40.22		55,000		41.40
Vested		0				0
Forfeited/Canceled		0				0

Outstanding at December 31		135,000	$	40.70		55,000	$	41.40