Share Capital

(a) Authorized and Issued

Ordinary Shares

In connection with the Catlin Acquisition described in Note 3(a), "Acquisition and Disposals - Catlin Acquisition," the Company issued 49.9 million ordinary shares to Catlin shareholders, which had an aggregate value as of the Acquisition Date of $1.85 billion.

The following table is a summary of ordinary shares issued and outstanding:



(in thousands)	June 30, 2015		December 31, 2014
Balance – beginning of period	255,183		278,253
Exercise of options	220		424
Net issuance of restricted shares	1,536		1,246
Share buybacks (1)	(2,982	)	(24,740	)
Issue of shares	49,935		—
Balance – end of period	303,892		255,183

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(1)	Includes share buybacks associated with authorized share buyback programs as well as purchases related to satisfying tax withholding obligations of employees in connection with the vesting of restricted shares granted under the Company's equity compensation programs.

Buybacks of Ordinary Shares

On February 21, 2014, XL-Ireland announced that its Board of Directors approved an increase to the Share Buyback Program, authorizing the purchase of up to $1.0 billion of ordinary shares, which included the amounts that remained under the previous Share Buyback Program. The Company had suspended active share buybacks through the close of the Catlin Acquisition; however, following the close of the Catlin Acquisition, the Company resumed buybacks under the Share Buyback Program. During the three and six months ended June 30, 2015, the Company purchased and canceled 2.9 million ordinary shares under the Share Buyback Program for $110.0 million. As of June 30, 2015, $157.6 million remained available for purchase under the Share Buyback Program.

Acquisition of Non-controlling Preferred Shares

In connection with the Catlin Acquisition described in Note 3(a), "Acquisition and Disposals - Catlin Acquisition," the Company assumed responsibility for 0.6 million non-cumulative perpetual preferred shares issued by Catlin-Bermuda, par value of $0.01 per share, with liquidation preference of $1,000 per share, plus declared and unpaid dividends ("CICL Prefs"). Dividends at a rate of 7.249 percent on the liquidation preference are payable semi-annually on January 19 and July 19 in arrears as and when declared up to but not including January 2017. Thereafter, if the CICL-Prefs have not yet been redeemed, dividends will be payable quarterly at a rate equal to 2.975 percent plus the three-month LIBOR rate of the liquidation preference. The fair value on the date of Catlin Acquisition was $562.3 million, which was based on the last trade price of the security prior to the Catlin Acquisition.

(b) Stock Plans

The Company's performance incentive programs provide for grants of stock options, restricted stock, equity-classed restricted stock units, liability-classed restricted stock units, performance units and stock appreciation rights. Share-based compensation granted by the Company generally contains a vesting period of three or four years, and certain awards also contain performance conditions. The Company records compensation expense related to each award over its vesting period, incorporating the best estimate of the expected outcome of performance conditions where applicable. Compensation expense is generally recorded on a straight line basis over the vesting period of an award. See Item 8, Note 20, "Share Capital," to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014 for further information on the Company's performance incentive programs and associated accounting.

During the six months ended June 30, 2015, the Company granted approximately 2.0 million stock options with a weighted-average grant date fair value of $6.51 per option. The fair value of the options issued was estimated on the date of grant using the Black-Scholes option pricing model using the following weighted average assumptions:



Dividend yield	2.00	%
Risk free interest rate	1.70	%
Volatility	21.6	%
Expected lives	6.0 years

During the six months ended June 30, 2015, the Company granted approximately 40,570 restricted stock awards to certain employees and directors of the Company and its subsidiaries with an aggregate grant date fair value of approximately $1.5 million. The award recipients generally have the rights and privileges of a shareholder as to the restricted stock, including the right to receive dividends contingent upon the vesting of the restricted stock and the right to vote such restricted stock. The recipients are not entitled to receive delivery of a stock certificate prior to vesting nor may any restricted stock be sold, transferred, pledged, or otherwise disposed of prior to the satisfaction of all vesting requirements.

During the six months ended June 30, 2015, the Company granted approximately 1.5 million equity-classed restricted stock units to certain employees of the Company and its subsidiaries with an aggregate grant date fair value of approximately $55.4 million. Each equity-classed restricted stock unit represents the Company's obligation to deliver to the holder one ordinary share, and grants vest in three equal installments upon the first, second and third anniversaries of the date of grant. Equity-classed restricted stock units are granted at the closing market price on the day of grant and entitle the holder to receive dividends declared and paid in the form of additional ordinary shares contingent upon vesting.

During the six months ended June 30, 2015, the Company granted approximately 2.5 million liability-classed stock units to certain employees of the Company and its subsidiaries with an aggregate grant date fair value of approximately $93.4 million. Each liability-classed restricted stock unit represents the Company's obligation to deliver to the holder a cash payment equivalent to the value of one ordinary share. The grants may vest either in three equal installments upon the first, second and third anniversaries of the date of grant; or in two equal installments upon the first and second anniversaries of the date of grant. Liability-classed restricted stock units are granted at the closing market price on the day of grant and entitle the holder to receive dividends declared and are paid in cash contingent upon vesting.

During the six months ended June 30, 2015, the Company granted approximately 0.8 million performance units (representing a potential maximum share payout of approximately 1.6 million ordinary shares) to certain employees with an aggregate grant date fair value of approximately $28.2 million. The performance units issued in 2015 vest after three years, subject to the achievement of stated market metrics, and entitle the holder to ordinary shares of the Company. Performance units issued prior to 2015 vest subject to the achievement of stated performance metrics. Each grant of performance units has a target number of shares, with final payouts ranging from 0% to 200% of the grant amount depending upon the achievement of stated market metrics along with each employee's continued service through the vesting date. Performance units issued prior to 2015 have a similar range of targeted number of shares, but payouts are dependent upon the achievement of stated performance metrics along with each employee's continued service through the vesting date. Furthermore, performance units granted in the current year are granted at the closing market price on the day of grant and entitle the holder to receive dividends declared and paid in the form of additional ordinary shares contingent upon vesting. There are no dividend rights associated with performance units issued prior to 2015. Performance targets are based on relative and absolute financial performance metrics.