Stock-based Compensation

6 Months Ended

Jun. 30, 2016

Stock-based Compensation [Abstract]

Stock-based Compensation

10. Stock-based Compensation

As of June 30, 2016, there were 4,934,810 shares, 2,420,768 shares and 705,382 shares available for grant under The Hanover Insurance Group 2014 Long-Term Incentive Plan, The Hanover Insurance Group 2014 Employee Stock Purchase Plan and the Chaucer Share Incentive Plan, respectively.

Compensation cost for the Company’s stock-based awards and the related tax benefits were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2016		2015		2016		2015
Stock-based compensation expense	$	2.7	$	4.2	$	5.5	$	7.5
Tax benefit		(0.9)		(1.4)		(1.9)		(2.6)
Stock-based compensation expense, net of taxes	$	1.8	$	2.8	$	3.6	$	4.9

Stock Options

Information on the Company’s stock option plans is summarized below.

	Six Months Ended June 30,
	2016			2015
(in whole shares and dollars)	Shares		Weighted Average Exercise Price	Shares		Weighted Average Exercise Price
Outstanding, beginning of period	1,619,948	$	56.57	2,236,620	$	46.61
Granted	524,940		82.74	659,850		70.28
Exercised	(495,242)		48.57	(204,444)		44.29
Forfeited or cancelled	(161,207)		66.80	(90,137)		51.52
Outstanding, end of period	1,488,439		67.36	2,601,889		52.63

Restricted Stock Units

The following tables summarize activity information about employee restricted stock units:

	Six Months Ended June 30,
	2016			2015
(in whole shares and dollars)	Shares		Weighted Average Grant Date Fair Value	Shares		Weighted Average Grant Date Fair Value
Time-based restricted stock units:
Outstanding, beginning of period	301,897	$	54.54	384,923	$	45.63
Granted	141,949		83.47	92,409		70.61
Vested	(135,863)		42.44	(95,787)		41.56
Forfeited	(18,831)		67.15	(20,988)		48.90
Outstanding, end of period	289,152		73.61	360,557		52.93
Performance-based and market-based restricted stock units:
Outstanding, beginning of period	196,142	$	47.89	218,338	$	44.24
Granted	118,736		73.14	82,025		48.55
Vested	(144,141)		41.11	(77,854)		38.82
Forfeited	(56,500)		63.52	(14,451)		44.68
Outstanding, end of period	114,237		74.97	208,058		47.93

In the first six months of 2016 and 2015, the Company granted market-based awards totaling 79,153 and 80,738, respectively, to certain members of senior management, which are included in the table above as performance and market-based restricted stock activity. The vesting of these stock units is based on the relative total shareholder return (“TSR”) of the Company. This metric is generally based on relative TSR for a three-year period as compared to a pre-selected group of property and casualty companies. The fair value of market-based awards was estimated at the date of grant using a valuation model. These units have the potential to range from 0% to 150% of the shares disclosed. Included in the amount granted above in 2016 are30,453 shares related to market-based awards that achieved a payout in excess of 100%. These awards vested in the first sixmonths of 2016.

Performance-based restricted stock units are based upon the achievement of the performance metric at 100%. These units have the potential to range from 0% to 200% of the shares disclosed, which varies based on grant year and individual participation level. Increases above the 100% target level are reflected as granted in the period in which performance-based stock unit goals are achieved. Decreases below the 100% target level are reflected as forfeited. Included in the amounts granted above for the performance-based restricted stock units are1,949 shares related to awards that a performance metric in excess of 100% was achieved. These awards vested in the first six months of 2016.