Stock-based Compensation

3 Months Ended

Mar. 31, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-based Compensation

10. Stock-based Compensation

As of March 31, 2019, there were 3,506,780 shares and 2,369,081 shares available for grant under The Hanover Insurance Group 2014 Long-Term Incentive Plan and The Hanover Insurance Group 2014 Employee Stock Purchase Plan, respectively.

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

	Three Months Ended March 31,
(in millions)	2019			2018
Stock-based compensation expense	$	4.2		$	2.5
Tax benefit		(0.9	)		(0.5	)
Stock-based compensation expense, net of taxes	$	3.3		$	2.0

Stock-based compensation expense for Chaucer, net of taxes, of $0.4 million for the three months ended March 31, 2018 is reported in discontinued operations and is excluded from the amounts disclosed above.

Stock Options

Information on the Company’s stock option activity for the three months ended March 31, 2019 and 2018 is summarized below.

	Three Months Ended March 31,
	2019					2018
(in whole shares and dollars)	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding, beginning of period		1,099,076		$	85.75		1,062,177		$	75.53
Granted		232,568			95.05		291,390			110.58
Exercised		(64,017	)		75.98		(84,353	)		70.31
Forfeited or cancelled		(3,141	)		95.39		(50,491	)		88.48
Outstanding, end of period		1,264,486			87.93		1,218,723			83.73

Restricted Stock Units

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

	Three Months Ended March 31,
	2019					2018
(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		332,481		$	97.28		298,528		$	83.45
Granted		144,072			117.51		131,290			110.60
Vested		(99,855	)		83.25		(50,810	)		70.24
Forfeited		(8,687	)		97.14		(10,585	)		87.47
Outstanding, end of period		368,011			109.01		368,423			94.83
Performance-based and market-based restricted stock units:
Outstanding, beginning of period		69,838		$	95.58		102,586		$	81.21
Granted		42,119			117.68		29,715			116.82
Vested		(10,089	)		82.74		(14,032	)		70.24
Forfeited		—			—		(7,625	)		81.91
Outstanding, end of period		101,868			105.99		110,644			92.12

In the first three months of 2019 and 2018, the Company granted market-based awards totaling 23,924 and 29,715, 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 2019 and 2018 are 5,820 shares and 3,115 shares, respectively, related to market-based awards that achieved a payout in excess of 100%. These awards vested in the first quarters of 2019 and 2018, respectively.

The Company also granted performance-based restricted stock units in 2019 which are based upon the achievement of the performance metric at 100%. These units have the potential to range from 0% to 150% 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. There were no performance-based awards that vested in 2019 or 2018.