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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT


SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.      )

 

Filed by the Registrant  x

Filed by a Party other than the Registrant  o

Check the appropriate box:

x

Preliminary Proxy Statement

o

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

o

Definitive Proxy Statement

o

Definitive Additional Materials

o 

Soliciting Material Pursuant to §240.14a-12

 

 

American International Group, Inc.

(Name of Registrant as Specified in its Charter)


 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of filing fee (Check the appropriate box):

 

x

No fee required.

o

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

  

 

(1)

Title of each class of securities to which transaction applies:

     
     

 

(2)

Aggregate number of securities to which transaction applies:

     
     

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

     
     

 

(4)

Proposed maximum aggregate value of transaction:

     
     

 

(5)

Total fee paid:

     

       

o

Fee paid previously with preliminary materials:

 

 

o            Check box if any part of the fee is offset as provided by Exchange Act Rule  0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

(1)

Amount Previously Paid:

     
     

 

(2)

Form, Schedule or Registration Statement No.:

     
     

 

(3)

Filing Party:

     
     

 

(4)

Date Filed:

     

 


Preliminary Proxy Materials
Subject to Completion

AMERICAN INTERNATIONAL GROUP, INC.
180 Maiden Lane, New York, N.Y. 10038

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 11, 2011

[MAILING DATE], 2011

To the Shareholders of
 AMERICAN INTERNATIONAL GROUP, INC.:

The Annual Meeting of Shareholders of AMERICAN INTERNATIONAL GROUP, INC. (AIG) will be held at 180 Maiden Lane, 3rd Floor, New York, New York, on May 11, 2011, at 11:00 a.m., for the following purposes:

 

1.

 

 

 

To elect the fourteen nominees specified under “Election of Directors” as directors of AIG to hold office until the next annual election and until their successors are duly elected and qualified;

 

2.

 

 

 

To vote upon a non-binding shareholder resolution to approve executive compensation;

 

3.

 

 

 

To act upon a proposal to amend AIG’s Amended and Restated Certificate of Incorporation to restrict certain transfers of AIG Common Stock in order to protect AIG’s tax attributes;

 

4.

 

 

 

To act upon a proposal to ratify the American International Group, Inc. Tax Asset Protection Plan;

 

5.

 

 

 

To act upon a proposal to ratify the selection of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2011;

 

6.

 

 

 

To act upon a shareholder proposal relating to restricting hedging transactions; and

 

7.

 

 

 

To transact any other business that may properly come before the meeting.

Shareholders of record at the close of business on March 18, 2011 will be entitled to vote at the meeting.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 11, 2011. The Proxy Statement, Annual Report to Shareholders and other Soliciting Material are available in the Investor Information section of AIG’s corporate website at www.aigcorporate.com.

By Order of the Board of Directors
JEFFREY A. WELIKSON
Secretary


If you plan on attending the meeting, please remember to bring photo identification with you. In addition, if you hold shares in “street name” and would like to attend the meeting, you should bring an account statement or other acceptable evidence of ownership of AIG Common Stock as of the close of business on March 18, 2011. If you cannot be present at the meeting, please sign and date the enclosed proxy and return it at once in the accompanying postage prepaid envelope or vote your shares by telephone or through the Internet.


Preliminary Proxy Materials
Subject to Completion

AMERICAN INTERNATIONAL GROUP, INC.
180 Maiden Lane, New York, N.Y. 10038

PROXY STATEMENT

[MAILING DATE], 2011

 

 

 

 

 

TIME AND DATE

 

11:00 a.m. on Wednesday, May 11, 2011.

 

PLACE

 

180 Maiden Lane, 3rd floor, New York, New York 10038.

 

MAILING DATE

 

These materials are being mailed to shareholders of AIG commencing on or about [MAILING DATE], 2011.

 

ITEMS OF BUSINESS

 

 

To elect the fourteen nominees specified under “Election of Directors” as directors of AIG to hold office until the next annual election and until their successors are duly elected and qualified;

 

 

 

 

To vote upon a non-binding shareholder resolution to approve executive compensation;

 

 

 

 

To act upon a proposal to amend AIG’s Amended and Restated Certificate of Incorporation to restrict certain transfers of AIG Common Stock in order to protect AIG’s tax attributes;

 

 

 

 

To vote upon a proposal to ratify the American International Group, Inc. Tax Asset Protection Plan;

 

 

 

 

To act upon a proposal to ratify the selection of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2011;

 

 

 

 

To act upon a shareholder proposal relating to restricting hedging transactions; and

 

 

 

 

To transact any other business that may properly come before the meeting.

 

RECORD DATE

 

You can vote if you were a shareholder of record at the close of business on March 18, 2011.

 

INSPECTION OF LIST OF SHAREHOLDERS OF RECORD

 

A list of the shareholders of record as of March 18, 2011 will be available for inspection during ordinary business hours during the ten days prior to the meeting at AIG’s offices, 180 Maiden Lane, New York, New York 10038.

 

ADDITIONAL INFORMATION

 

Additional information regarding the matters to be acted on at the meeting is included in the accompanying proxy materials.

 

PROXY VOTING

 

PLEASE SUBMIT YOUR PROXY THROUGH THE INTERNET OR BY TELEPHONE OR MARK, SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.



TABLE OF CONTENTS

 

 

 

 

 

Page

VOTING INSTRUCTIONS AND INFORMATION

 

 

 

4

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

 

 

8

 

RELATIONSHIPS WITH THE FEDERAL RESERVE BANK OF NEW YORK, THE AIG CREDIT FACILITY TRUST AND THE UNITED STATES DEPARTMENT OF THE TREASURY

 

 

 

9

 

ELECTION OF DIRECTORS

 

 

 

12

 

CORPORATE GOVERNANCE

 

 

 

20

 

Governance

 

 

 

20

 

Report of the Nominating and Corporate Governance Committee

 

 

 

22

 

Committees

 

 

 

24

 

Compensation of Directors

 

 

 

27

 

Compensation and Management Resources Committee Interlocks and Insider Participation

 

 

 

28

 

OWNERSHIP OF CERTAIN SECURITIES

 

 

 

29

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

 

 

30

 

RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

 

 

 

30

 

EXECUTIVE COMPENSATION

 

 

 

31

 

Report of the Compensation and Management Resources Committee

 

 

 

31

 

Compensation Discussion and Analysis

 

 

 

35

 

2010 Compensation

 

 

 

52

 

Exercises and Holdings of Previously Awarded Equity

 

 

 

58

 

Post-Employment Compensation

 

 

 

61

 

Potential Payments on Termination and Arrangements with Former Officers

 

 

 

67

 

PROPOSAL 2—NON-BINDING SHAREHOLDER RESOLUTION TO APPROVE EXECUTIVE COMPENSATION

 

 

 

70

 

BACKGROUND TO PROPOSALS 3 AND 4

 

 

 

71

 

PROPOSAL 3—APPROVAL OF PROTECTIVE AMENDMENT TO AIG’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

 

 

 

72

 

PROPOSAL 4—RATIFICATION OF THE TAX ASSET PROTECTION PLAN

 

 

 

76

 

REPORT OF AUDIT COMMITTEE AND RATIFICATION OF SELECTION OF ACCOUNTANTS

 

 

 

79

 

Report of the Audit Committee

 

 

 

79

 

PROPOSAL 5—RATIFICATION OF SELECTION OF PRICEWATERHOUSECOOPERS LLP

 

 

 

81

 

Fees Paid to PricewaterhouseCoopers LLP

 

 

 

82

 

EQUITY COMPENSATION PLAN INFORMATION

 

 

 

83

 

SHAREHOLDER PROPOSAL

 

 

 

84

 

Shareholder Proposal—Prohibit Executive Hedging

 

 

 

84

 

AIG Statement in Opposition

 

 

 

84

 

OTHER MATTERS

 

 

 

86

 

Other Matters to be Presented at the 2011 Annual Meeting

 

 

 

86

 

Shareholder Proposals for 2012 Annual Meeting

 

 

 

86

 

Communications with the Board of
Directors

 

 

 

86

 

Important Notice Regarding Delivery of Shareholder Documents

 

 

 

86

 

Proxy Solicitation

 

 

 

86

 

Incorporation by Reference

 

 

 

86

 

CORPORATE GOVERNANCE GUIDELINES

 

 

 

A-1

 

PROPOSED AMENDMENT TO AMERICAN INTERNATIONAL GROUP, INC.’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION (ADDING ARTICLE THIRTEEN) RELATING TO PROPOSAL 3

 

 

 

B-1

 

AMERICAN INTERNATIONAL GROUP, INC. TAX ASSET PROTECTION PLAN

 

 

 

C-1

 

3


VOTING INSTRUCTIONS AND INFORMATION

The enclosed proxy is solicited on behalf of the Board of Directors (Board of Directors or Board) of American International Group, Inc., a Delaware corporation (AIG), for use at the AIG Annual Meeting of Shareholders to be held on May 11, 2011, or at any adjournment thereof (Annual Meeting or 2011 Annual Meeting of Shareholders). These proxy materials are being mailed to shareholders of AIG commencing on or about [MAILING DATE], 2011.

Who can vote at the Annual Meeting?

You are entitled to vote or direct the voting of your shares of AIG’s common stock, par value $2.50 per share (AIG Common Stock), if you were a shareholder of record or if you held AIG Common Stock in “street name” at the close of business on March 18, 2011. On that date, [___] shares of AIG Common Stock (exclusive of shares held by AIG and certain subsidiaries) were outstanding, held by [___] shareholders of record. Each share of AIG Common Stock held by you on the record date is entitled to one vote.

Who is a shareholder of record?

During the ten days prior to the Annual Meeting, a list of the shareholders will be available for inspection at the offices of AIG at 180 Maiden Lane, New York, New York 10038.

 

 

 

 

If you hold AIG Common Stock that is registered in your name on the records of AIG maintained by AIG’s transfer agent, Wells Fargo Shareowner Services, you are a shareholder of record.

 

 

 

 

If you hold AIG Common Stock indirectly through a broker, bank or similar institution, you are not a shareholder of record, but instead hold shares in “street name.”

If you are a shareholder of record, these proxy materials are being sent to you directly. If you hold shares in street name, these materials are being sent to you by the bank, broker or similar institution through which you hold your shares.

What do I need to attend, and vote at, the Annual Meeting?

If you plan on attending the Annual Meeting, please remember to bring photo identification with you, such as a driver’s license. In addition, if you hold shares in “street name” and would like to attend the Annual Meeting, you should bring an account statement or other acceptable evidence of ownership of AIG Common Stock as of the close of business on March 18, 2011, the record date for voting. In order to vote at the Annual Meeting if you hold shares in “street name”, you will also need a valid “legal proxy”, which you can obtain by contacting your account representative at the broker, bank or similar institution through which you hold your shares. See “How do I vote?” for four ways to cast your vote.

What proposals will be voted on at the Annual Meeting?

Five proposals from AIG will be considered and voted on at the Annual Meeting:

 

1.

 

 

 

To elect the fourteen nominees specified under “Election of Directors” as directors of AIG to hold office until the next annual election and until their successors are duly elected and qualified;

 

2.

 

 

 

To vote upon a non-binding shareholder resolution on executive compensation;

 

3.

 

 

 

To act upon a proposal to amend AIG’s Amended and Restated Certificate of Incorporation to restrict certain transfers of AIG Common Stock in order to protect AIG’s tax attributes;

 

4.

 

 

 

To act upon a proposal to ratify the American International Group, Inc. Tax Asset Protection Plan; and

 

5.

 

 

 

To act upon a proposal to ratify the selection of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2011.

In addition, one shareholder proposal will be considered and voted on at the Annual Meeting:

 

6.

 

 

 

To act upon a shareholder proposal relating to restricting hedging transactions.

You may also vote on any other business that properly comes before the Annual Meeting.

4


How does the Board of Directors recommend I vote?

AIG’s Board of Directors unanimously recommends that you vote:

 

1.

 

 

 

“FOR” each of the nominees specified under “Election of Directors” to the Board of Directors.

 

2.

 

 

 

“FOR” the non-binding shareholder resolution on executive compensation.

 

3.

 

 

 

“FOR” the proposal to amend AIG’s Amended and Restated Certificate of Incorporation to restrict certain transfers of AIG Common Stock in order to protect AIG’s tax attributes.

 

4.

 

 

 

“FOR” the proposal to ratify the American International Group, Inc. Tax Asset Protection Plan.

 

5.

 

 

 

“FOR” the proposal to ratify the selection of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2011.

 

6.

 

 

 

“AGAINST” the shareholder proposal relating to restricting hedging transactions.

How do I vote?

You may cast your vote in one of four ways:

 

 

 

 

By Submitting a Proxy by Internet. Go to the following website: www.eproxy.com/aig. You may submit a proxy by Internet 24 hours a day. Enter the information requested on your computer screen and follow the simple instructions. If you choose to submit a proxy by Internet, then you do not need to return the proxy card. To be valid, your proxy by Internet must be received by 11:59 a.m., Eastern Daylight Saving Time, on May 10, 2011. Please have your proxy card and the last four digits of your Social Security number or tax identification number available.

 

 

 

 

By Submitting a Proxy by Telephone. To submit a proxy using the telephone (within the United States and Canada), call toll free 1-800-560-1965 in the United States or Canada any time on a touch tone telephone. From outside the United States or Canada, call 1-816-737-9783. You may submit a proxy by telephone 24 hours a day, 7 days a week. There is NO CHARGE to you for the call in the United States or Canada. International calling charges apply outside the United States and Canada. Follow the simple instructions provided by the recorded message. If you choose to submit a proxy by telephone, then you do not need to return the proxy card. To be valid, your proxy by telephone must be received by 11:59 a.m., Eastern Daylight Saving Time, on May 10, 2011.

 

 

 

 

By Submitting a Proxy by Mail. Mark the enclosed proxy card, sign and date it, and return it in the prepaid envelope that has been provided. To be valid, your proxy by mail must be received by 9:00 a.m., Eastern Daylight Saving Time, on May 11, 2011.

 

 

 

 

At the Annual Meeting. You can vote your shares in person at the Annual Meeting (see “What do I need to attend, and vote at, the Annual Meeting?”). If you are a shareholder of record, in order to vote at the Annual Meeting, you must present an acceptable form of photo identification, such as a driver’s license. If you hold your shares in street name, you must obtain a legal proxy, as described above under “What do I need to attend, and vote at, the Annual Meeting?”, and bring that proxy to the Annual Meeting.

How can I revoke my proxy or substitute a new proxy or change my vote?

You can revoke your proxy or substitute a new proxy by:

For a Proxy Submitted by Internet or Telephone

 

 

 

 

Subsequently submitting in a timely manner a new proxy through the Internet or by telephone; or

 

 

 

 

Executing and mailing a later-dated proxy card that is received by AIG prior to 9:00 a.m., Eastern Daylight Saving Time, on May 11, 2011; or

 

 

 

 

Voting in person at the Annual Meeting.

For a Proxy Submitted by Mail

 

 

 

 

Subsequently executing and mailing another proxy card bearing a later date; or

 

 

 

 

Giving written notice of revocation to AIG’s Secretary at 180 Maiden Lane, New York, New York 10038 that is received by AIG prior to 9:00 a.m., Eastern Daylight Saving Time, on May 11, 2011; or

 

 

 

 

Voting in person at the Annual Meeting.

5


If I submit a proxy by Internet, telephone or mail, how will my shares be voted?

If you properly submit your proxy by one of these methods, and you do not subsequently revoke your proxy, your shares will be voted in accordance with your instructions.

If you sign, date and return your proxy card but do not give voting instructions, your shares will be voted as follows: FOR the election of AIG’s director nominees specified under “Election of Directors”; FOR the non-binding shareholder resolution on executive compensation; FOR the amendment of AIG’s Amended and Restated Certificate of Incorporation to restrict certain transfers of AIG Common Stock in order to protect AIG’s tax attributes; FOR the ratification of the American International Group, Inc. Tax Asset Protection Plan; FOR the ratification of the appointment of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2011; AGAINST the shareholder proposal; and otherwise in accordance with the judgment of the persons voting the proxy on any other matter properly brought before the Annual Meeting.

If I hold my shares in “street name” and do not provide voting instructions, can my broker still vote my shares?

Under the rules of the New York Stock Exchange (NYSE), brokers that have not received voting instructions from their customers ten days prior to the Annual Meeting date may vote their customers’ shares in the brokers’ discretion on the proposals regarding the amendment of AIG’s Amended and Restated Certificate of Incorporation to restrict certain transfers of AIG Common Stock in order to protect AIG’s tax attributes and the ratification of the appointment of independent auditors because these are considered “discretionary” under NYSE rules. If your broker is an affiliate of AIG, NYSE policy specifies that, in the absence of your specific voting instructions, your shares may only be voted in the same proportion as all other shares are voted with respect to each proposal.

Under NYSE rules, each other proposal, including the election of directors, is a “non-discretionary” item, which means that member brokers who have not received instructions from the beneficial owners of AIG Common Stock do not have discretion to vote the shares of AIG Common Stock held by those beneficial owners on any of those proposals.

How are votes counted?

Proposal 1—Election of Directors. AIG’s By-laws provide that in uncontested elections, directors must receive a majority of the votes cast by the holders of AIG Common Stock. In other words, directors in an uncontested election must receive more votes “for” their election than “against” their election. Pursuant to AIG’s By-laws and Corporate Governance Guidelines, each nominee who is currently a director has submitted to the Board an irrevocable resignation from the Board that would become effective upon (1) the failure of such nominee to receive the required vote at the Annual Meeting and (2) Board acceptance of such resignation. In the event that a nominee who is currently a director fails to receive the required vote at the Annual Meeting, AIG’s Nominating and Corporate Governance Committee will then make a recommendation to the Board on the action to be taken with respect to the resignation. The Board will accept such resignation unless the Committee recommends and the Board determines that the best interests of AIG and its shareholders would not be served by doing so.

Proposal 2—Non-binding Shareholder Vote to Approve Executive Compensation. Adoption of the resolution of the non-binding shareholder vote to approve executive compensation requires a “for” vote of a majority of the votes cast by the holders of AIG Common Stock, which votes cast are either “for” or “against” the resolution.

Proposal 3—Amendment of AIG’s Amended and Restated Certificate of Incorporation to Restrict Certain Transfers of AIG Common Stock in order to Protect AIG’s Tax Attributes. Approval of the amendment requires a “for” vote of a majority of the outstanding shares of AIG Common Stock.

Proposal 4—Ratification of the American International Group, Inc. Tax Asset Protection Plan. Ratification of the American International Group, Inc. Tax Asset Protection Plan requires a “for” vote of a majority of the votes cast by the holders of AIG Common Stock, which votes cast are either “for” or “against” the Plan.

Proposal 5—Ratification of the Selection of PricewaterhouseCoopers LLP as AIG’s Independent Registered Public Accounting Firm. Ratification of the selection of accountants requires a “for” vote of a majority of the votes cast by the holders of AIG Common Stock, which votes cast are either “for” or “against” the ratification. Neither AIG’s Amended and Restated Certificate of Incorporation nor AIG’s By-laws require that the shareholders ratify the selection of PricewaterhouseCoopers LLP as its independent registered public

6


accounting firm. AIG’s Board is requesting shareholder ratification as a matter of good corporate practice. If the shareholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers LLP, but may still retain PricewaterhouseCoopers LLP. Even if the selection is ratified, the Audit Committee in its discretion may change the appointment at any time during the year if it determines that such change would be in the best interests of AIG and its shareholders.

Shareholder Proposal 6. Approval of the shareholder proposal requires a “for” vote of a majority of the outstanding shares of AIG Common Stock.

Broker Non-Votes and Abstentions. Because directors are elected by a majority of the votes cast, an abstention will have no effect on the election, although a director who receives more votes “against” than “for” his or her election will be required to resign, subject to the process described above under “Proposal 1—Election of Directors.” In the case of the non-binding shareholder resolution to approve executive compensation, the ratification of the American International Group, Inc. Tax Asset Protection Plan and the ratification of the appointment of PricewaterhouseCoopers LLP, only votes cast “for” or “against” the proposal will be considered; abstentions, broker non-votes and withheld votes will not be treated as a vote “for” or “against” these proposals and therefore will have no effect on the vote. With respect to each other proposal, an abstention, broker non-vote or withheld vote will have the effect of a vote “against” such proposal.

How many votes are required to transact business at the Annual Meeting?

A quorum is required to transact business at the Annual Meeting. The holders of a majority of the outstanding shares of AIG Common Stock entitled to vote will constitute a quorum.

Proxies marked as abstaining, and any proxies returned by brokers as “non-votes” on behalf of shares held in street name because beneficial owners’ discretion has been withheld as to one or more matters on the agenda for the Annual Meeting, will be treated as present for purposes of determining a quorum for the Annual Meeting.

How do I obtain more information about AIG?

A copy of AIG’s 2010 Annual Report to Shareholders, which includes AIG’s Annual Report on Form 10-K for the year ended December 31, 2010 (AIG’s 2010 Annual Report on Form 10-K) filed with the U.S. Securities and Exchange Commission (SEC), has been previously delivered to shareholders. You also may obtain, free of charge, a copy of the 2010 Annual Report to Shareholders and AIG’s 2010 Annual Report on Form 10-K by writing to American International Group, Inc., 180 Maiden Lane, New York, New York 10038, Attention: Investor Relations. These documents also are available in the Investor Information section of AIG’s corporate website at www.aigcorporate.com.

Who pays for the expenses of this proxy solicitation?

AIG will bear the cost of this solicitation of proxies. Proxies may be solicited by mail, email, personal interview, telephone and facsimile transmission by directors, their associates, and certain officers and regular employees of AIG and its subsidiaries. In addition to the foregoing, AIG has retained D.F. King & Co., Inc. to assist in the solicitation of proxies for a fee of approximately $18,500 plus reasonable out-of-pocket expenses and disbursements of that firm. AIG will reimburse brokers and others holding AIG Common Stock in their names, or in the names of nominees, for forwarding proxy materials to their principals.

7


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Proxy Statement and other publicly available documents may include, and AIG’s officers and representatives may from time to time make, projections and statements that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These projections and statements are not historical facts but instead represent only AIG’s belief regarding future events, many of which, by their nature, are inherently uncertain and outside AIG’s control. These projections and statements may address, among other things:

 

 

 

 

the timing of the disposition of the ownership position of the United States Department of the Treasury (Department of the Treasury) in AIG;

 

 

 

 

the timing and method of repayment of the preferred interests (the SPV Preferred Interests) in AIA Aurora LLC (the AIA SPV) and ALICO Holdings LLC (the ALICO SPV) held by the Department of the Treasury;

 

 

 

 

AIG’s exposures to subprime mortgages, monoline insurers and the residential and commercial real estate markets;

 

 

 

 

AIG’s credit exposures to state and municipal bond issuers;

 

 

 

 

AIG’s strategy for risk management;

 

 

 

 

AIG’s ability to retain and motivate its employees; and

 

 

 

 

AIG’s strategy for customer retention, growth, product development, market position, financial results and reserves.

It is possible that AIG’s actual results and financial condition will differ, possibly materially, from the anticipated results and financial condition indicated in these projections and statements. Factors that could cause AIG’s actual results to differ, possibly materially, from those in the specific projections and statements include:

 

 

 

 

actions by credit rating agencies;

changes in market conditions;

the occurrence of catastrophic events;

significant legal proceedings;

concentrations in AIG’s investment portfolios, including its municipal bond portfolio;

judgments concerning casualty insurance underwriting and reserves;

judgments concerning the recognition of deferred tax assets; and

 

 

 

 

such other factors as are discussed throughout the Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Item 1A. Risk Factors of AIG’s 2010 Annual Report on Form 10-K.

AIG is not under any obligation (and expressly disclaims any obligation) to update or alter any projection or other statement, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise.

8


RELATIONSHIPS WITH THE FEDERAL RESERVE BANK OF NEW YORK, THE AIG CREDIT FACILITY
TRUST AND THE UNITED STATES DEPARTMENT OF THE TREASURY

Financing and Equity Arrangements Prior to the January 2011 AIG Recapitalization

Throughout 2010, AIG was a party to several important transactions and relationships with the Federal Reserve Bank of New York (the FRBNY), the AIG Credit Facility Trust (the Trust) and the Department of the Treasury. As a result of these arrangements, AIG was controlled by the Trust until the closing of the Recapitalization (as defined below) in January 2011 and is now controlled by the Department of the Treasury.

Credit Facility with the FRBNY

AIG and the FRBNY entered into a revolving credit facility (as amended, the FRBNY Credit Agreement) and a Guarantee and Pledge Agreement on September 22, 2008. On January 14, 2011, AIG repaid to the FRBNY approximately $21 billion in cash, representing complete repayment of all amounts owing under the FRBNY Credit Agreement, and the FRBNY Credit Agreement was terminated.

AIG Series C Preferred Stock Outstanding Throughout 2010

During all of 2010, the Trust, established for the sole benefit of the United States Treasury in connection with the FRBNY Credit Agreement and issuance of AIG’s Series C Perpetual Convertible Participating Preferred Stock, par value $5.00 per share (AIG Series C Preferred Stock), held all of the outstanding 100,000 shares of the AIG Series C Preferred Stock. The AIG Series C Preferred Stock was, to the extent permitted by law, entitled to vote on all matters with the AIG Common Stock and was entitled to approximately 79.8 percent of the voting power of AIG’s shareholders entitled to vote on any particular matter and approximately 79.8 percent of the aggregate dividend rights of the outstanding AIG Common Stock and the AIG Series C Preferred Stock, in each case, on an as converted basis. On January 14, 2011, as detailed below, the AIG Series C Preferred Stock was exchanged for shares of AIG Common Stock, which were subsequently transferred by the Trust to the Department of the Treasury.

AIG Series E Preferred Stock, AIG Series F Preferred Stock and Warrants Outstanding Throughout 2010

Also during all of 2010, the Department of the Treasury held all of the outstanding 400,000 shares of AIG’s Series E Fixed Rate Non-Cumulative Perpetual Preferred Stock, par value $5.00 per share (AIG Series E Preferred Stock), 300,000 shares of AIG’s Series F Fixed Rate Non-Cumulative Perpetual Preferred Stock, par value $5.00 per share (AIG Series F Preferred Stock), and two 10-year warrants (the Treasury Warrants) to purchase a total of 2,690,088 shares of AIG Common Stock, as part of the Troubled Asset Relief Program (TARP) and the Program for Systemically Significant Failing Institutions. On January 14, 2011, as detailed below, the AIG Series E Preferred Stock and the AIG Series F Preferred Stock were exchanged for shares of AIG Common Stock and other consideration.

Recapitalization of AIG

On January 14, 2011 (the Recapitalization Closing), AIG completed the previously announced series of integrated transactions (the Recapitalization) to recapitalize AIG as contemplated by the Master Transaction Agreement, dated as of December 8, 2010 (the Master Transaction Agreement), among AIG, the ALICO SPV, the AIA SPV, the FRBNY, the Department of the Treasury and the Trust. The Recapitalization is summarized below and discussed in more detail in AIG’s 2010 Annual Report on Form 10-K. As a result of the Recapitalization, AIG is controlled by the Department of the Treasury.

Repurchase and Exchange of SPV Preferred Interests. At the Recapitalization Closing, AIG drew down approximately $20 billion (the Series F Closing Drawdown Amount) under the Department of the Treasury’s commitment (the Department of the Treasury Commitment) pursuant to the Securities Purchase Agreement, dated as of April 17, 2009 (the Series F SPA), between AIG and the Department of the Treasury relating to the AIG Series F Preferred Stock. The Series F Closing Drawdown Amount was the full amount remaining under the Department of the Treasury Commitment, less $2 billion that AIG designated to be available after the Recapitalization Closing for general corporate purposes under a commitment relating to AIG’s Series G Cumulative Mandatory Convertible Preferred Stock, par value $5.00 per share (AIG Series G Preferred Stock),

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described below (the Series G Drawdown Right). The right of AIG to draw on the Department of the Treasury Commitment (other than the Series G Drawdown Right) was terminated.

AIG applied certain proceeds from asset sales to retire a portion of the FRBNY’s ALICO SPV Preferred Interests and used the Series F Closing Drawdown Amount to repurchase the remainder of the FRBNY’s ALICO SPV Preferred Interests and all of the FRBNY’s AIA SPV Preferred Interests. AIG transferred the SPV Preferred Interests to the Department of the Treasury as part of the consideration for the exchange of the AIG Series F Preferred Stock, described below.

Under the Master Transaction Agreement, the Department of the Treasury, so long as it holds SPV Preferred Interests, will have the right, subject to existing contractual restrictions, to require AIG to dispose of the remaining AIA ordinary shares held by the AIA SPV and certain of the MetLife, Inc. (MetLife) securities received from the sale of American Life Insurance Company (ALICO) held by the ALICO SPV. The consent of the Department of the Treasury, so long as it holds SPV Preferred Interests, will also be required for AIG to take specified significant actions with respect to the Nan Shan Life Insurance Company, Ltd. (Nan Shan), International Lease Finance Corporation (ILFC and, together with Nan Shan, the Designated Entities) and, prior to the closing of their sale on February 1, 2011, AIG Star Life Insurance Co., Ltd. (AIG Star) and AIG Edison Life Insurance Company (AIG Edison), including initial public offerings, sales, significant acquisitions or dispositions and incurrence of significant levels of indebtedness. If any SPV Preferred Interests are outstanding on May 1, 2013, the Department of the Treasury will have the right to compel the sale of all or a portion of one or more of the Designated Entities on terms that it will determine.

On February 8, 2011, AIG entered into a letter agreement with the Department of the Treasury, pursuant to which the Department of the Treasury permitted AIG to retain $2 billion of the net cash proceeds from the sale of AIG Star and AIG Edison. The $2 billion was used to support the capital of Chartis, Inc. (Chartis) and its subsidiaries in connection with the reserve strengthening described in Item 8.01 of AIG’s Current Report on Form 8-K filed with the SEC on February 9, 2011. The remainder of the net cash proceeds was, with the Department of the Treasury’s consent, used to repay a portion of the Department of the Treasury’s SPV Preferred Interests.

On March 1, 2011, AIG entered into a Coordination Agreement, dated as of March 1, 2011, among the ALICO SPV, AIG and MetLife regarding a series of integrated transactions (the MetLife Disposition) whereby MetLife agreed to allow AIG to offer for sale the MetLife securities that AIG received when it sold ALICO to MetLife earlier than contemplated under the original terms of the sale. With the consent of the Department of the Treasury, AIG completed the MetLife Disposition on March 8, 2011 and used $6.6 billion of the proceeds to repay all of the liquidation preference and accrued return of the Department of the Treasury’s ALICO SPV Preferred Interests and a portion of the liquidation preference and accrued return of the Department of the Treasury’s AIA SPV Preferred Interests.

Issuance of AIG’s Series G Preferred Stock and Exchange of AIG’s Series C, E and F Preferred Stock. At the Recapitalization Closing, AIG and the Department of the Treasury amended and restated the Series F SPA to provide for the issuance of 20,000 shares of AIG Series G Preferred Stock by AIG to the Department of the Treasury. The AIG Series G Preferred Stock initially has a liquidation preference of zero, which will increase by the amount of any funds drawn down by AIG under the Series G Drawdown Right from the Recapitalization Closing until March 31, 2012 (or the earlier termination of the Series G Drawdown Right).

At the Recapitalization Closing, (i) the shares of the AIG Series C Preferred Stock held by the Trust were exchanged for 562,868,096 shares of AIG Common Stock, which were subsequently transferred by the Trust to the Department of the Treasury; (ii) the shares of the AIG Series E Preferred Stock held by the Department of the Treasury were exchanged for 924,546,133 shares of AIG Common Stock; and (iii) the shares of the AIG Series F Preferred Stock held by the Department of the Treasury were exchanged for (a) the SPV Preferred Interests, (b) 20,000 shares of the AIG Series G Preferred Stock and (c) 167,623,733 shares of AIG Common Stock. As a result of the Recapitalization, the Department of the Treasury holds 1,655,037,962 shares of newly issued AIG Common Stock, representing ownership of approximately 92 percent of the outstanding AIG Common Stock, and 20,000 shares of AIG Series G Preferred Stock. After this share exchange and distribution were completed, the Trust terminated pursuant to the terms and conditions of the AIG Credit Facility Trust Agreement, dated as of January 16, 2009, among the FRBNY and the Trustees named therein.

Effect of the Recapitalization

As a result of the Recapitalization, AIG is controlled by the Department of the Treasury. The interests of the Department of the Treasury may not be the same as the interests of AIG’s other shareholders. As a result of its

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ownership, the Department of the Treasury is able to elect all of AIG’s directors and can, to the extent permitted by law, control the vote on substantially all matters, including:

 

 

 

 

Approval of mergers or other business combinations;

 

 

 

 

A sale of all or substantially all of AIG’s assets;

 

 

 

 

Amendments to AIG’s Amended and Restated Certificate of Incorporation; and

 

 

 

 

Other matters that might be favorable to the Department of the Treasury but not to other shareholders.

AIG understands that, subject to market conditions, the Department of the Treasury intends to dispose of its ownership interest over time, and AIG has granted certain registration rights to the Department of the Treasury to facilitate such dispositions, including:

 

 

 

 

the right to participate in any registered offering of AIG Common Stock by AIG after the Recapitalization Closing;

 

 

 

 

the right to demand no more than twice in any 12-month period that AIG effect a registered market offering of its shares after the earlier of August 15, 2011 and the date of AIG’s completion of a primary equity offering;

 

 

 

 

the right to engage in at-the-market offerings; and

 

 

 

 

subject to certain exceptions, the right to approve the terms and conditions of any registered offering in which it participates until its ownership falls below 33 percent of AIG’s voting securities.

Should the Department of the Treasury, subject to applicable securities laws, transfer all, or a portion of, the AIG Common Stock it currently holds to another person or entity, that person or entity could become AIG’s controlling shareholder.

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ELECTION OF DIRECTORS

Fourteen directors are to be elected at the Annual Meeting to hold office until the next annual election and until their successors are duly elected and qualified. It is the intention of the persons named in the accompanying form of proxy to vote for the election of the nominees listed below. All of the nominees, other than Messrs. Cornwell and Fitzpatrick, are currently members of AIG’s Board of Directors. It is not expected that any of the nominees will become unavailable for election as a director, but if any should become unavailable prior to the Annual Meeting, proxies will be voted for such persons as the persons named in the accompanying form of proxy may determine in their discretion. Directors will be elected by a majority of the votes cast by the shareholders of the AIG Common Stock, which votes are cast “for” or “against” election. Pursuant to AIG’s By-laws and Corporate Governance Guidelines, each nominee who is currently a director of AIG has submitted to the Board an irrevocable resignation from the Board that would become effective upon (1) the failure of such nominee to receive the required vote at the shareholder meeting and (2) Board acceptance of such resignation. In the event that a nominee who is currently a director of AIG fails to receive the required vote, AIG’s Nominating and Corporate Governance Committee will then make a recommendation to the Board on the action to be taken with respect to the resignation. The Board will accept such resignation unless the Board determines (after consideration of the Nominating and Corporate Governance Committee’s recommendation) that the best interests of AIG and its shareholders would not be served by doing so.

Dennis D. Dammerman resigned from the Board of Directors as of February 28, 2010. Harvey Golub resigned from the Board of Directors as of July 14, 2010.

On January 6, 2011, the Board, on the recommendation of the Nominating and Corporate Governance Committee, elected Donald H. Layton and Ronald A. Rittenmeyer as directors, effective upon the Recapitalization Closing. Prior to the Recapitalization Closing, Messrs. Layton and Rittenmeyer served as directors of AIG pursuant to the exercise by the Department of the Treasury, as sole holder of the AIG Series E Preferred Stock and the AIG Series F Preferred Stock, of its right to elect additional directors to the Board. Upon the Recapitalization Closing, the AIG Series E Preferred Stock and the AIG Series F Preferred Stock were cancelled, and Messrs. Layton and Rittenmeyer would no longer have been directors of AIG. The Board determined, on the recommendation of the Nominating and Corporate Governance Committee, that it was advisable and in the best interests of AIG and its shareholders to provide for the continued service of Messrs. Layton and Rittenmeyer as directors of AIG.

The principal occupation or affiliation of the nominees for director and any directorships held by such nominee during the past five years are set forth below.

 

 

 

 

 

 

 

 

 

 

ROBERT H. BENMOSCHE
Director since 2009

 

President and Chief Executive Officer, AIG
Age 66

Mr. Benmosche has been AIG’s President and Chief Executive Officer since August 2009. Previously, he served as Chairman and Chief Executive Officer of MetLife, Inc. from September 1998 to March 2006. He served as President of MetLife, Inc. from September 1999 to June 2004, President and Chief Operating Officer from November 1997 to June 1998, and Executive Vice President from September 1995 to October 1997. He served as an Executive Vice President of PaineWebber Group Incorporated from 1989 to 1995. Mr. Benmosche is currently a director of Credit Suisse Group AG, where he is a member of the Compensation Committee. In the past five years, Mr. Benmosche has served as a director of MetLife, Inc. In light of Mr. Benmosche’s experience managing large, complex, international institutions and his professional experience across industries including insurance, financial services, and operations and technology, AIG’s Board has concluded that Mr. Benmosche should be re-elected to the Board.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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W. DON CORNWELL

 

Former Chairman of the Board and Chief Executive Officer of Granite Broadcasting Corporation
Age 63

Mr. Cornwell was Chairman of the Board and Chief Executive Officer of Granite Broadcasting Corporation from 1988 until his retirement in August 2009, and Vice Chairman until December 2009. Mr. Cornwell spent 17 years at Goldman, Sachs & Co. where he served as Chief Operating Officer of the Corporate Finance Department from 1980 to 1988 and Vice President of the Investment Banking Division from 1976 to 1988. Mr. Cornwell is currently a director of Avon Products, Inc., where he is a member of the Finance and Strategic Planning Committee and the Audit Committee, and Pfizer, Inc., where he is Chairman of the Audit Committee and a member of the Compensation and Regulatory and Compliance Committees. Mr. Cornwell was Chairman of the Board and Chief Executive Officer of Granite Broadcasting when it filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code in December 2006 and emerged from its restructuring in June 2007. In the past five years, Mr. Cornwell has also served as a director of CVS Caremark Corporation from 1994 until 2007. In light of Mr. Cornwell’s experience in finance and restructuring, as well as his professional experience across the financial services industry, AIG’s Board has concluded that Mr. Cornwell should be elected to the Board.

 

 

 

 

 

 

 

 

 

 

JOHN H. FITZPATRICK

 

Chairman of Oak Street Management Co., LLC
Age 54

Mr. Fitzpatrick is currently Chairman of Oak Street Management Co., LLC, a manager of commercial real estate funds, and Oak Family Advisors, LLC, a private wealth management firm. From 2006 to 2010, Mr. Fitzpatrick was a partner at Pension Corporation and a director of Pension Insurance Corporation Ltd. From 1998 to 2006, he was a member of Swiss Re’s Executive Board Committee and served at Swiss Re as Chief Financial Officer, Head of the Life and Health Business Group, and Head of Financial Services. From 1996 to 1998, Mr. Fitzpatrick was a partner in insurance private equity firms sponsored by Zurich Financial Services, Credit Suisse and Swiss Re. From 1990 to 1996, Mr. Fitzpatrick served as the Chief Financial Officer and a Director of Kemper Corporation, a NYSE-listed insurance and financial services organization where he started his career in corporate finance in 1978. Mr. Fitzpatrick currently serves as a director of Validus Holdings, Ltd., where he serves on the Audit and Finance Committees. AIG understands that Mr. Fitzpatrick will resign as a director of Validus Holdings, Ltd. prior to the AIG Annual Meeting. Mr. Fitzpatrick is a Certified Public Accountant and a Chartered Financial Analyst. In light of Mr. Fitzpatrick’s broad experience in the insurance and reinsurance industry, AIG’s Board has concluded that Mr. Fitzpatrick should be elected to the Board.

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LAURETTE T. KOELLNER
Director since 2009

 

Former President, Boeing International; Former Executive Vice President of The Boeing Company
Age 56

Ms. Koellner is the former President of Boeing International, a division of The Boeing Company, serving from 2006 to 2008. Prior to that, Ms. Koellner served as President of Connexion by Boeing from 2004 to 2006. She also served as Executive Vice President, Chief Administration and Human Resources Officer of Boeing from 2002 to 2004 and was a member of the Office of the Chairman from 2002 to 2003. She served as Senior Vice President and President of Shared Services Group of Boeing from 2001 to 2002. She served as Vice President and Corporate Controller of Boeing from 1999 to 2000. Ms. Koellner spent 19 years at McDonnell Douglas Corp., where she served as Division Director of Human Resources as well as Vice President of Internal Audit. Ms. Koellner is currently a director of Celestica Inc., where she is a member of the Audit, Nominating and Corporate Governance and Compensation Committees, and Sara Lee Corporation, where she is Chairman of the Audit Committee and a member of the Executive and Corporate Governance, Nominating and Policy Committees. In light of Ms. Koellner’s experience in managing large, complex, international institutions, and in finance, accounting and risk management, as well as her professional experience in the aircraft and the operations and technology industries, AIG’s Board has concluded that Ms. Koellner should be re-elected to the Board.

 

 

 

 

 

 

 

 

 

 

DONALD H. LAYTON
Director since 2010

 

Former Chairman and Chief Executive Officer, E*TRADE Financial Corporation; Former Vice Chairman, J.P. Morgan Chase & Co.
Age 60

Mr. Layton is the former Chairman and Chief Executive Officer of E*TRADE Financial Corporation, serving from 2008 to 2009, and non-executive Chairman of the Board, serving from 2007 to 2008. Previously, he was employed by J.P. Morgan Chase & Co. and its predecessors for twenty-nine years, retiring in 2004. Prior to his retirement, Mr. Layton was Vice Chairman and served as a member of J.P. Morgan Chase & Co.’s three person Office of the Chairman. He was Head of Chase Financial Services, the consumer and middle market banking business, from 2002 to 2004, Co-Chief Executive Officer of J.P. Morgan, the investment bank of J.P. Morgan Chase & Co., from 2000 to 2002, and Head of Global Markets, the worldwide capital markets and trading division, of the predecessor Chase Manhattan Corporation from 1996 to 2000. He was also Head of Treasury & Securities Services from 1999 through 2004. Mr. Layton was a Senior Adviser to the Securities Industry and Financial Markets Association and is currently a director of Assured Guaranty Ltd., where he serves on the Compensation Committee and is Chairman of the Risk Oversight Committee. In light of Mr. Layton’s experience in managing large, complex, international businesses, his experience in finance as well as his professional experience across the financial services industry, AIG’s Board has concluded that Mr. Layton should be re-elected to the Board.

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CHRISTOPHER S. LYNCH
Director since 2009

 

Former Partner, KPMG LLP
Age 53

Mr. Lynch has been an independent consultant since 2007, providing a variety of services to public and privately held financial intermediaries, including risk management, strategy, governance, financial accounting and regulatory reporting and troubled-asset management. Mr. Lynch is the former National Partner in Charge of KPMG LLP’s Financial Services Line of Business and Banking and Finance Practice. He held a variety of positions with KPMG from 1979 to 2007, including chairing KPMG’s Americas Financial Services Leadership team and being a member of the Global Financial Services Leadership and the U.S. Industries Leadership teams. Mr. Lynch has experience as an audit signing partner under Sarbanes Oxley for some of KPMG’s largest financial services clients. He also served as a Partner in KPMG’s Department of Professional Practice and as a Practice Fellow at the Financial Accounting Standards Board. Mr. Lynch is currently a director of the Federal Home Loan Mortgage Corporation, where he is Chairman of the Audit Committee and a member of the Compensation Committee. In light of Mr. Lynch’s experience in finance, accounting and risk management and restructuring, as well as his professional experience across the financial services industry, AIG’s Board has concluded that Mr. Lynch should be re-elected to the Board.

 

 

 

 

 

 

 

 

 

 

ARTHUR C. MARTINEZ
Director since 2009

 

Former Chairman of the Board, President and Chief Executive Officer, Sears, Roebuck and Co.
Age 71

Mr. Martinez is the former Chairman of the Board, President and Chief Executive Officer of Sears, Roebuck and Co., serving from 1995 to 2000. Mr. Martinez was Chairman and Chief Executive Officer of the former Sears Merchandise Group from 1992 to 1995. He served as Chief Financial Officer of Saks Fifth Avenue from 1980 to 1984, as Executive Vice President from 1984 to 1987 and then as Vice Chairman from 1990 to 1992. Mr. Martinez also served as Chairman of the Board of the Federal Reserve Bank of Chicago from 2000 to 2002. Mr. Martinez is currently a director of HSN, Inc., where he is Non-Executive Chairman and Chairman of the Governance and Nominating Committee, IAC/InterActiveCorp, where he is Chairman of the Compensation and Human Resources Committee, International Flavors & Fragrances Inc., where he is the Lead Director and a member of the Audit and the Nominating and Governance Committees, Liz Claiborne, Inc., where he is Chairman of the Compensation Committee and a member of the Audit Committee, and PepsiCo, Inc., where he is Chairman of the Compensation Committee and a member of the Nominating and Corporate Governance Committee. In the past five years, Mr. Martinez has also served as a director of ABN AMRO Holding N.V. from 2002 to 2010 and was also Chairman from 2006 until 2010. Shortly after joining the Board in 2009, Mr. Martinez committed to AIG that, in accordance with AIG’s Corporate Governance Guidelines, he would reduce the number of public company boards on which he serves as director (other than AIG) to no more than four within the following 12 months. Since then, Mr. Martinez has reduced his board memberships by one and his commitment to further reduce his board memberships was extended, with Board approval. In light of Mr. Martinez’s experience in finance and restructuring, AIG’s Board has concluded that Mr. Martinez should be re-elected to the Board.

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GEORGE L. MILES, JR.
Director since 2005

 

Executive Chairman, Chester Engineers, Inc.; Former President and Chief Executive Officer, WQED Multimedia
Age 69

Mr. Miles is the Executive Chairman of Chester Engineers, Inc. and the former President and Chief Executive Officer of WQED Multimedia, serving from 1994 to 2010. Mr. Miles served as an Executive Vice President and Chief Operating Officer of WNET/Thirteen from 1984 to 1994. Prior to WNET/Thirteen, he was Business Manager and Controller of KDKA-TV and KDKA Radio in Pittsburgh; Controller and Station Manager of WPCQ in Charlotte; Vice President and Controller of Westinghouse Broadcasting Television Group in New York; and Station Manager of WBZ-TV in Boston. Mr. Miles is currently a director of HFF, Inc., where he is Chairman of the Audit Committee and serves on the Compensation Committee, Harley-Davidson, Inc., where he serves on the Audit and Nominating and Corporate Governance Committees, WESCO International, Inc., where he serves on the Nominating and Corporate Governance Committee, and EQT Corporation, where he serves on the Executive Committee and as Chairman of the Corporate Governance Committee. In the past five years, Mr. Miles has also served as a director of Citizens Financial Corporation and Westwood One, Inc. Mr. Miles is a Certified Public Accountant. In light of Mr. Miles’ experience in accounting as well as his professional experience across the operations and technology industry, AIG’s Board has concluded that Mr. Miles should be re-elected to the Board.

 

 

 

 

 

 

 

 

 

 

HENRY S. MILLER
Director since 2010

 

Chairman and Managing Director, Miller Buckfire & Co., LLC; Chairman and Chief Executive Officer, Marblegate Asset Management
Age 65

Mr. Miller has served as the Chairman and a Managing Director of Miller Buckfire & Co., LLC, an investment bank, since 2002 and as Chief Executive Officer until December 31, 2009 and as the Chairman and Chief Executive Officer of Marblegate Asset Management, an affiliate of Miller Buckfire & Co., LLC, since February 2009. Prior to founding Miller Buckfire & Co., LLC, Mr. Miller was Vice Chairman and a Managing Director at Dresdner Kleinwort Wasserstein and its predecessor company Wasserstein Perella & Co., where he served as the global head of the firm’s financial restructuring group. Prior to that, Mr. Miller was a Managing Director and Head of both the Restructuring Group and Transportation Industry Group of Salomon Brothers Inc. From 1989 to 1992 Mr. Miller was a managing director and from 1990 to 1992 co-head of investment banking at Prudential Securities. In light of Mr. Miller’s experience in restructuring as well as his professional experience across the financial services industry, AIG’s Board has concluded that Mr. Miller should be re-elected to the Board.

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ROBERT S. MILLER
Director since 2009

 

Former Executive Chairman, Delphi Corporation
Age 69

Mr. Miller has been Chairman of MidOcean Partners, a leading middle market private equity firm, since December 2009. Mr. Miller also served as the Executive Chairman of the Delphi Corporation from 2007 to 2009. He was previously Chairman and Chief Executive Officer of Delphi Corporation from 2005 to 2007. Prior to joining Delphi Corporation, Mr. Miller served in a number of corporate restructuring situations, including as Chairman and Chief Executive Officer of Bethlehem Steel Corporation, Chairman and Chief Executive Officer of Federal Mogul Corporation, Chairman and Chief Executive Officer of Waste Management, Inc., and Executive Chairman of Morrison Knudsen Corporation. He has also served as Vice Chairman and Chief Financial Officer of Chrysler Corporation. Mr. Miller is currently a director of Symantec Corporation, where he is a member of the Audit and Nominating and Governance Committees. In the past five years, Mr. Miller has also served as a director of Delphi Corporation and UAL Corporation (United Airlines). Mr. Miller was Chairman and Chief Executive Officer of Delphi Corporation when it filed for Chapter 11 bankruptcy in October 2005 and Chairman and Chief Executive Officer of Bethlehem Steel Corporation when it filed for Chapter 11 bankruptcy in 2001. In light of Mr. Miller’s experience in managing large, complex, international institutions, his experience in finance, accounting and risk management and restructuring, as well as his professional experience across the financial services industry, AIG’s Board has concluded that Mr. Miller should be re-elected to the Board.

 

 

 

 

 

 

 

 

 

 

SUZANNE NORA JOHNSON
Director since 2008

 

Former Vice Chairman, The Goldman Sachs Group, Inc.
Age 53

Ms. Nora Johnson is a former Vice Chairman of The Goldman Sachs Group, Inc., serving from 2004 to 2007. During her 21 years at Goldman Sachs, she also served as the Chairman of the Global Markets Institute, Head of the Global Investment Research Division and Head of the Global Healthcare Business. Ms. Nora Johnson is currently a director of Intuit Inc., where she serves on the Acquisitions and Audit and Risk Committees, Pfizer Inc., where she serves on the Audit, Compensation and Science and Technology Committees, and Visa Inc., where she serves on the Compensation Committee and chairs the Nominating and Corporate Governance Committee. In light of Ms. Nora Johnson’s experience in managing large, complex, international institutions, her experience in finance as well as her professional experience across the financial services industry, AIG’s Board has concluded that Ms. Nora Johnson should be re-elected to the Board.

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MORRIS W. OFFIT
Director since 2005

 

Chairman, Offit Capital Advisors LLC; Founder and Former Chief Executive Officer, OFFITBANK
Age 74

Mr. Offit is the Chairman of Offit Capital Advisors LLC, a wealth management advisory firm, and served as the Co-Chief Executive Officer of Offit Hall Capital Management LLC from 2002 to 2007. He was the founder and former Chief Executive Officer of OFFITBANK, a private bank, from 1990 to 2001. Prior to that, he was President of Julius Baer Securities, a General Partner at Salomon Brothers, an adjunct professor at Columbia Business School and Head of Stock Research at Mercantile Safe Deposit and Trust Co. In light of Mr. Offit’s experience in accounting and risk management as well as his professional experience across the financial services industry, AIG’s Board has concluded that Mr. Offit should be re-elected to the Board.

 

 

 

 

 

 

 

 

 

 

RONALD A. RITTENMEYER
Director since 2010

 

Former Chairman, Chief Executive Officer and President, Electronic Data Systems Corporation; Former Chairman, Chief Executive Officer and President, Safety-Kleen Corp.
Age 63

Mr. Rittenmeyer is the Former Chairman, Chief Executive Officer and President of Electronic Data Systems Corporation, serving from 2005 to 2008. Prior to that, Mr. Rittenmeyer was a Managing Director of the Cypress Group, a private equity firm, serving from 2004 to 2005. Mr. Rittenmeyer also served as Chairman, Chief Executive Officer and President of Safety-Kleen Corp. from 2001 to 2004. Among his other leadership roles, Mr. Rittenmeyer served as President and Chief Executive Officer of AmeriServe Food Distribution Inc. from 2000 to 2001, Chairman, Chief Executive Officer and President of RailTex, Inc. from 1998 to 2000, President and Chief Operating Officer of Ryder TRS, Inc. from 1997 to 1998, President and Chief Operating Officer of Merisel, Inc. from 1995 to 1996 and Chief Operating Officer of Burlington Northern Railroad Co. from 1994 to 1995. Mr. Rittenmeyer is currently a director of Tenet Healthcare Corporation, where he serves on the Audit Committee and Compensation Committee. In the past five years, Mr. Rittenmeyer served as a director of Electronic Data Systems Corporation and RH Donnelly Corporation (presently Dex One Corporation). In light of Mr. Rittenmeyer’s experience in managing large, complex, international institutions, his experience in finance and restructuring as well as his professional experience across the financial services industry and railroad industry, AIG’s Board has concluded that Mr. Rittenmeyer should be re-elected to the Board.

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DOUGLAS M. STEENLAND
Director since 2009

 

Former President and Chief Executive Officer, Northwest Airlines Corporation
Age 59

Mr. Steenland is the former Chief Executive Officer of Northwest Airlines Corporation, serving from 2004 to 2008, and President, serving from 2001 to 2004. Prior to that, he served in a number of Northwest Airlines executive positions after joining Northwest Airlines in 1991, including Executive Vice President, Chief Corporate Officer and Senior Vice President and General Counsel. Mr. Steenland retired from Northwest Airlines upon its merger with Delta Air Lines, Inc. Prior to joining Northwest Airlines, Mr. Steenland was a senior partner at a Washington, D.C. law firm that is now part of DLA Piper. Mr. Steenland is currently a director of Delta Air Lines, Inc., where he serves on the Finance Committee, Digital River, Inc., where he serves on the Compensation Committee and Finance Committee, and International Lease Finance Corporation, an AIG subsidiary, where he is Non-Executive Chairman. In the past five years, Mr. Steenland has also served as a director of Northwest Airlines Corporation. Mr. Steenland was President and Chief Executive Officer of Northwest Airlines Corporation when it filed for Chapter 11 bankruptcy in 2005. In light of Mr. Steenland’s experience in managing large, complex, international institutions and his experience in restructuring as well as his professional experience in the airline industry, AIG’s Board has concluded that Mr. Steenland should be re-elected to the Board.

All of these nominees have lengthy direct experience in the oversight of public companies as a result of their service on AIG’s Board and/or those of other public companies and their involvement in the other organizations described above. This diverse and complementary set of skills, experience and backgrounds creates a highly qualified and independent Board of Directors.

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CORPORATE GOVERNANCE

GOVERNANCE

AIG’s Board regularly reviews corporate governance developments and modifies its Corporate Governance Guidelines, charters and practices from time to time. AIG’s Corporate Governance Guidelines are included as Appendix A. AIG’s Corporate Governance Guidelines and the charters of the Audit Committee, the Compensation and Management Resources Committee, the Finance and Risk Management Committee, the Nominating and Corporate Governance Committee, and the Regulatory, Compliance and Public Policy Committee are available in the Corporate Governance section of AIG’s corporate website at www.aigcorporate.com or in print by writing to American International Group, Inc., 180 Maiden Lane, New York, New York 10038, Attention: Investor Relations.

AIG’s Director, Executive Officer and Senior Financial Officer Code of Business Conduct and Ethics and a Code of Conduct for employees are available, without charge, in the Corporate Governance section of AIG’s corporate website at www.aigcorporate.com or in print by writing to American International Group, Inc., 180 Maiden Lane, New York, New York 10038, Attention: Investor Relations. Any amendment to AIG’s Director, Executive Officer and Senior Financial Officer Code of Business Conduct and Ethics and any waiver applicable to AIG’s directors, executive officers or senior financial officers will be posted on AIG’s website within the time period required by the SEC and the NYSE.

Using the current AIG Director Independence Standards that are included with the Corporate Governance Guidelines as Annex A thereto, the Board, on the recommendation of the Nominating and Corporate Governance Committee, determined that Ms. Koellner, Ms. Nora Johnson and Messrs. Cornwell, Fitzpatrick, Layton, Lynch, Martinez, Miles, Henry Miller, Robert Miller, Offit, Rittenmeyer and Steenland are independent under NYSE listing standards and the AIG Director Independence Standards. In addition, Mr. Golub, who served as Chairman of the Board until July 2010, and Mr. Dammerman, who served on the Board in 2010 before the 2010 Annual Meeting of Shareholders, were independent under NYSE listing standards and the AIG Director Independence Standards.

In making the independence determinations, the Nominating and Corporate Governance Committee considered relationships arising from: (1) contributions by AIG to charitable organizations with which Ms. Nora Johnson and Mr. Offit or members of their immediate families are affiliated; and (2) in the case of certain directors, investments and insurance products provided to them by AIG in the ordinary course of business and on the same terms made available to third parties. None of these relationships exceeded the thresholds set forth in the AIG Director Independence Standards.

AIG’s current policy, as reflected in its By-laws, is that the role of the Chairman should be separate from that of the CEO and that the Chairman should be an independent director. AIG believes that this structure is optimal in AIG’s current situation because it permits the Chairman to deal with AIG’s various stakeholders while permitting the CEO to focus more on AIG’s business.

The Board oversees the management of risk through the complementary functioning of the Finance and Risk Management Committee and the Audit Committee and interaction with other committees of the Board. The Finance and Risk Management Committee oversees AIG’s enterprise risk management as one of its core responsibilities while the Audit Committee reviews the guidelines and policies governing the process by which AIG assesses and manages risk and considers AIG’s major risk exposures and how they are monitored and controlled. The Chairmen of the two committees then coordinate with each other and the Chairmen of the other committees of the Board to help ensure that each committee has received the information that it needs to carry out its responsibilities with respect to risk management. Both the Finance and Risk Management Committee and the Audit Committee report to the Board with respect to any notable risk management issues.

There were twenty-five meetings of the Board during 2010. The non-management directors meet in executive session, without any management directors present, in conjunction with each regularly scheduled Board meeting. Mr. Golub, as Non-Executive Chairman of the Board, presided at the executive sessions before his departure in July 2010 and Mr. Robert Miller, as Non-Executive Chairman of the Board, presided at the executive sessions after July 14, 2010. For 2009 and 2010, all of the directors attended at least 75 percent of the aggregate of all meetings of the Board and of the committees of the Board on which they served. Under AIG’s Corporate Governance Guidelines, any director who, for two consecutive calendar years, attends fewer than 75 percent of the regular meetings of the Board and the meetings of all committees of which such director is a voting member will not be nominated for reelection at the annual meeting in the next succeeding calendar year, absent special circumstances that may be taken into account by the Board and the Nominating and Corporate Governance Committee in making its recommendations to the Board.

20


Directors are expected to attend the annual meeting of shareholders. All directors serving at the time of the 2010 Annual Meeting of Shareholders attended that meeting.

AIG has adopted policies on reporting of concerns regarding accounting and other matters and on communicating with non-management directors. These policies are available in the Corporate Governance section of AIG’s corporate website at www.aigcorporate.com. Interested parties may make their concerns known to the non-management members of AIG’s Board of Directors as a group or the other members of the Board of Directors by writing in care of Special Counsel and Secretary to the Board, American International Group, Inc., 180 Maiden Lane, New York, New York 10038 or by email to: boardofdirectors@aig.com.

21


REPORT OF THE NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

Overview

The role of the Nominating and Corporate Governance Committee is to identify individuals qualified to become Board members and recommend these individuals to the Board for nomination as members of the Board and its committees, to advise the Board on corporate governance matters and to oversee the evaluation of the Board and its committees.

Committee Organization

Committee Charter. The Nominating and Corporate Governance Committee’s charter is available in the Corporate Governance section of AIG’s corporate website at www.aigcorporate.com.

Independence. The Board of Directors has determined that each member of the Nominating and Corporate Governance Committee is independent, as required by NYSE listing standards.

Conduct of meetings and governance process. During 2010, the Nominating and Corporate Governance Committee held seven meetings. In discussing governance initiatives and in preparation for meetings, the Chairman of the Board, the Chairman of the Nominating and Corporate Governance Committee and the Special Counsel and Secretary to the Board of Directors met and consulted frequently with the other Committee and Board members.

Board Membership and Composition

Election of Messrs. Layton and Rittenmeyer. On January 6, 2011, the Board, on the recommendation of the Nominating and Corporate Governance Committee, elected Donald H. Layton and Ronald A. Rittenmeyer as directors, effective upon the Recapitalization Closing. Prior to the Recapitalization Closing, Messrs. Layton and Rittenmeyer served as directors of AIG pursuant to the exercise by the Department of the Treasury, as sole holder of the AIG Series E Preferred Stock and the AIG Series F Preferred Stock, of its right to elect additional directors to the Board. Upon the Recapitalization Closing, the AIG Series E Preferred Stock and the AIG Series F Preferred Stock were cancelled, and Messrs. Layton and Rittenmeyer would no longer have been directors of AIG. The Board determined, on the recommendation of the Nominating and Corporate Governance Committee, that it was advisable and in the best interests of AIG and its shareholders to provide for the continued service of Messrs. Layton and Rittenmeyer as directors of AIG. See “Election of Directors” above and “Nomination and Election of Directors” below for more information regarding the nomination and election of Messrs. Layton and Rittenmeyer at the 2011 Annual Meeting of Shareholders.

Nomination and Election of Directors. The Nominating and Corporate Governance Committee evaluated and recommended to the Board of Directors the fourteen nominees discussed under “Election of Directors” that are standing for election at the 2011 Annual Meeting of Shareholders, based on the criteria set forth in AIG’s Corporate Governance Guidelines. A description of the nominees recommended by the Nominating and Corporate Governance Committee is set forth under “Election of Directors.” The process for identification of director nominees when standing for election for the first time is provided below in “Committees—Nominating and Corporate Governance Committee.”

Nomination of Messrs. Cornwell and Fitzpatrick. The Nominating and Corporate Governance Committee evaluated and recommended to the Board that Messrs. Cornwell and Fitzpatrick be nominated for election to the Board. Both nominees were brought to the Committee’s attention by Korn/Ferry International, an executive search firm the Committee engaged to assist it in identifying potential director nominees. The Committee believes that Mr. Cornwell brings further expertise to the Board in finance, restructuring and the financial services industry, while Mr. Fitzpatrick brings his broad experience in the insurance and reinsurance industry to the Board. The Board determined, on the recommendation of the Nominating and Corporate Governance Committee, to nominate Messrs. Cornwell and Fitzpatrick for election to the Board at the 2011 Annual Meeting of Shareholders. For more information on the experiences and backgrounds of Messrs. Cornwell and Fitzpatrick, see “Election of Directors.”

Independence. The Board of Directors, on the recommendation of the Nominating and Corporate Governance Committee, determined that each of AIG’s thirteen non-management directors or director nominees is independent within the meaning of the NYSE listing standards. Mr. Benmosche is the only director or director nominee who holds an AIG management position and, therefore, is not an independent director.

Diversity Consideration. The Nominating and Corporate Governance Committee does not have a specific diversity policy. Rather, the Nominating and Corporate Governance Committee considers diversity in terms of

22


minority status and sex as factors in evaluating director candidates and also considers diversity in the broader sense of how a candidate’s experience and skills could assist the Board in light of the Board’s then composition.

Conclusion

During 2010, the Nominating and Corporate Governance Committee performed its duties and responsibilities under the Nominating and Corporate Governance Committee charter.

 

 

 

 

 

Nominating and Corporate Governance Committee
American International Group, Inc.
     
George L. Miles, Jr., Chairman
Donald H. Layton
Arthur C. Martinez
Suzanne Nora Johnson

23


COMMITTEES

The following table sets forth the current membership on each standing committee of the Board and the number of committee meetings held in 2010. Mr. Benmosche does not serve on any committees of the Board. Mr. Golub was Chairman of the Board from August 6, 2009 until he resigned on July 14, 2010. From June 30, 2009 until April 7, 2010, Mr. Golub also served as a member of the Compensation and Management Resources Committee and the Nominating and Corporate Governance Committee. On July 14, 2010, Mr. Robert Miller became Chairman of the Board. From April 7, 2010 to July 14, 2010, he was a member of the Audit Committee and from July 30, 2009 to July 14, 2010, he was a member of the Finance and Risk Management Committee and the Regulatory, Compliance and Public Policy Committee. During their respective tenures as Chairman of the Board, Mr. Golub was and Mr. Robert Miller is an ex-officio member of each Committee. Mr. Layton became a member of the Board on April 1, 2010 and a member of the Audit Committee and the Nominating and Corporate Governance Committee on April 7, 2010. Mr. Martinez became Chairman of the Compensation and Management Resources Committee on March 1, 2010. From June 30, 2009 until April 7, 2010, Mr. Martinez also served as a member of the Audit Committee. Mr. Henry Miller became a member of the Board, the Finance and Risk Management Committee and the Regulatory, Compliance and Public Policy Committee on April 7, 2010. Mr. Rittenmeyer became a member of the Board on April 1, 2010 and a member of the Audit Committee and the Compensation and Management Resources Committee on April 7, 2010.

 

 

 

 

 

 

 

 

 

 

 

Director

 

Audit
Committee

 

Compensation
and
Management
Resources
Committee

 

Finance
and Risk
Management
Committee

 

Nominating
and
Corporate
Governance
Committee

 

Regulatory,
Compliance
and Public Policy
Committee

 

Laurette T. Koellner

 

 

 

 

P

 

 

 

 

 

 

 

P

(C)

 

 

Donald H. Layton

 

 

P

***

 

 

 

 

 

 

 

P

***

 

 

 

 

Christopher S. Lynch

 

 

P

(C)

 

 

 

 

 

P

 

 

 

 

 

 

Arthur C. Martinez

 

 

 

 

P

(C)**

 

 

 

 

 

P

 

 

 

 

George L. Miles, Jr.

 

 

P

 

 

 

 

 

 

 

P

(C)

 

 

 

 

Henry S. Miller

 

 

 

 

 

 

P

***

 

 

 

 

 

P

***

 

 

Robert S. Miller

 

 

 

*

 

 

 

 

*

 

 

 

 

*

 

 

 

 

*

 

 

 

 

*

 

 

Suzanne Nora Johnson

 

 

 

 

P

 

 

 

 

 

P

 

 

 

 

Morris W. Offit

 

 

 

 

 

 

P

(C)

 

 

 

 

 

P

 

 

Ronald A. Rittenmeyer

 

 

P

***

 

 

 

P

***

 

 

 

 

 

 

 

 

Douglas M. Steenland

 

 

 

 

 

 

P

 

 

 

 

 

P

 

 

Number of meetings in 2010

 

 

 

14

 

 

 

 

13

 

 

 

 

12

 

 

 

 

7

 

 

 

 

5

 

P = Member
C = Chairman


 

 

*

 

 

 

Mr. Robert Miller is an ex-officio, non-voting member.

 

**

 

 

 

Mr. Dammerman served as Chairman of the Compensation and Management Resources Committee until February 28, 2010.

 

***

 

 

 

Member since April 7, 2010.

Audit Committee

The Audit Committee, which held fourteen meetings during 2010, assists the Board in its oversight of AIG’s financial statements and compliance with legal and regulatory requirements, the qualifications and performance of AIG’s independent registered public accounting firm and the performance of AIG’s internal audit function. As part of these oversight responsibilities, the Audit Committee discusses with senior management the guidelines and policies by which AIG assesses and manages risk. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of AIG’s independent registered public accounting firm. In its oversight of AIG’s internal audit function, the Audit Committee also is involved in performance reviews and determining compensation of AIG’s chief internal auditor. The Audit Committee’s assistance in the Board of Directors’ oversight of AIG’s compliance with legal and regulatory requirements

24


primarily focuses on the effect of such matters on AIG’s financial statements, financial reporting and internal control over financial reporting. In considering AIG’s compliance with legal and regulatory requirements, the Audit Committee also takes into account the oversight of legal and regulatory matters by the Regulatory, Compliance and Public Policy Committee.

The Board has determined, on the recommendation of the Nominating and Corporate Governance Committee, that all members of the Audit Committee are independent under both NYSE listing standards and SEC rules. The Board has also determined, on the recommendation of the Nominating and Corporate Governance Committee, that all members of the Audit Committee are financially literate and have accounting or related financial management expertise, each as defined by NYSE listing standards, and are audit committee financial experts, as defined under SEC rules. Although designated as audit committee financial experts, no member of the Committee is an accountant for AIG or, under SEC rules, an “expert” for purposes of the liability provisions of the Securities Act of 1933, as amended (the Securities Act), or for any other purpose.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee held seven meetings in 2010. The Board has determined that all members of the Nominating and Corporate Governance Committee are independent under NYSE listing standards. The primary responsibilities of the Nominating and Corporate Governance Committee are to identify and recommend individuals to the Board of Directors for nomination, election or appointment as members of the Board and its committees, to advise the Board on corporate governance matters and to oversee the evaluation of the Board and its committees.

The AIG Corporate Governance Guidelines include characteristics that the Nominating and Corporate Governance Committee considers important for nominees for director and information for shareholders with respect to director nominations. The Nominating and Corporate Governance Committee will consider director nominees recommended by shareholders and will evaluate shareholder nominees on the same basis as all other nominees. Shareholders who wish to submit nominees for director for consideration by the Nominating and Corporate Governance Committee for election at the 2012 Annual Meeting of Shareholders may do so by submitting in writing such nominees’ names, in compliance with the procedures described in “Other Matters—Shareholder Proposals for 2012 Annual Meeting” in this Proxy Statement.

Compensation and Management Resources Committee

The Compensation and Management Resources Committee, which held thirteen meetings during 2010, is responsible for reviewing and approving the compensation awarded to AIG’s Chief Executive Officer (subject to ratification or approval by the Board) and to the other senior executives under its purview, including the performance measures and goals relevant to that compensation. The Compensation and Management Resources Committee is also responsible for making recommendations to the Board with respect to AIG’s compensation programs for senior executives and other employees, for evaluating, in conjunction with AIG’s Chief Risk Officer, any risks posed to AIG by its compensation programs and whether such compensation programs encourage AIG’s senior executive officers to take unnecessary and excessive risks that threaten the value of AIG, and for oversight of AIG’s management development and succession planning programs. These responsibilities, which may not be delegated to persons who are not members of the Compensation and Management Resources Committee, are set forth in the Committee’s charter, which is available in the Corporate Governance section of AIG’s corporate website at www.aigcorporate.com.

Seventeen key employees are currently under the purview of the Compensation and Management Resources Committee, including all of the current executive officers named in the 2010 Summary Compensation Table. Additionally, because of AIG’s current circumstances, the Committee reviews certain actions for two other groups of employees (whether or not they are under the purview of the Committee): Senior Partners and the 100 most highly compensated employees who fall within the purview of the Special Master for TARP Executive Compensation. Mr. Benmosche participates in meetings of the Compensation and Management Resources Committee and makes recommendations with respect to the annual compensation of employees under the Committee’s purview other than himself. Pursuant to AIG’s By-laws, the Board ratifies or approves the determination of the Compensation and Management Resources Committee as to the compensation paid or to be paid to AIG’s Chief Executive Officer.

The Compensation and Management Resources Committee does not determine the compensation of the Board of Directors. The compensation of directors is recommended by the Nominating and Corporate Governance Committee and is approved by the Board.

25


To provide independent advice, the Compensation and Management Resources Committee engaged Frederic W. Cook & Co. (the Cook firm) as a consultant and has used the services of the Cook firm since 2005. The Compensation and Management Resources Committee directly engaged the Cook firm to provide independent, analytical and evaluative advice about AIG’s compensation programs for senior executives, including comparisons to industry peers and comparisons to “best practices” in general. A senior consultant of the Cook firm regularly attends Committee meetings and provides information on compensation trends along with specific views on AIG’s compensation programs. For services related to board and executive officer compensation, the Cook firm was paid $204,238 in 2010.

The Cook firm has provided advice to the Nominating and Corporate Governance Committee on AIG director compensation and market practices with respect to director compensation. The Cook firm reports directly to the Chairman of the Compensation and Management Resources Committee. Other than services provided to the Compensation and Management Resources Committee and the Nominating and Corporate Governance Committee, neither the Cook firm nor any of its affiliates provides any other services to AIG.

The Board has determined, on the recommendation of the Nominating and Corporate Governance Committee, that all members of the Compensation and Management Resources Committee are independent under NYSE listing standards.

Other Committees

The Finance and Risk Management Committee held twelve meetings in 2010. The Finance and Risk Management Committee assists the Board in its oversight responsibilities by reviewing and making recommendations to the Board with respect to AIG’s financial and investment policies, provides strategic guidance to management as to AIG’s capital structure, the allocation of capital as to its businesses, methods of financing its businesses and other related strategic initiatives. The Finance and Risk Management Committee also reports to and assists the Board in overseeing and reviewing information regarding AIG’s enterprise risk management, including the significant policies, procedures, and practices employed to manage liquidity risk, credit risk, market risk, operational risk and insurance risk. The Finance and Risk Management Committee’s charter is available in the Corporate Governance section of AIG’s corporate website at www.aigcorporate.com.

The Regulatory, Compliance and Public Policy Committee held five meetings in 2010. The Regulatory, Compliance and Public Policy Committee assists the Board in its oversight of AIG’s handling of legal, regulatory and compliance matters and reviews AIG’s position and policies that relate to current and emerging corporate social responsibility and political and public policy issues. The Regulatory, Compliance and Public Policy Committee’s charter is available in the Corporate Governance section of AIG’s corporate website at www.aigcorporate.com.

The Government Repayment Committee held 22 meetings in 2010. The Government Repayment Committee was established in April 2010 to evaluate a possible transaction with the Department of the Treasury, the FRBNY and the Trust to repay amounts owed under the FRBNY Credit Agreement and to permit the government to exit its ownership relationship with AIG. This evaluation ultimately resulted in the Government Repayment Committee recommending to the Board approval of an agreement in principle that was the basis for the Recapitalization. The Government Repayment Committee comprised Mr. Steenland as Chairman, Mr. Lynch, Mr. Henry Miller and Mr. Robert Miller (until he became Chairman of the Board, at which time he became an ex-officio member of the Committee), with Mr. Offit and the Chairman of the Board as ex-officio members.

26


COMPENSATION OF DIRECTORS

From January 2010 until April 2010, the annual retainer for each non-management director was $75,000. In 2010, the chairman of each committee received an annual committee retainer of $15,000, except the chairman of the Audit Committee, who received $25,000. For each other member of each committee, the annual committee retainer was $5,000. See “Committees” for information on current committee memberships and committee memberships during 2010.

In 2010, the Chairman of the Board received an additional annual retainer of $500,000 (the additional retainer was prorated for the part of the year that such director served as Chairman). The Chairman of the Board serves as an ex-officio member of all standing committees of the Board of which such director is not a member.

In April 2010, the Nominating and Corporate Governance Committee completed a review of AIG non-management director compensation. The review included the consideration of the level of non-management director compensation at other companies and the level of commitment required by the directors, given AIG’s current circumstances. As a result of this review, the Nominating and Corporate Governance Committee recommended to the Board, and the Board approved, effective April 1, 2010, the increase of the annual retainer to $150,000 and the addition of an annual award of Deferred Stock Units (DSUs) in an amount of $50,000. The other elements of non-management director compensation remained unchanged.

Each DSU provides that one share of AIG Common Stock will be delivered when a director ceases to be a member of the Board and includes dividend equivalent rights that entitle the director to a quarterly payment, in the form of DSUs, equal to the amount of any regular quarterly dividend that would have been paid by AIG if the shares of AIG Common Stock underlying the DSUs had been outstanding. DSUs granted after April 2010 were granted under the 2010 Stock Incentive Plan (2010 Stock Incentive Plan). DSUs granted prior to April 2010 were granted under the Amended and Restated 2007 Stock Incentive Plan (2007 Stock Incentive Plan).

Under director stock ownership guidelines, non-management directors should own at least 10,000 shares of AIG Common Stock (including deferred stock and DSUs).

Mr. Benmosche did not receive any compensation for his service as a director.

The following table contains information with respect to the compensation of the individuals who served as non-management directors of AIG for all or part of 2010.

2010 Non-Management Director Compensation

 

 

 

 

 

 

 

Non-Management Members of the Board in 2010

 

Fees
Earned or
Paid in
Cash(1)

 

Stock Awards(2)

 

Total

Dennis D. Dammerman

 

 

$

 

23,750

 

 

 

$

 

0

 

 

 

$

 

23,750

 

Harvey Golub

 

 

$

 

471,250

 

 

 

$

 

49,970

 

 

 

$

 

521,220

 

Laurette T. Koellner

 

 

$

 

151,250

 

 

 

$

 

49,970

 

 

 

$

 

201,220

 

Donald H. Layton

 

 

$

 

120,000

 

 

 

$

 

49,970

 

 

 

$

 

169,970

 

Christopher S. Lynch

 

 

$

 

161,250

 

 

 

$

 

49,970

 

 

 

$

 

211,220

 

Arthur C. Martinez

 

 

$

 

150,000

 

 

 

$

 

49,970

 

 

 

$

 

199,970

 

George L. Miles, Jr.

 

 

$

 

151,250

 

 

 

$

 

49,970

 

 

 

$

 

201,220

 

Henry S. Miller

 

 

$

 

120,000

 

 

 

$

 

49,970

 

 

 

$

 

169,970

 

Robert S. Miller

 

 

$

 

369,519

 

 

 

$

 

49,970

 

 

 

$

 

419,489

 

Suzanne Nora Johnson

 

 

$

 

141,250

 

 

 

$

 

49,970

 

 

 

$

 

191,220

 

Morris W. Offit

 

 

$

 

151,250

 

 

 

$

 

49,970

 

 

 

$

 

201,220

 

Ronald A. Rittenmeyer

 

 

$

 

120,000

 

 

 

$

 

49,970

 

 

 

$

 

169,970

 

Douglas M. Steenland

 

 

$

 

341,250

 

 

 

$

 

49,970

 

 

 

$

 

391,220

 


 

 

(1)

 

 

 

This column represents annual retainer fees, committee and committee chairman retainer fees. For Mr. Steenland, the amount includes $200,000, which is the annual retainer fee for his service as Non-Executive Chairman of ILFC. For Mr. Dammerman, the amount does not include (i) $107,972, which represents the value of the shares of AIG Common Stock that were delivered when he ceased to be a member of the Board in accordance with the terms of the DSUs (the grant of which has been previously reported) and (ii) $47,500, which represents the delivery of previously reported but deferred director compensation, the deferral of which ended when he ceased to be a member of the Board. For Mr. Golub, the amount does not include $46,433, which represents the value of the shares of AIG Common Stock that were delivered when he ceased to be a member of the Board, in accordance with the terms of the DSUs, the grant of which is

27


 

 

 

 

disclosed in this table under the Stock Awards column. For Messrs. Golub and Robert Miller, the amount includes a prorated portion of the additional annual retainer for serving as Chairman of the Board.

 

(2)

 

 

 

This column represents the grant date fair value of DSUs granted in 2010 to directors, based on the closing sale price of AIG Common Stock on the date of grant.

The following table sets forth information with respect to the option and stock awards outstanding at December 31, 2010 for the non-management directors of AIG.

Stock and Option Awards Outstanding at December 31, 2010

 

 

 

 

 

 

 

Non-Management Members of the Board in 2010

 

Option Awards(1)

 

Deferred
Stock(2)

 

Deferred
Stock Units(3)

Dennis D. Dammerman

 

 

 

0

 

 

 

 

0

 

 

 

 

0

 

Harvey Golub

 

 

 

0

 

 

 

 

0

 

 

 

 

0

 

Laurette T. Koellner

 

 

 

0

 

 

 

 

0

 

 

 

 

1,207

 

Donald H. Layton

 

 

 

0

 

 

 

 

0

 

 

 

 

1,207

 

Christopher S. Lynch

 

 

 

0

 

 

 

 

0

 

 

 

 

1,207

 

Arthur C. Martinez

 

 

 

0

 

 

 

 

0

 

 

 

 

1,207

 

George L. Miles, Jr.

 

 

 

250

 

 

 

 

90

 

 

 

 

1,465

 

Henry S. Miller

 

 

 

0

 

 

 

 

0

 

 

 

 

1,207

 

Robert S. Miller

 

 

 

0

 

 

 

 

0

 

 

 

 

1,207

 

Suzanne Nora Johnson

 

 

 

0

 

 

 

 

0

 

 

 

 

4,296

 

Morris W. Offit

 

 

 

250

 

 

 

 

90

 

 

 

 

1,465

 

Ronald A. Rittenmeyer

 

 

 

0

 

 

 

 

0

 

 

 

 

1,207

 

Douglas M. Steenland

 

 

 

0

 

 

 

 

0

 

 

 

 

1,207

 


 

 

(1)

 

 

 

Represents outstanding option awards made by AIG in 2006 and prior years. All options are exercisable, but have exercise prices far in excess of the value of AIG Common Stock at year-end 2010 ($57.62). The exercise price of the options ranges from $1,250.00 to $1,253.39.

 

(2)

 

 

 

No deferred stock was awarded in 2010. Deferred stock shown was awarded in 2007 and prior years. Receipt of deferred stock is deferred until the director ceases to be a member of the Board.

 

(3)

 

 

 

DSUs shown include DSUs awarded in 2010 and prior years, director’s fees deferred into DSUs and DSUs awarded as dividend equivalents. Receipt of shares of AIG Common Stock underlying DSUs is deferred until the director ceases to be a member of the Board.

COMPENSATION AND MANAGEMENT RESOURCES COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION

No member of the Compensation and Management Resources Committee has served as an officer or employee of AIG at any time or has any relationship with AIG requiring disclosure as a related-party transaction under SEC rules. During 2010, none of AIG’s executive officers served as a director of another entity, one of whose executive officers served on the Compensation and Management Resources Committee; and none of AIG’s executive officers served as a member of the compensation committee of another entity, one of whose executive officers served as a member of the Board of Directors of AIG.

28


OWNERSHIP OF CERTAIN SECURITIES

AIG Common Stock

The following table contains information regarding the only persons who, to the knowledge of AIG, beneficially own more than five percent of AIG Common Stock at January 31, 2011.

 

 

 

 

 

Name and Address

 

Shares of Common Stock
Beneficially Owned

 

Number

 

Percent

U.S. Department of the Treasury
c/o Timothy Massad
United States Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington D.C. 20220

 

 

 

1,655,037,962

 

 

 

 

92.2

%

 

The following table summarizes the ownership of AIG Common Stock by the current and nominee directors, by the current and former executive officers named in the 2010 Summary Compensation Table in “Executive Compensation—2010 Compensation” and by the directors and current executive officers as a group. None of the shares of AIG Common Stock listed in the following table have been pledged as security.

 

 

 

 

 

 

 

AIG Common Stock
Owned Beneficially as
of
January 31, 2011

 

Amount and Nature
of Beneficial
Ownership(1)(2)

 

Percent
of
Class

Robert H. Benmosche

 

 

 

90,846

 

 

 

 

.01

 

W. Don Cornwell

 

 

 

0

 

 

 

 

0

 

John H. Fitzpatrick

 

 

 

0

 

 

 

 

0

 

Peter D. Hancock

 

 

 

32,617

 

 

 

 

(3)

 

David L. Herzog

 

 

 

9,010

 

 

 

 

(3)

 

Laurette T. Koellner

 

 

 

1,207

 

 

 

 

(3)

 

Donald H. Layton

 

 

 

1,207

 

 

 

 

(3)

 

Christopher S. Lynch

 

 

 

1,207

 

 

 

 

(3)

 

Arthur C. Martinez

 

 

 

1,207

 

 

 

 

(3)

 

George L. Miles, Jr.

 

 

 

1,805

 

 

 

 

(3)

 

Henry S. Miller

 

 

 

1,207

 

 

 

 

(3)

 

Robert S. Miller

 

 

 

1,207

 

 

 

 

(3)

 

Kris P. Moor

 

 

 

20,931

 

 

 

 

(3)

 

Suzanne Nora Johnson

 

 

 

4,296

 

 

 

 

(3)

 

Morris W. Offit

 

 

 

5,256

 

 

 

 

(3)

 

Ronald A. Rittenmeyer

 

 

 

1,207

 

 

 

 

(3)

 

Douglas M. Steenland

 

 

 

1,207

 

 

 

 

(3)

 

Mark A. Wilson

 

 

 

141,450

 

 

 

 

.01

 

Jay S. Wintrob

 

 

 

162,195

 

 

 

 

.01

 

All Directors and Executive Officers of AIG as a group (27 individuals)

 

 

 

630,283

 

 

 

 

0.04

 


 

 

(1)

 

 

 

Amount of equity securities shown includes (i) shares of AIG Common Stock subject to options which may be exercised within 60 days as follows: Herzog — 8,204 shares, Miles — 250 shares, Moor — 17,244 shares, Offit — 250 shares, Wintrob — 20,744 shares and all directors and the former and current executive officers of AIG as a group — 78,693 shares; and (ii) shares receivable upon the exercise of warrants which may be exercised within 60 days as follows: Benmosche — 400 warrants, Herzog — 280 warrants, Moor — 1,283 warrants, Offit — 1,201 warrants, Wintrob — 49,231 warrants and all directors and the former and current executive officers of AIG as a group — 95,360 warrants; (iii) for non-management directors, shares granted to each non-employee director with delivery deferred until the director ceases to be a member of the Board as follows: Miles — 90 shares and Offit — 90 shares; and (iv) DSUs granted to each non-employee director with delivery of the underlying AIG Common Stock deferred until such director ceases to be a member of the Board as follows: Koellner — 1,207 shares, Layton — 1,207 shares, Lynch — 1,207 shares, Martinez — 1,207 shares, Miles — 1,465 shares, Henry Miller — 1,207 shares, Robert Miller — 1,207 shares, Nora Johnson — 4,296 shares, Offit — 1,465 shares, Rittenmeyer — 1,207 shares and Steenland — 1,207 shares.

 

(2)

 

 

 

Amount of equity securities shown also excludes the following securities owned by or held in trust for members of the named individual’s immediate family as to which securities such individual has disclaimed beneficial ownership: Hancock — 32 shares, Wintrob — 200 shares and all directors and current executive officers of AIG as a group — 1,331 shares.

 

(3)

 

 

 

Less than .01 percent.

29


AIG Series G Preferred Stock

The Department of the Treasury, c/o Timothy Massad, United States Department of the Treasury, 1500 Pennsylvania Avenue, NW, Washington D.C. 20220, holds all of the outstanding 20,000 shares of the AIG Series G Preferred Stock.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires directors, executive officers, and greater than ten percent holders of AIG Common Stock to file reports with respect to their ownership of AIG equity securities. Based solely on the review of the Forms 3, 4 and 5 and amendments thereto furnished to AIG and certain representations made to AIG, AIG believes that the only filing deficiency under Section 16(a) by its directors, executive officers, and greater than ten percent holders during 2010 was one late report filed by then-Executive Vice President, Mark A. Wilson, reporting the distribution of 3,721.4999 shares under the 2010 Stock Salary Plan.

RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

Transactions in 2011 with the Trust and the Department of the Treasury

For a discussion of the transactions between AIG, the Trust and the Department of the Treasury in 2010 and 2011, see “Relationships with the Federal Reserve Bank of New York, the AIG Credit Facility Trust and the United States Department of the Treasury.”

Co-Investments with AIG

AIG has established employee investment funds to permit selected employees to participate alongside AIG’s merchant banking, venture capital and similar funds. Such employee investment funds have a fee structure that is generally more favorable than that offered by AIG to non-employees. AIG employees who have invested in these funds include one former employee who was an executive officer during a part of 2010, one former employee who was an executive officer for all of 2010 but retired in 2011 and two of AIG’s current executive officers. These investment funds are managed by PineBridge Investments LLC, which was a wholly owned subsidiary of AIG until it was sold on March 26, 2010. There were no distributions from these funds in 2010. A current executive officer invested in a similar fund, the SunAmerica Venture Fund 2000, LP.

Related-Party Transactions Approval Policy

The Board of AIG has adopted a related-party transaction approval policy. Under this written policy, any transaction that involves more than $120,000 and would be required to be disclosed in AIG’s Proxy Statement, between AIG or any of its subsidiaries and any director or executive officer, or their related persons, must be approved by the Nominating and Corporate Governance Committee. In determining to approve a related-party transaction, the Nominating and Corporate Governance Committee will consider:

 

 

 

 

Whether the terms of the transaction are fair to AIG and on terms at least as favorable as would apply if the other party was not or did not have an affiliation with a director, executive officer or employee of AIG;

 

 

 

 

Whether there are demonstrable business reasons for AIG to enter into the transaction;

 

 

 

 

Whether the transaction would impair the independence of a director; and

 

 

 

 

Whether the transaction would present an improper conflict of interest for any director, executive officer or employee of AIG, taking into account the size of the transaction, the overall financial position of the director, executive officer or employee, the direct or indirect nature of the interest of the director, executive officer or employee in the transaction, the ongoing nature of any proposed relationship and any other factors the Nominating and Corporate Governance Committee or its chairman deems relevant.

30


EXECUTIVE COMPENSATION

REPORT OF THE COMPENSATION AND MANAGEMENT RESOURCES COMMITTEE

Overview

The Compensation and Management Resources Committee reviews and approves the compensation awarded to AIG’s Chief Executive Officer (subject to ratification or approval by the Board) and to the other key employees under its purview, oversees AIG’s compensation programs for key and other employees and makes recommendations to the Board where appropriate, oversees AIG’s management development and succession planning programs and produces this Report on annual compensation. In carrying out these responsibilities, our objective is to maintain responsible compensation practices that attract, develop and retain high performing senior executives and other employees.

Risk and Compensation Plans

AIG continues to enhance its risk management control environment, risk management processes and enterprise risk management functions. AIG’s compensation practices are essential parts of AIG’s approach to risk management, and the Committee regularly monitors AIG’s compensation programs to ensure they align with sound risk management principles. In March 2009, the Committee’s charter was amended to expressly include the Committee’s duty to meet periodically to discuss and review, in consultation with the Chief Risk Officer, the relationship between AIG’s risk management policies and practices and the incentive compensation arrangements applicable to senior executives.

Risk Assessment

As a TARP recipient, AIG must comply with the executive compensation requirements set forth in the TARP Standards for Compensation and Corporate Governance (the TARP Standards) and the interpretations of those standards by the Special Master for TARP Executive Compensation (the Special Master), who is appointed by the Secretary of the Treasury. To comply with these standards, the Committee must annually provide a narrative description of how the senior executive officer (SEO) compensation plans do not encourage the SEOs to take unnecessary and excessive risks that threaten the value of AIG (including how the SEO plans do not encourage behavior focused on short-term results rather than long-term value creation), the risks posed by the employee compensation plans and how these risks were limited (including how the employee compensation plans do not encourage behavior focused on short-term results rather than long-term value creation) and how AIG has ensured that the employee compensation plans do not encourage the manipulation of AIG’s reported earnings to enhance the compensation of any employee.

In accordance with these standards, the Committee instructed AIG’s Chief Risk Officer to conduct an assessment of AIG’s compensation plans. The Committee then met with AIG’s Chief Risk Officer on multiple occasions to discuss the assessment, to develop appropriate performance metrics and to further discuss, evaluate and review the compensation plans. The Committee also discussed the process with its independent consultant, the Cook firm, who participated in the Committee meetings in which the assessments were discussed and who advised that the process was thorough and well designed.

Senior Executive Officer Compensation Plans

The Committee reviewed, with AIG’s Chief Risk Officer, the SEO compensation plans and made all reasonable efforts to ensure that these plans do not encourage SEOs to take unnecessary and excessive risks that threaten the value of AIG. During the review, the Committee and the Chief Risk Officer focused on any features that could encourage behavior focused on short-term results rather than long-term value creation.

Our SEOs participate in compensation structures approved and/or determined by the Special Master, which generally consist of cash salary, equity-based awards (including “Stock Salary,” described under “Compensation Discussion and Analysis—Compensation Structure—Direct Compensation Components—Stock Salary,” and performance-based incentive compensation) as well as benefits categorized as “perquisites” or “other” compensation under the SEC rules that may not exceed specified limits set by the Special Master. AIG provides the SEOs with retirement benefits under various defined benefit and defined contribution plans, including AIG’s tax-qualified 401(k) plan, tax-qualified pension plan, Excess Retirement Income Plan and Supplemental Executive Retirement Plan. Certain of the SEOs also have balances under legacy nonqualified defined contribution plans. Pursuant to the Special Master’s determinations, the accrual of benefits under these

31


retirement plans, other than the tax-qualified plans, have been frozen for the SEOs, although they may continue to receive age and service credit for the purpose of vesting in previously accrued benefits. Because AIG received financial assistance, the SEOs may not receive severance or other benefits as a result of a termination of employment or a change of control during 2011.

As described in the Compensation Discussion and Analysis that follows, the Special Master approved the compensation structures for AIG’s SEOs and, in certain cases, amounts payable or potentially payable to them. The approved structures contain numerous features that emphasize long-term value creation and help prevent unnecessary or excessive risk-taking. The majority of compensation is performance-based and paid in equity. Such equity-based compensation is subject to transfer restrictions and, in certain cases, tied to repayment of AIG’s TARP financial assistance.

The approved structures include performance-based awards granted based on the achievement of objective performance criteria tailored to each individual. For the SEOs, therefore, we focused on developing and reviewing performance metrics in consultation with the Office of the Special Master, that encourage appropriate levels of risk-taking and emphasize behavior focused on long-term value creation. With a view towards proactive risk management, AIG established a working group (the Working Group) in 2010 to develop and review the SEOs’ 2010 performance metrics. The Working Group includes, among others, AIG’s Chief Risk Officer, Chief Financial Officer, director of Human Resources and director of the Internal Audit Division. The performance metrics of our CEO and CFO emphasized responsible management of the company’s assets, including goals such as setting appropriate relative priority between short-term profitability, long-term growth and risk mitigation; maintaining ratings; and establishing a technology architecture and plan for effective operation of critical control functions, including enterprise risk management and human resources. Such metrics are not tied directly to AIG’s reported earnings. The Working Group was also thoroughly engaged in the development of performance metrics for our other SEOs. These metrics included the achievement of risk management objectives, as recommended by AIG’s Chief Risk Officer, such as supporting a robust compliance framework and improving governance mechanisms through the appointment of chief risk officers at the business unit level.

The Committee retains discretion to reduce the amount of any incentive compensation on the basis of individual or company-wide performance, and all incentive compensation paid is subject to clawback if the payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria, or if the individual is terminated due to misconduct that occurred during the period in which the payment was earned.

Some SEOs also have outstanding awards under legacy long-term incentive plans, including the Senior Partners Plan, the Partners Plan and AIG’s 2005-2006 Deferred Compensation Profit Participation Plan. As the performance periods for such awards are complete, and the awards are fully earned but not yet vested, they do not encourage the SEOs to take unnecessary and excessive risks or behavior focused on achieving short-term results. In addition, some SEOs were granted retention awards in 2008. These awards were initially payable 60 percent on December 31, 2008 and 40 percent payable on December 31, 2009, and later extended voluntarily to April 2009 and April 2010, respectively. The April 2009 payment was further delayed by AIG as part of a general freeze on non-salary payments instituted early in 2009. The Office of the Special Master determined that, with respect to certain members of our Top 25 and Top 26-100, both as described under “Compensation Discussion and Analysis—Executive Summary” (and, together, the Top 100), further restructuring of these retention awards would not be consistent with the public interest. The Committee considered the risks of these awards as part of the award process and believes retention of critical senior executive talent is a crucial part of restoring the value of AIG.

Employee Compensation Plans

The Committee reviewed with AIG’s Chief Risk Officer the employee compensation plans to eliminate any features that would encourage the manipulation of reported earnings of AIG to enhance the compensation of any employee and made all reasonable efforts to limit any unnecessary risks these plans pose to AIG. As recommended by AIG’s Chief Risk Officer, the Committee focused its review of employee compensation plans on incentive-based compensation plans and their administration. Information for 358 plans covering over 100,429 employees was collected, with programs applicable to the same business unit and containing similar design features sometimes combined to facilitate review. The Committee’s review was guided by the work of AIG human resources professionals, who identified the incentive plans and received training from AIG risk officers to develop a profile for each plan based on evaluation of features such as number of participants, mix of

32


incentive pay compared to salary, performance and vesting periods and performance goals. Human resources then assigned the plans to one of four risk quadrants: low risk (low business risk/low design risk), intermediate risk (low business risk/high design risk), intermediate risk (high business risk/low design risk) or high risk (high business risk/high design risk). After taking into account the analysis carried out by AIG human resources, risk officers reviewed any plans classified as high risk or intermediate risk, as well as a sampling of low risk plans. They produced a final classification of the plans as follows:

 

 

 

 

 

 

 

 

 

 

 

Business Unit

 

Low Risk

 

Intermediate Risk
(low business risk/
(high design risk)

 

Intermediate Risk
(high business risk/
low design risk)

 

High Risk

 

Total

Corporate

     

34

       

0

       

0

       

0

       

34

 

Asset Mgmt
Group

 

 

 

1

 

 

 

 

0

 

 

 

 

1

 

 

 

 

0

 

 

 

 

2

 

Financial
Services

     

28

       

0

       

0

       

0

       

28

 

Chartis

 

 

 

188

 

 

 

 

0

 

 

 

 

0

 

 

 

 

0

 

 

 

 

188

 

SAFG

     

86

       

1

       

0

       

0

       

87

 

UGC

 

 

 

7

 

 

 

 

0

 

 

 

 

0

 

 

 

 

0

 

 

 

 

7

 

Nan Shan

     

12

       

0

       

0

       

0

       

12

 
   

 

 

 

 

 

 

 

 

 

Total

 

 

 

356

 

 

 

 

1

 

 

 

 

1

 

 

 

 

0

 

 

 

 

358

 

During 2010, some plans were eliminated through divestitures, termination and consolidation with other plans. Plans added during 2010 were mainly plans that facilitate the reporting and tracking of compensation prescribed under the TARP Standards, completion plans approved by the Committee to promote the achievement of transactions to repay the U.S. taxpayer and plans added to Chartis as a result of its acquisition of Fuji Fire and Marine Insurance Co., Ltd. These additional plans, which the Committee reviewed with the Chief Risk Officer, are all classified as low risk.

AIG also actively targeted plans to reduce risky features, either through termination of the plan where legally feasible or restructuring of the plan. In 2010, no plans were categorized as high risk and the number of intermediate risk plans was reduced from eleven in 2009 to two in 2010.

Most plans were categorized as low risk. While these plans vary in structure and payout, the incentive pay is generally discretionary or based on strict performance parameters. Other features incorporated into these plans that mitigate risk include capped payouts, consideration of qualitative aspects of performance, multi-year vesting periods and use of equity and deferrals.

Two plans were classified as intermediate risk, and we concluded that these plans were within tolerable risk limits. In the case of the low business risk/high design risk plan, features such as the ability to set reserves and a multi-year vesting period function as sufficient mitigants. Similarly, the high business risk/low design risk plan contains design features, including oversight from a steering committee and a requirement that all payments under the plan be approved by AIG’s Chief Risk Officer and Chief Financial Officer, which mitigate risk. The Committee will continue to monitor these plans with the Chief Risk Officer.

The Chief Risk Officer also provided detailed recommendations for certain business units, including the appointment of chief risk officers at the business, the implementation of special goals and the use of risk-adjusted performance metrics. These recommendations are currently being addressed. In addition, the Committee, together with the Chief Risk Officer and the Working Group, developed and reviewed separately the performance metrics used to grant incentive awards to the Top 25 (other than the SEOs, whose performance metrics are discussed above) and the Top 26-100 under the compensation structures approved by the Special Master, and we determined that these metrics do not pose unnecessary risks to AIG or encourage the manipulation of AIG’s reported earnings to enhance the compensation of any of the executives. We concluded that AIG has made major strides over the past year in the oversight of its compensation plans and in ensuring that these plans do not expose AIG to unnecessary and excessive risks that threaten the value of AIG. Nonetheless, AIG will continue to enhance its risk management by utilizing lessons learned from 2010 to establish 2011 performance metrics, develop an approval process for proposed new compensation plans and work with the chief risk officers at the business unit level to implement specific risk management goals.

33


Certifications

The Compensation Discussion and Analysis that follows discusses the principles the Committee has been using to guide its compensation decisions for senior executives. The Committee has reviewed and discussed the Compensation Discussion and Analysis with management. The Cook firm has also reviewed and discussed the Compensation Discussion and Analysis on behalf of the Committee with management and outside counsel. Based on such review and discussions, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and in AIG’s 2010 Annual Report on Form 10-K.

The Committee certifies that all incentive compensation granted in respect of 2010 to the SEOs and Top 100 was awarded pursuant to objective performance criteria developed and reviewed by the Committee that met the requirements of the Special Master.

In addition, the Committee certifies the following:

 

1.

 

 

 

It has reviewed with the Chief Risk Officer the SEO compensation plans and has made all reasonable efforts to ensure that these plans do not encourage SEOs to take unnecessary and excessive risks that threaten the value of AIG;

 

2.

 

 

 

It has reviewed with the Chief Risk Officer the employee compensation plans and has made all reasonable efforts to limit any unnecessary risks these plans pose to AIG; and

 

3.

 

 

 

It has reviewed the employee compensation plans to eliminate any features of these plans that would encourage the manipulation of reported earnings of AIG to enhance the compensation of any employee.

Compensation and Management Resources Committee     
American International Group, Inc.

Arthur C. Martinez, Chairman
Laurette T. Koellner
Suzanne Nora Johnson
Ronald A. Rittenmeyer

34


COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

By all accounts, 2010 was a year of significant progress for AIG. The year ended with AIG ready to complete the restructuring of its government ownership. During 2010, AIG raised more than $37 billion in cash and securities, primarily through the initial public offering (IPO) of AIA and the sale of ALICO. During this same period, AIG experienced growth at both Chartis and SunAmerica Financial Group (SunAmerica), its two most significant business operations. AIG also started to regain investor confidence, tapping the credit markets after a more than two-year absence.

These were the types of objectives that the Committee emphasized as part of its 2010 compensation program. AIG is committed to compensation practices that allow it to attract and retain capable and experienced professionals and motivate them to achieve strong business results, both in the short and long term. AIG is now a stronger company than at the end of 2009 and is on the road to independence from government support and a return to its former prominence as a leader in insurance services worldwide.

AIG has been subject to limits on its executive compensation program beginning with the receipt of government support in 2008 and, since 2009, has been subject to the more restrictive limits on the structure and amounts of compensation established by statute. Accordingly, the 2010 pay structures for AIG’s senior executive officers and 20 other most highly paid employees (based on 2009 compensation) were prescribed by law, as interpreted by the Special Master. The Special Master also determined the specific compensation structures and amounts payable for this “Top 25” group, which included Messrs. Benmosche, Herzog, Moor and Wintrob. The determined compensation for AIG’s Top 25 group was publicly announced by the Special Master in March 2010.

The Special Master also determined the pay structure (but not the amounts) of the remainder of AIG’s 100 most highly compensated employees (based on 2009 compensation) and executive officers. Mr. Hancock, who joined AIG in February 2010, was a member of this “Top 26-100” group for 2010 due to his position as an executive officer. The Special Master approved and publicly announced a compensation structure for Mr. Hancock in February 2010. The structures determined for other members of the Top 26-100 group were publicly announced by the Special Master in April 2010.

The Committee’s executive compensation proposals were made in the context of the legal restrictions discussed above and, for the Top 25, these proposals were then reviewed and modified by the Special Master’s determinations. As a result, the Committee’s decisions for the Top 25 were effectively confined to approving year-end compensation awards up to the amounts allowed by the Special Master. The Committee made these and other executive compensation decisions in the context of the exceptional results achieved by AIG’s executive team during 2010 relative to previously established performance goals developed in consultation with the Special Master’s Office.

Approved Compensation

The following table shows the approved 2010 annualized compensation rates and target incentive amounts for Messrs. Benmosche, Herzog, Hancock, Moor and Wintrob as determined by the Special Master and the actual incentive awards for 2010 as determined by the Committee for these executives. We refer to the executives listed on this table as AIG’s “current named executives.”

 

 

 

 

 

 

 

 

 

 

 

 

 

Structure and Maximum Amounts
Determined by Special Master(1)

 

Structure
Determined by
Special Master

 

Robert H.
Benmosche

 

David L.
Herzog

 

Kris P.
Moor

 

Jay
Wintrob

 

Peter
Hancock

2010 Special Master Approved Structure

 

 

 

 

 

 

 

 

 

 

Cash Salary(2)

 

 

$

 

3,000,000

 

 

 

$

 

495,000

 

 

 

$

 

700,000

 

 

 

$

 

495,000

 

 

 

$

 

1,500,000

 

Stock Salary(2)

 

 

$

 

4,000,000

 

 

 

$

 

4,485,000

 

 

 

$

 

5,000,000

 

 

 

$

 

5,149,000

 

 

 

$

 

2,400,000

 

Target Incentive(3)

 

 

$

 

3,500,000

 

 

 

$

 

1,020,000

 

 

 

$

 

1,900,000

 

 

 

$

 

1,156,000

 

 

 

$

 

3,600,000

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

$

 

10,500,000

 

 

 

$

 

6,000,000

 

 

 

$

 

7,600,000

 

 

 

$

 

6,800,000

 

 

 

$

 

7,500,000

 

2010 Committee
Awarded Incentive

% of Target

 

100%

 

100%

 

90%

 

100%

 

120%

Amount(3)

 

 

$

 

3,500,000

 

 

 

$

 

1,020,000

 

 

 

$

 

1,710,000

 

 

 

$

 

1,156,000

 

 

 

$

 

4,320,000

 

35



 

 

(1)

 

 

 

The manner in which the Special Master and the Committee administered 2010 compensation for the current named executives is substantially different from the manner in which SEC rules require the compensation to be presented in the 2010 Summary Compensation Table. For further discussion, see “2010 Compensation—Summary Compensation Table.”

 

(2)

 

 

 

The approved cash salary and Stock Salary rates for Messrs. Benmosche and Hancock were effective as of their dates of hire, August 10, 2009 and February 8, 2010, respectively. The approved cash salary and Stock Salary rates for Messrs. Herzog, Moor and Wintrob became effective January 1, 2010, the effective date required by the Special Master’s determination.

 

(3)

 

 

 

No cash incentives were permitted for Messrs. Benmosche, Herzog, Moor and Wintrob, and incentives were instead required to be paid in unvested “TARP RSUs” (described under “Compensation Structure—Direct Compensation Components—2010 Incentive Compensation”) up to the maximum (target) amounts approved by the Special Master. Mr. Hancock’s incentive was paid in a mix of cash and restricted stock designed to comply with the Special Master’s structural requirements for the Top 26-100.

For 2011, each of the current named executives is a Top 25 employee and is subject to the heightened restrictions that apply to that group. The Special Master has not yet finally determined the 2011 structures and maximum amounts for the current named executives, although AIG has been in regular discussions with the Special Master.

This Compensation Discussion and Analysis also discusses the compensation of Mr. Wilson, who served as Chief Executive Officer and President of AIA Group Limited (AIA) during a portion of 2010. (AIA was a subsidiary of AIG until its IPO in the fourth quarter of 2010.) Mr. Wilson’s compensation is discussed separately. His cash salary and Stock Salary through AIA’s IPO in October 2010 were determined by AIG, but his compensation after the offering, including the form and amount of his 2010 year-end compensation, was determined by AIA after consultation with AIG. Mr. Wilson separated from AIA in January 2011, and AIA, after discussion and consultation with AIG, determined his separation entitlements. Mr. Wilson and the current named executives are, together, our “named executive officers.”

Objectives and Design of Compensation Framework

In 2010, the Committee approved a comprehensive compensation philosophy that centers around the following:

 

 

 

 

Attracting and retaining the strongest employees for AIG’s various business needs by providing competitive and consistent compensation opportunities.

 

 

 

 

Creating a culture of performance management and pay-for-performance by providing total direct compensation opportunities that reward the performance of AIG, AIG’s business units and individual employees.

 

 

 

 

Managing total direct compensation to provide a market-competitive, performance driven structure through a four-part program that takes into account base salary, annual incentives, long-term incentives and benefits and perquisites.

 

 

 

 

Motivating all AIG employees to achieve sustainable increases in AIG’s “intrinsic value,” which represents a balance of profitability, growth and risk, to drive long-term value creation for shareholders.

 

 

 

 

Aligning the long-term economic interests of key employees with those of shareholders by ensuring that a meaningful component of each key employee’s compensation is represented by AIG securities.

 

 

 

 

Avoiding incentives that encourage employees to take unnecessary or excessive risks that could threaten the value of AIG by appropriately balancing risk and reward as well as rewarding both annual and long-term performance.

 

 

 

 

Maintaining strong corporate governance practices by meeting evolving standards of compensation governance and complying with regulations applicable to employee compensation.

These objectives apply enterprise-wide, but we are required to implement them differently for our current named executives for so long as we are subject to the statutory compensation restrictions. In particular, the Special Master was required to determine the compensation structure for each of the current named executives (and, in the case of Messrs. Benmosche, Herzog, Moor and Wintrob, amounts payable or potentially payable) and to conclude that the compensation structures will not result in payments that are inconsistent with the purposes of Section 111 of the Emergency Economic Stabilization Act of 2008 (EESA) or TARP, and will not

36


otherwise be contrary to the public interest. In doing so, the Special Master must consider the following six principles:

 

 

 

 

Risk. Compensation should avoid incentives that encourage employees to take unnecessary or excessive risks that could threaten the value of AIG.

 

 

 

 

Taxpayer Return. Compensation should reflect the need for AIG to remain a competitive enterprise and to retain and recruit talented employees so that AIG will ultimately be able to repay its TARP obligations.

 

 

 

 

Appropriate Allocation. Compensation should be appropriately allocated to different components, such as salary and short- and long-term incentives, and forms, such as cash and equity, based on the role of each employee and other relevant circumstances.

 

 

 

 

Performance-based Compensation. An appropriate portion of compensation should be performance-based, and the performance metrics should be measurable, enforceable, and actually enforced if not met.

 

 

 

 

Comparable Structures and Payments. Compensation should be consistent with compensation for executives in similar positions at entities that are similarly situated, including at financially distressed institutions.

 

 

 

 

Employee Contributions to AIG’s Value. Compensation should reflect current and prospective contributions of the employee to AIG’s value.

During the period that compensation for AIG employees is subject to the determinations of the Special Master, the Committee’s approach for those employees also will focus on these principles.

The Special Master had discretion to determine the appropriate weight or relevance of each principle, depending on his views of the facts and circumstances surrounding the compensation structure or payment for a particular employee. To the extent that two or more principles are inconsistent in a particular situation, the Special Master exercised his discretion to determine the relative weight to be accorded to each principle.

In the course of applying these principles, the Special Master was permitted to take into account other compensation structures and other compensation earned, accrued, or paid, including compensation and compensation structures that are not subject to the restrictions of EESA. For example, the Special Master was permitted to consider payments by AIG under valid contracts entered into before the enactment of EESA.

As required by EESA, AIG held a non-binding shareholder advisory vote at its 2010 Annual Meeting of Shareholders to approve the compensation of AIG’s named executives. This shareholder resolution was approved by over 97 percent of the votes cast. Although the Committee reviewed the outcome of the vote, the result did not impact compensation decisions in light of the authority of the Special Master to determine the specific compensation structures and/or amounts for AIG’s named executives.

Compensation Structure—Direct Compensation Components

Cash Salary. In 2009 and 2010, the Special Master determined that compensation for Top 25 and Top 26-100 employees should be primarily performance-based. He therefore required that cash salaries be generally limited to $500,000, except in certain exceptional cases. AIG’s historical practice has been to pay a limited portion of overall compensation in the form of base salary. However, under the prescribed structure for the Top 25, cash salary is the only source of liquid compensation AIG can provide to the Top 25 that is not dependent on the future performance of AIG securities. As a result, the limitation on cash salary has resulted in cash compensation opportunities for members of the Top 25 in 2009 and 2010 that are lower than ever before, as a percentage of total compensation, and that are significantly lower than AIG’s competitors.

Stock Salary. As a result of the Special Master’s determinations, in 2009, AIG implemented a program of regular grants of vested stock or units that has become generally referred to as “Stock Salary.” The ultimate value of Stock Salary is determined by the value of AIG Common Stock or a basket of AIG Common Stock and debt securities over a period of years, and the Special Master has therefore determined that this compensation is both performance-based and consistent with the long-term interest of shareholders. In large part, Stock Salary takes the place of what would otherwise be annual and long- term cash, stock and performance-based incentive programs.

Stock Salary generally takes the form of regular, semi-monthly grants of immediately vested stock or units. The amount of stock or units awarded on each grant date is based on the dollar value of the Stock Salary earned over the period since the preceding grant date. Furthermore, each grant of Stock Salary is subject to transfer or

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payment restrictions over a multi-year period. The periods of restriction for Stock Salary paid to AIG’s current named executives in 2010 are as follows:

 

 

 

 

For Mr. Benmosche, restrictions will lapse on the fifth anniversary of the date of hire.

 

 

 

 

For Messrs. Herzog, Hancock, Moor, and Wintrob, the restrictions will lapse on one-third of the Stock Salary each year, starting on the first anniversary of grant.

The 2010 determination permitted AIG to use a new form of Stock Salary based on a basket of AIG Common Stock and debt securities designed to serve as a proxy for AIG’s long-term value. In May 2010, final terms for long-term performance units (LTPUs) based on a basket of AIG Common Stock and debt securities were approved by the Special Master, and the Committee determined to pay 2010 Stock Salary in LTPUs for a group of senior employees including Messrs. Herzog, Hancock, Moor and Wintrob. Grants of LTPU-based Stock Salaries were then made to Messrs. Herzog, Moor and Wintrob with retroactive effect from January 1, 2010 and to Mr. Hancock with retroactive effect from his date of hire on February 8, 2010. The grant date notional value of an LTPU is $1,000, representing 20 percent AIG Common Stock and 80 percent debt securities by value. The amount of LTPUs awarded on each grant date is determined by dividing the dollar value of the Stock Salary earned over the period since the preceding grant date by $1,000. At any other time, the value of an LTPU equals the value of the underlying securities, determined by reference to the trailing ten-trading-day volume weighted average price as reported by the Financial Industry Regulatory Authority, Inc. (in the case of the debt securities) or the closing sale price on the NYSE (in the case of the AIG Common Stock). The 2010 determination for Mr. Benmosche required that grants of Stock Salary continue to be made on the terms specified in his August 16, 2009 letter agreement with AIG. The amount of restricted stock awarded to Mr. Benmosche on each grant date is determined by dividing the dollar value of the Stock Salary earned since the preceding grant date by the market price of AIG Common Stock on the date of grant. All Stock Salary granted in 2009 was granted in restricted shares of AIG Common Stock or units based on AIG Common Stock.

Under the terms of the AIG Long-Term Performance Units Plan, the LTPUs must become based solely on AIG Common Stock 90 days after the date on which at least 75 percent of the preferred securities in AIG held by the Department of the Treasury are converted into AIG Common Stock. On January 14, 2011, AIG completed a series of integrated transactions to recapitalize AIG, including the exchange of more than 75 percent of the Department of the Treasury’s preferred holdings for AIG Common Stock. Accordingly, on April 14, 2011, the debt securities portion of any outstanding LTPU will be converted into AIG Common Stock based on the values of the debt securities and AIG Common Stock at the time of the conversion.

Stock Salary awards to AIG’s current named executives in 2010 generally took the form of cash-settled units. An exception was made for Mr. Benmosche’s Stock Salary, which as an inducement grant continued to be paid outside a shareholder-approved plan and took the form of restricted stock.

2010 Incentive Compensation. The current named executives in the Top 25 could not receive any incentive compensation other than TARP RSUs during 2010. Under the structure determined by the Special Master, Mr. Hancock could be paid incentives in the form of cash or other equity, so long as:

 

 

 

 

incentives were based on objective performance metrics,

 

 

 

 

no more than half of the incentives were paid in cash and at least half were paid in stock (based on the value at grant) that could not be transferred for at least three years from grant,

 

 

 

 

at least half of any cash incentive was deferred for at least one year,

 

 

 

 

no more than 45 percent of total compensation was paid in cash, and

 

 

 

 

at least 50 percent of total compensation was paid in a form that was not transferable over a period of at least three years.

TARP RSUs. TARP RSUs are a form of incentive compensation defined by applicable regulation under the name “long-term restricted stock.” In order to qualify as TARP RSUs, the award must generally have at least a two-year vesting period and may only become transferable or payable in 25 percent increments in proportion to AIG’s repayment of its TARP obligations. For TARP RSUs awarded to Messrs. Herzog, Moor and Wintrob, the Special Master extended the vesting period to three years. TARP RSUs granted to the current named executives in 2010 were issued under the 2007 Stock Incentive Plan or the 2010 Stock Incentive Plan, depending on the date of grant.

Cash Incentive. Members of AIG’s Top 25, including Messrs. Benmosche, Herzog, Moor and Wintrob, were not eligible for any cash incentives. Cash incentives to members of AIG’s Top 26-100 were generally payable half in March 2011 and half in March 2012. In light of the restrictions that would apply to Mr. Hancock because

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he was entering the Top 25 for 2011, the Special Master allowed his cash incentive to be paid in December 2010, with half paid in cash and half paid in the form of restricted stock, issued under the 2010 Stock Incentive Plan, that cannot be transferred until the first quarter of 2012. We refer to this award as his “Variable Cash Incentive.” In light of the substantial stock component required by the Special Master’s determination and in light of the necessity to convert an additional part of the cash incentive to restricted stock, AIG structured Mr. Hancock’s incentive opportunities to permit the maximum amount of target cash incentive.

Stock Incentive. Members of AIG’s Top 25, including Messrs. Benmosche, Herzog, Moor and Wintrob, were not eligible for any stock incentives other than a limited amount of TARP RSUs. For Mr. Hancock, a member of AIG’s Top 26-100 for 2010, stock incentive was paid in the form of restricted stock, issued under the 2010 Stock Incentive Plan, which cannot be transferred until December 2013. The three-year restriction was designed so that the award would reflect long-term performance and comply with the Special Master’s structural requirements. We refer to this award as his “Variable Stock Incentive.”

Performance Determination. Incentives were awarded on the basis of performance criteria tailored to each executive’s particular situation and responsibilities, and reviewed and approved by the Committee in consultation with the Special Master. However, notwithstanding the full or partial satisfaction of the performance criteria, the Committee retained the discretion to reduce any employee’s incentive award on the basis of its overall evaluation of the employee’s or AIG’s performance. The performance criteria used for each current named executive are summarized under “Committee Compensation Decisions for 2010—Incentive Awards.”

The same performance criteria were used for determining grants of each form of incentive compensation. For Mr. Hancock, and other employees in the Top 26-100, when the level of performance had been determined, the dollar value of the incentive awarded was allocated in a way that followed the approved structure. For Mr. Hancock’s Variable Stock Incentive, AIG determined the number of shares awarded by dividing the dollar value of the incentive by the closing sale price of AIG Common Stock on the NYSE on the date of grant.

Clawback. All of the 2010 incentive compensation paid to the current named executives is subject to “clawback” if it is later determined to have been based on materially inaccurate financial statements or any other materially inaccurate performance metrics, or if the current named executive is terminated due to misconduct that occurred during 2010.

Timing. AIG granted incentive awards to Messrs. Herzog, Hancock, Moor and Wintrob on December 20, 2010 to facilitate compliance with the TARP Standards, although the Committee reevaluated the incentives granted following the issuance of AIG’s audited financial statements. The incentive award for Mr. Benmosche was determined by the Committee on March 8, 2011, ratified by the Board on March 9, 2011, approved by the Special Master on March 11, 2011 and granted on March 15, 2011.

Historic Compensation Components

Deferred Payments of 2008 Compensation. Due to a number of actions taken by AIG in consultation with the Department of the Treasury, the service period for some payments that were originally intended to be made with respect to 2008 and 2009 for Messrs. Herzog, Moor and Wintrob was extended and the payments were subjected to additional performance review. According to SEC rules, certain of these payments must be included as 2010 compensation in AIG’s 2010 Summary Compensation Table. The payments, which are described in the following paragraphs, were detailed in proxy statements for the past two years and were specifically considered by the Special Master. These amounts are included as 2010 compensation in the 2010 Summary Compensation Table in addition to the full amount of the 2010 compensation for these named executives.

As described in AIG’s 2009 Proxy Statement, promptly following the announcement of the FRBNY Credit Agreement in September 2008, AIG instituted a program in order to retain key employees. Awards under this program were received by Messrs. Herzog, Moor and Wintrob in the amounts of $2,500,000, $4,000,000, and $3,000,000, respectively, based on multiples of their base salaries. These amounts were initially scheduled to be paid 60 percent for service through December 31, 2008, and 40 percent for service through December 31, 2009.

AIG did not pay any retention awards to the current named executives in 2008. In November 2008, all of AIG’s executive officers, including Messrs. Herzog, Moor and Wintrob, voluntarily agreed to extend the period for earning these awards to April 2009 and April 2010, and the April 2009 payment was further delayed by AIG as part of a general review of non-salary payments instituted early in 2009. After consulting with officials at the FRBNY and officials at the Department of the Treasury, and considering their opinions, the Special Master

39


concluded that, due to the unique financial circumstances existing at AIG, and the need to retain the services of employees deemed to be particularly critical to AIG’s long-term financial success, further restructuring of the retention awards would not be consistent with the public interest. Instead, the Special Master was permitted to take the awards into consideration when deciding compensation amounts for Messrs. Herzog, Moor and Wintrob.

Based on the Committee’s review of AIG’s progress under its restructuring plans through September 2009, payments of the deferred 2008 retention awards were made to the named executives in October and December 2009. The remaining retention awards were paid in April 2010, based on the Committee’s assessment of additional restructuring actions taken in the fourth quarter of 2009 and the first quarter of 2010, including the following:

 

 

 

 

Closing the AIA SPV and ALICO SPV transactions,

 

 

 

 

Preparing for a potential IPO of AIA,

 

 

 

 

Signing or closing of dispositions/asset sales that would generate proceeds available to be used to repay the FRBNY,

 

 

 

 

Reducing further the systemic risk posed by the AIG Financial Product Corp. (AIGFP) derivatives portfolio, including a 34 percent reduction in notional amount of the portfolio since September 30, 2009, and a 26 percent reduction in the number of trade positions over the same period, and

 

 

 

 

Developing and implementing de-risking plans in AIG’s major operating subsidiaries to minimize the need for liquidity and capital injections from AIG.

Other Components. In January 2010, Messrs. Herzog, Moor and Wintrob received 123 shares, 503 shares and 431 shares, respectively, of AIG Common Stock upon the vesting of awards previously made under AIG’s 2006 Partners Plan (the Partners Plan).

In May 2010, Messrs. Herzog, Moor and Wintrob received 270 shares, 1,400 shares and 1,200 shares, respectively, of AIG Common Stock upon the vesting of awards previously made under AIG’s 2005-2006 Deferred Compensation Profit Participation Plan (the DCPPP). In December 2010, Mr. Herzog also received 31 shares of AIG Common Stock upon the vesting of a 2007 grant of time-vested restricted stock units under AIG’s 2007 Stock Incentive Plan. These awards are described in greater detail in the 2010 Vesting of Stock-Based Awards table.

In January 2010, Messrs. Herzog, Moor, and Wintrob received $206,563, $1,652,500 and $1,239,375, respectively, upon the vesting of awards previously earned for the 2004-2006 performance period under AIG’s Senior Partners Plan. Messrs. Herzog, Moor and Wintrob each had additional outstanding awards under the Senior Partners Plan in 2010 that had been earned in prior performance periods but were not yet vested. These awards are described in greater detail in the 2010 Nonqualified Deferred Compensation table.

Compensation Structure—Indirect Compensation Components

Welfare and Other Indirect Benefits. AIG’s senior executives generally participate in the same broad-based health, life and disability benefit programs as AIG’s other employees.

Retirement Benefits. AIG provides a number of retirement benefits to eligible employees, including both defined contribution plans (such as 401(k) plans) and traditional pension plans (called defined benefit plans). The Special Master required that further accruals under all of these plans, other than the tax-qualified plans, be halted for employees in the Top 25 and Top 26-100 but stated that such employees may continue to receive age and service credit for the purpose of vesting in previously accrued benefits. Mr. Hancock did not accrue any benefits under any AIG pension plan.

AIG’s only active defined contribution plan for the current named executives is a 401(k) plan, which is tax-qualified. AIG matched a percentage of participants’ contributions to the 401(k) plan, depending on a participant’s length of service, up to $17,150 in 2010 for the current named executives. This plan was not affected by the TARP Standards and the Special Master permitted employees in the Top 25 and Top 26-100 to continue to participate in this plan. In addition, some current named executives have balances under legacy nonqualified defined contribution plans. These plans are described in greater detail in “Post-Employment Compensation—Nonqualified Deferred Compensation.” AIG’s defined benefit plans include a tax-qualified pension plan, an Excess Retirement Income Plan (a “restoration” plan) and a Supplemental Executive Retirement Plan (SERP). Each of these plans provides for a yearly benefit based on years of service and

40


average final salary. These plans and their benefits are described in greater detail in “Post-Employment Compensation—Pension Benefits.”

Perquisites and Other Compensation. To facilitate the performance of their management responsibilities, AIG provides some employees with automobile allowances, parking, legal services, financial and tax planning and other benefits categorized as “perquisites” or “other” compensation under the SEC rules.

The Special Master generally limited the amount of perquisites and “other” compensation for employees in the Top 25 and Top 26-100 to $25,000 per year. In addition, all payments of tax “gross-ups” to these employees have been prohibited, except in connection with expatriate arrangements. Under the structure the Special Master approved, Mr. Hancock was entitled to payment of legal fees incurred in connection with his hire in early 2010. These fees exceeded $25,000.

In addition, since September 2009, AIG has maintained a Luxury Expenditure Policy, which summarizes existing relevant underlying policies and guidelines that address corporate expenditures, including entertainment and events, office and facility renovations, aviation and other transportation services and other similar items, activities and events. The policy is intended to help ensure that AIG’s expenses are reasonable and appropriate. A copy of the policy may be obtained from the Corporate Governance section of AIG’s corporate website at www.aigcorporate.com.

Termination Benefits and Policies. Under the TARP Standards, none of the current named executives may receive severance or other benefits as a result of termination or a change in control during 2011, and Messrs. Benmosche, Herzog, Moor and Wintrob could not have received such benefits in 2010. If any of the current named executives becomes no longer subject to this restriction in future years, they may be eligible for benefits upon termination under AIG’s Executive Severance Plan (ESP), except for Mr. Benmosche, who does not participate in the ESP. However, benefits under the ESP could not be increased by any of the 2010 compensation structures for the current named executives or by the 2009 compensation structure for Messrs. Herzog, Moor and Wintrob. Mr. Hancock would have been eligible for benefits under the ESP under certain circumstances if his employment had been terminated in 2010.

The ESP generally extends to senior managers who participated in AIG’s historical Partners Plan, although Mr. Hancock’s eligibility is specified in his employment agreement. The ESP provides for severance payments and benefits if terminated by AIG without “Cause” or if a qualifying executive terminates for “Good Reason.”

In the event of a qualifying termination, but subject to the restrictions described above in the case of the current named executives, a participant is eligible to receive an annual amount equal to the sum of salary, annual quarterly bonuses and three-year-average performance-based annual incentives for a severance period of up to two years that is based on the executive’s seniority or length of service. Unvested long-term awards (other than TARP RSUs) continue to vest during the severance period but otherwise generally will be forfeited. As of March 2010, any severance payments that would otherwise be payable under the ESP are offset by any amounts resulting from the participant’s subsequent employment by another employer.

Committee Compensation Decisions for 2010

Total Direct Compensation Opportunity. AIG based its 2010 compensation proposals largely on the 2009 structures determined by the Special Master for Top 25 and Top 26-100 employees. For Mr. Benmosche, AIG proposed the same structure set forth in his August 16, 2009 letter agreement with AIG and approved by the Special Master in 2009, including a total opportunity of $10.5 million. AIG believed that this level was appropriate and significantly less than actual historic compensation of Chief Executive Officers at AIG and other large insurance companies and Mr. Benmosche’s total compensation at his prior employer. The Special Master approved the amounts potentially payable for 2010, subject to the Special Master’s further formal review and approval of any incentive award.

AIG had several discussions with the Special Master regarding the appropriate total opportunity for each Top 25 employee. These discussions focused on three major factors: the amount of total direct compensation, the appropriate allocation between cash and non-cash compensation components and the form and transferability of the non-cash components. The Special Master determined total compensation opportunities of $6,000,000, $7,600,000 and $6,800,000 for Messrs. Herzog, Moor and Wintrob, respectively. These compensation levels were less than AIG’s proposal.

For members of the Top 26-100, AIG was permitted to establish total opportunities subject to the Special Master’s structural requirements. For Mr. Hancock, AIG established target total compensation of $7,500,000. This amount was based on Mr. Hancock’s anticipated level of responsibility at AIG, the historic compensation of

41


persons with similar responsibilities at peer companies and Mr. Hancock’s total compensation with his prior employer. Mr. Hancock accepted this proposal, and the Special Master approved Mr. Hancock’s structure.

Cash Salary. For Mr. Benmosche, the Special Master approved a salary level of $3,000,000, which AIG first proposed in 2009 as an appropriate level in light of the prohibition on other cash pay to Mr. Benmosche under the TARP Standards, historic cash opportunities of Chief Executive Officers at AIG and at other large insurance companies and Mr. Benmosche’s compensation at his prior employer.

For 2010, the Special Master increased the salaries for Messrs. Herzog, Moor and Wintrob from their 2009 levels of $350,000, $450,000 and $375,000 to $495,000, $700,000 and $495,000, respectively. These cash salaries were significantly below the levels AIG proposed for the executives and substantially less than their salary levels in effect prior to the involvement of the Special Master in AIG’s compensation process.

Mr. Hancock’s annualized cash salary rate was set at $1,500,000 in light of the significant role he was expected to play in AIG’s de-risking and restructuring plans, historic cash opportunities of persons with similar responsibilities at peer companies and Mr. Hancock’s compensation at his prior employer. Mr. Hancock’s cash salary level was discussed with, and included in AIG’s submission to, the Special Master.

Stock Salary. For Mr. Benmosche, the Special Master approved a Stock Salary level of $4,000,000. This level was first proposed by AIG in 2009 in order to allow Mr. Benmosche to receive the targeted annual total opportunity using the maximum amount of TARP RSUs that could be granted under the TARP Standards.

For Messrs. Herzog, Moor and Wintrob, the Special Master determined the amount of their total opportunity that was to be in the form of Stock Salary and also established the related transfer restrictions.

For Mr. Hancock, AIG set the amount of Stock Salary so as to allow the largest target incentive award opportunity consistent with the approved structure and the targeted total direct compensation level (on the basis that 50 percent of the targeted incentive award would be paid in cash and 50 percent would be paid in stock). Because of Mr. Hancock’s position, AIG proposed, and the Special Master approved, transfer restrictions on Mr. Hancock’s Stock Salary identical to those on Top 25 employees’ Stock Salaries.

Incentive Awards. For each of the current named executives, the Special Master required that incentive awards be granted based on objective performance metrics. For Mr. Benmosche, the Special Master was required to formally review and approve the actual amount awarded. The performance metrics, and associated weights, for the current named executives were established in July 2010 and reviewed favorably by the Office of the Special Master. The metrics were established across four categories—financial, strategic, operational and organizational—and were selected to reflect objectives deemed critical for the continued stabilization of AIG’s businesses and the successful implementation of AIG’s restructuring.

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For Mr. Benmosche, the performance metrics were designed to reflect the performance of AIG’s business as a whole, and included the following measures:

 

 

 

Metric

 

Significant Achievements

Financial (30%)

 

 

Achieve a permanent reduction of $6 billion in the FRBNY credit facility by year end

 

Achieved a permanent reduction of $10.5 billion by year end and set the stage for full repayment of the FRBNY credit facility on January 14, 2011

Maintain AIG’s creditworthiness within a target multiple (460%) of its peers as measured by its 5 year CDS spread vs. the peer average

 

Met and exceeded target multiple by lowering AIG’s 5 year CDS spread to 151% of the peer average

Establish a sustainable, recurring dividend strategy, with a 2010 target of $1 billion for operating companies up to the holding company

 

Introduced initiatives resulting in an annual dividend capacity of $2.5 billion

     

Strategic (30%)

 

 

Clarify which businesses are core

 

Simplified AIG’s business portfolio by successfully completing divestures that allow AIG, going forward, to focus on its core businesses and to benefit from diversification and economies of scale

Set appropriate relative priority between short- term profitability, long-term growth and risk mitigation initiatives as expressed in 2011 Long- Term Incentive Plan (LTIP) metrics and incentive compensation goals

 

Guided management’s focus on profitability and long-term value creation, including the development of 2011 LTIP metrics that emphasize growth in AIG’s intrinsic value

Enhance management process

 

Improved decision-making and cooperation by establishing monthly reviews with senior management and the AIG Group Risk Committee (a management committee) to discuss AIG’s businesses and to deliberate key decisions on strategy, performance metrics, capital allocation and risk

Operational (20%)

 

 

Support and promote a robust compliance framework within AIG

 

Led the implementation of AIG’s compliance framework, including recruiting executive and senior level compliance professionals

 

 

Promoted ethical integrity by setting the “tone at the top” and fully supporting compliance framework

Establish a technology architecture and implementation plan for the effective operation of critical control functions, including financial reporting, investments, Enterprise Risk Management, compliance and human resources

 

Reviewed the current state of critical control functions and designed three-year implementation plans for more effective operations, including a modernization plan for human resources operations, recommendations for new information technology service delivery options and the re-design of technology architecture and support for risk management

Organizational (20%)

 

 

Succession planning for top 10 executives

 

Developed succession plans for top 25 executives

Strengthen senior management team through executive development and targeted new hires

 

Recruited new talent, realigned roles and responsibilities to fill critical senior management positions and prepared for a 2011 launch of AIG’s executive development program

Implement a governance model with clear decision rights and accountability between the Board and management and businesses and functions. Model will provide role clarity between the central functions and the businesses, along with a target operating model

 

Led senior management team in extensive review of available alternatives, developing the framework for a governance model tailored to AIG’s needs

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For Mr. Herzog, performance criteria were based on business-wide financial and fiscal management measures, as follows:

 

 

 

Metric

 

Significant Achievements

Financial (50%)

 

 

Develop and implement plans to increase dividends from subsidiaries

 

Implemented increase in 2010 dividends received by AIG from SunAmerica and Chartis and implemented plan for further increase in 2011

 

 

Committee noted that metric was designed to address the legal, financial and ratings obstacles to increased dividends and that need for additional subsidiary contributions by AIG therefore did not affect achievement

Develop and execute strategies to realize the range of AIG’s deferred tax assets

 

Designed multiple strategies, including with respect to SunAmerica and Chartis assets; execution pending

Implement strategies to reduce general operating expenses

 

Implemented headcount and consulting controls and implemented strategies to reduce day-to-day expense for 2011

 

 

Committee noted that remediation, restructuring and investment in infrastructure took priority over expense management for 2010

Implement metrics and functionality of business unit performance measurement

 

Engaged staff to support initiative and implemented pilots in selected areas

 

 

Committee noted that infrastructure needs are still significant

Strategic (20%)

 

 

Gain access to capital markets

 

Achieved in multiple instances, including through unsecured debt offerings, unsecured bank facility financing, contingent capital facility and capital raises by International Lease Finance Corporation

 

 

Committee noted that achievement exceeded expectations

Develop AIG Direct Investment business

 

Direct Investment business established

 

 

Management of appropriate AIGFP credit assets and debt migrated to Direct Investment business

Maintain ratings

 

Ratings maintained other than as a result of the restructuring and charge to strengthen Chartis’ loss reserves

Operational (15%)

 

 

Achieve milestones with respect to finance infrastructure transformation

 

Relevant milestones achieved

Achieve control environment improvement objectives

 

Partially achieved and well positioned for 2011

Improve reliability of earnings estimates

 

Improved process and results

Support and promote robust compliance framework within Finance which complements and supports the overall AIG compliance framework

 

Promoted ethical integrity by setting the “tone at the top” and fully supporting compliance framework

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Organizational (15%)

 

 

Finance organizational transformation and staffing

 

Completed global assessment of Finance and filled all senior positions

 

 

Committee noted particularly strong achievements in this area

Staff development/feedback/career path and skills development

 

Successfully implemented the relative performance rating process

 

 

Reinstituted crucial training and development programs for Finance function

For Mr. Hancock, who serves as Executive Vice President, Finance, Risk and Investments, performance metrics were based on the performance of the functional areas of AIG that report to him and Mr. Hancock’s contributions to AIG’s business as a whole. These metrics included:

 

 

 

Metric

 

Significant Achievements

Financial (60%)

 

 

Plan and implement AIG’s restructuring and divestiture initiatives (40%)

 

AIG accomplished an unprecedented divestiture program, divesting 34 businesses

 

 

Restructuring planned and implemented successfully, including framing of negotiations with the Department of the Treasury and the FRBNY

 

 

AIG de-risked and deleveraged, resulting in significant reduction in operating and financial leverage

Continue to de-risk AIGFP and transition the appropriate portfolios to AIG investment management (10%)

 

Developed metrics for assessing risk reduction (focusing on liquidity risks), achieved reduction targets and achieved FRBNY risk reduction closing condition to the restructuring

Develop a plan to recapitalize the equity and debt structure of AIG (10%)

 

Plan developed, including working with the Chief Financial Officer and other officers on a new capital structure that both achieved satisfactory ratings and enabled increased capital mobility among legal entities

Strategic (10%)

 

 

Introduce and implement a plan to create and measure intrinsic value concepts (5%)

 

Dividend goals and basic intrinsic value growth concepts developed and incorporated in 2010 and 2011 LTIP design

Establish associated governance process (5%)

 

Led a series of workshops with Finance, Risk, SunAmerica and Chartis to introduce intrinsic value concepts

Operational (15%)

 

 

Achieve Enterprise Risk Management objectives (5%)

 

Shifted focus to a better understanding of aggregate exposures to macro risk factors

Facilitate the timely, accurate and complete internal financial reporting in support of AIG’s quarterly and annual financial reporting (5%)

 

Achieved

Support and promote a robust compliance framework in the Finance, Risk and Investment area that complements and supports the overall AIG compliance framework (5%)

 

Promoted ethical integrity by setting the “tone at the top” and fully supporting compliance framework

 

 

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Organizational (15%)

 

 

Clarify investment department and business unit responsibilities and implement organizational structure and goals to manage, as appropriate, roles and responsibilities (5%)

 

Worked with investment department to execute strategic asset allocation and organizational redesign

Build risk function at business unit level and execute governance plan for the risk function (5%)

 

Recruited new talent and realigned roles and responsibilities to better match skills and needs of the organization

Assess talent of Risk, Finance, Internal Audit, Strategic Planning and Investments and implement development and succession planning programs as appropriate for top 10 positions across all departments (5%)

 

Successfully transitioned reporting relationships of six executives reporting to the Chief Executive Officer to enable the Chief Executive Officer to focus on critical tasks, worked with the Chief Financial Officer in finance organization design and worked with the Chief Human Resources Officer in critical compensation design

For Mr. Moor, who serves as President and Chief Executive Officer of Chartis, the performance metrics related to the performance of Chartis, as follows:

 

 

 

Metric

 

Significant Achievements

Financial (30%)

 

 

Achieve Non-CAT Accident Year Combined Ratio in top 1/2 of peer group (10%)

 

Non-CAT Accident Year Combined Ratio was not in top 1/2 of peer group

Implement expense management program (10%)

 

Reduced U.S. general operating expenses run rate by $100 million

Maintain current ratings (10%)

 

Ratings maintained at two of four agencies

Strategic (30%)

 

 

Significantly enhance the visibility of Chartis innovation and service excellence; maintain leadership role in the release of new products (10%)

 

Chartis won more customer awards in 2010 than any other year, including 2010 Most Innovative Product and 2010 Best Global Insurance Company

Demonstrate significant accomplishment of key business strategies related to structure and technology improvement (10%)

 

Successfully reorganized both the domestic and international businesses to create regional operating centers and customer segments allowing for greater focus on clients needs and empowered decision making

Enhance the leadership development and succession planning activities to ensure a deep and nimble bench to drive the business strategies of Chartis (10%)

 

Succession planning implemented with talent development governance and programs

Operational (30%)

 

 

Complete steps to access the capital markets (10%)

 

Chartis issued three-year combined U.S. GAAP audited financial statements for the first time, enabling it to put in place a $1.3 billion syndicated letter of credit facility

 

 

Led Chartis’ first use of catastrophe bonds for protection against losses from U.S. hurricanes and earthquakes, obtaining $875 million in coverage from two issuances during 2010

Achieve Enterprise Risk Management objectives (10%)

 

Established a Chartis Risk Committee, implemented organizational changes surrounding the Chief Underwriting Officer position and implemented a defined risk tolerance statement

 

 

46


 

 

 

Facilitate timely, accurate and complete internal financial reports in support of AIG’s quarterly and annual financial reporting (5%)

 

Achieved

Support and promote robust compliance framework within Chartis which complements and supports the overall AIG compliance framework (5%)

 

Promoted ethical integrity by setting the “tone at the top” and fully supporting compliance framework

Organizational (10%)

 

 

Upgrade policies and improve practices that enhance the employee value proposition and create an inclusive, dynamic culture (5%)

 

Created the Executive Diversity Council and Employee Resources Groups, which sponsored a number of educational and training events

 

 

Implemented a Flexible Work Arrangements policy allowing for telecommuting and job sharing possibilities

Expand performance management initiative globally (5%)

 

Achieved

For Mr. Wintrob, who serves as President and Chief Executive Officer of SunAmerica, performance metrics related to the performance of SunAmerica. These metrics included:

 

 

 

Metric

 

Significant Achievements

Financial (50%)

 

 

Achieve business goals with respect to premiums, deposits and other considerations (35% of metric); operating income (30% of metric); expenses (12.5% of metric); return on equity (12.5% of metric) and risk-based capital (10% of metric):

 

 

Premiums, deposit and other considerations target: $19.563 billion

 

2% below target. Committee noted industry-wide trend of lower sales due to interest rate environment; maintenance of number one position for fixed annuities in bank channel

Pre-tax operating income target: $2.985 billion

 

Achieved above target

General and administrative operating expenses target: $1.295 billion

 

Achieved above target

Return on Equity target: 8.3%

 

Achieved above target

Risk-based capital target: 350%

 

Achieved above target

Strategic (15%)

 

 

Stabilize AIG Star and AIG Edison and provide strategic leadership and high level goal setting to those organizations

 

Chairman of AIG Star and AIG Edison successfully integrated into SunAmerica senior leadership team; AIG Star and AIG Edison stabilized; and AIG Star and AIG Edison financial goals estimated to be achieved

Engage SunAmerica functional leadership in the Japan business and ensure communication between corresponding functions in US and Japan

 

Paired senior functional leaders at AIG Star and AIG Edison with counterparts at SunAmerica and initiated robust two-way communication and information sharing and selected visits by SunAmerica functional leaders to Japan (Committee noted that this activity came to halt due to the decision to sell AIG Star and AIG Edison, as announced in September 2010 and completed in February 2011)

 

 

47


 

 

 

Take steps to facilitate successful signing and closing of sale of AIG Star and AIG Edison (added during 2010)

 

Designed, implemented and communicated a completion plan for key employees in Japan

 

 

Sale agreement executed and all other signing objectives achieved in 2010 and positioned organizations for a successful closing, which occurred in February 2011

Operational (10%)

 

 

Support and promote a robust compliance framework at SunAmerica which complements and supports the overall AIG compliance framework

 

Appointed a Chief Compliance Officer covering all profit centers. Committee noted that SunAmerica Compliance Committee is fully operational

Facilitate timely, accurate and complete internal financial reporting in support of AIG’s quarterly and annual financial reporting

 

Achieved

Oversee the establishment of the SunAmerica Enterprise Risk Management function

 

SunAmerica Enterprise Risk Management function established and staffed, including through appointment of a Chief Risk Officer and senior staff. Risk and Capital Committee and various subcommittees established and chartered and meeting regularly

Achieve Enterprise Risk Management Objectives

 

Initiated and achieved progress on bulk of identified projects related to risk controls and mitigation, capital management and investment strategy processes and articulation of risk tolerance. Well positioned for 2011

Organizational (25%)

 

 

Create unified shared service functions to support SunAmerica business units and facilitate integration of retirement services and domestic life shared service functions

 

Established shared service functional team and appointed heads of Finance, Human Resources, Information Technology, Legal/Regulatory, Compliance, Administration, Risk, Communications, and Actuarial

Recruit and retain key senior leaders

 

Retained key talent and recruited new head of Human Resources

In light of the applicable TARP restrictions, the Committee reviewed performance against these metrics in late 2010 for Messrs. Herzog, Hancock, Moor and Wintrob and granted year-end incentive awards in mid-December. Based on the results at that time, the Committee determined that each of Messrs. Herzog, Hancock, Moor and Wintrob had substantially achieved or exceeded target performance as a whole. Because the incentive compensation of Messrs. Herzog, Moor and Wintrob could not exceed the target amounts authorized by the Special Master, the Committee did not attempt to quantify the extent of any overachievement and awarded the target incentive amounts. For Mr. Hancock, the Committee determined that, in light of the success of AIG’s financial, restructuring and recapitalization activities, the de-risking of AIGFP and the organizational accomplishments, an award above target was warranted and awarded incentives at 120 percent of the target amount.

In early 2011, following the issuance of AIG’s audited financial statements, the Committee re-reviewed performance for Messrs. Herzog and Moor. In this review, the Committee considered the achievements noted in the preceding tables, which reflect results for full-year 2010. Due to underachievement of certain financial metrics as noted above, the Committee determined that the appropriate amount for Mr. Moor’s incentives was 90 percent of the target amount, and Mr. Moor’s award was adjusted accordingly.

The Committee also reviewed performance for Mr. Benmosche in early 2011 and, after taking into account the achievements noted in the preceding table for Mr. Benmosche, concluded that he had substantially achieved or exceeded target performance as a whole. The Committee therefore determined to award incentive compensation to Mr. Benmosche at the target amount (as with incentives for the other current named executives who were members of the Top 25 group, Mr. Benmosche’s award could not exceed the target amount established by the Special Master.) Mr. Benmosche’s incentive award was subsequently ratified by the Board and reviewed and approved by the Special Master.

48


Reconciliation of Non-GAAP Financial Measures

Certain of the performance measurements used by AIG management are “non-GAAP financial measures” under SEC rules and regulations. Operating income (loss) before net realized capital gains (losses), related deferred acquisition costs (DAC), value of business acquired (VOBA), and sales inducement asset (SIA) amortization and goodwill impairment charges (pre-tax operating income or PTOI) is utilized to report results for SunAmerica Financial Group operations. Premiums, deposits and other considerations (PDOC) is a non-GAAP financial measure which includes life insurance premiums, deposits on annuity contracts and mutual funds. General and administrative operating expenses (one of two components of General Operating Expenses) excludes restructuring costs, costs of long-term incentive plans and certain other non-operating expenses, including an accrued guaranty fund assessment for the State of New York and certain litigation accruals. For SunAmerica, after-tax return on equity (ROE) is calculated based on PTOI, average SunAmerica shareholders’ equity excluding Other Comprehensive Income (Loss) and certain affiliated investments and an assumed tax rate of 35 percent. Risk Based Capital ratios are determined using accounting principles promulgated by the National Association of Insurance Commissioners for use in insurance company reporting.

Management believes that these measures enhance the understanding of the underlying profitability of the ongoing operations of these businesses and allow for more meaningful comparisons with AIG’s insurance competitors. The reconciliations of the Non-GAAP financial measures to the most comparable GAAP measures in accordance with Regulation G are included below, within the relevant tables in Parts I and II of AIG’s 2010 Annual Report on Form 10-K, or in the fourth quarter 2010 Financial Supplement (Supplement) available in the Investor Information section of AIG’s corporate website, www.aigcorporate.com, as follows:


 

 

 

Measure

 

Location or Explanation

Operating income (loss)

 

AIG’s 2010 Annual Report on Form 10-K, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), p. 111

PDOC

 

AIG’s 2010 Annual Report on Form 10-K, Item 1. Business, p. 14

PTOI

 

AIG’s 2010 Annual Report on Form 10-K, Item 7, p. 111

Adjusted average shareholders’ equity

 

Supplement, pages 8-9

General and administrative operating expenses

 

Calculated by reducing General operating expenses (the GAAP measure) by Other general and administrative expenses (the second component of General operating expenses), restructuring charges and costs associated with the Long Term Incentive Plan. Other general and administrative expenses are excluded as they are deemed to be outside of SunAmerica management’s control.

ROE

 

Calculated by dividing After-tax operating income (PTOI less taxes at the 35 percent effective rate) by Adjusted average (beginning and end of year) shareholders’ equity


Arrangements for Former Executive Officer

Mr. Wilson, a member of the Top 26-100 group for 2010, was Executive Vice President and served as Chief Executive Officer and President of AIA for a part of 2010. In this capacity, until the IPO of AIA, Mr. Wilson received cash salary at an annual rate of $900,000 and Stock Salary at an annual rate of $1,580,000 paid in LTPUs. Mr. Wilson’s cash salary was set at $900,000 due to the crucial role of AIA in AIG’s restructuring efforts, and the Committee certified to the exceptional circumstances in accordance with the Special Master’s determination. A portion of Mr. Wilson’s Stock Salary is restricted for one year and the remainder is restricted for three years to comply with the Special Master’s requirement that at least 50 percent of total compensation be paid in a form that is non-transferable over a period of at least three years. Mr. Wilson also received certain expatriate benefits, including payment of housing and educational expenses, and tax preparation services due

49


to his service in Hong Kong, which were expressly permitted under the approved compensation structure for Top 26-100 employees. These benefits are described in further detail in the Perquisites and Benefits table. Mr. Wilson participated in the AIA-JF Premium Mandatory Provident Fund Scheme of Hong Kong, AIA, as described in “Post-Employment Compensation—Nonqualified Deferred Compensation”, and did not participate in any AIG domestic retirement plan.

In March 2010, Mr. Wilson received a $4,700,000 award of restricted stock for his performance in 2009 when he was not a member of the Top 25 or Top 26-100. Fifty percent of the award was vested at grant and fifty percent was scheduled to vest on the earlier of the completion of the sale of AIA or the nine-month anniversary of the grant date in light of the potential that Mr. Wilson would become part of the Top 25 for 2011 and would be unable to continue vesting. The Committee determined to grant a portion of the first tranche in cash to enable Mr. Wilson to satisfy his Hong Kong tax law obligations on the award, and subjected both tranches to transfer restrictions that will lapse in one-third increments over a three-year period following the grant date.

AIG completed the IPO of AIA in October 2010, raising over $20 billion. Following the IPO, AIA was no longer a subsidiary of AIG and responsibility for compensation determinations for AIA’s executive directors and senior managers was assumed by AIA. After discussion and consultation with AIG, AIA determined to pay a $4,280,000 year-end incentive award to Mr. Wilson based on the consummation of the offering and his assistance with the transition of AIA’s new executive team. This award was consistent with the annual incentive target that AIG had previously established for Mr. Wilson.

Mr. Wilson left AIA in January 2011. In addition to severance and accrued benefits, he received a payment in lieu of a pension benefit he forfeited with his prior employer, a payment to settle a disputed claim under his employment agreement with AIA and payment of certain equity awards previously granted under his AIA employment agreement. These payments are described in greater detail in the Termination Payments and Benefits table. Due to the release, non-solicitation and non-disparagement agreements Mr. Wilson provided and to clarify the treatment of pre-IPO awards, AIG is a party to the separation agreement with Mr. Wilson. AIG was not obligated to make any post-IPO awards or additional payments to Mr. Wilson in connection with his separation.

In December 2010, Mr. Wilson also received 701 shares of AIG Common Stock upon the vesting of awards previously made under AIG’s 2007 Stock Incentive Plan, as described in greater detail in the 2010 Vesting of Stock-Based Awards table.

Process for Compensation Decisions

Role of the Committee. The Committee determines the compensation of AIG’s Chief Executive Officer, and the Board approves or ratifies the amounts to be awarded to him. After considering the recommendation of AIG’s Chief Executive Officer, the Committee also reviews and approves the compensation of other employees in the Top 25 and Top 26-100. As described above, decisions regarding the structure (and, for the Top 25, amount) of compensation for these employees was required to be approved by the Special Master.

The Committee also makes recommendations to the Board with respect to AIG’s compensation programs for other key employees and oversees AIG’s management development and succession planning programs.

Attendance at Committee meetings generally includes internal legal and human resources executives and their staff members (depending upon agenda items), outside counsel and the Committee’s independent consultant; since October 2009, attendance also regularly includes representatives of the Department of the Treasury. Between September 2008 and January 14, 2011 (the date of AIG’s Recapitalization Closing), attendance regularly included representatives of the FRBNY and their advisors.

Consultants. To provide independent advice, the Committee has used the services of the Cook firm since 2005. A senior consultant of the Cook firm regularly attends the Committee’s meetings and is instructed to provide independent, analytical and evaluative advice about AIG’s compensation programs for senior executives, including comparisons to industry peers and comparisons to “best practices” in general. The Cook firm responds on a regular basis to questions from the Committee and the Committee’s other advisors, providing its opinions with respect to the design and implementation of current or proposed compensation programs. The Cook firm also participated in the Committee meetings in which the compensation risk assessments were conducted and advised that the process was thorough and well designed. Neither the Cook firm nor any of its affiliates provide any other services to AIG or its management except with respect to director compensation.

50


In 2010, the Committee also considered materials prepared by Mercer and Johnson Associates related to various aspects of AIG’s efforts to comply with the TARP Standards and the requirements of the Special Master. Mercer and Johnson Associates were engaged by AIG to assist management with this work.

Consideration of Competitive Compensation Levels. In 2009 and 2010, based on the direction of the staff of the Office of the Special Master, the Committee considered information based on a wider range of peer companies than the Committee had used in recent years. In 2010, for each position (other than Messrs. Benmosche and Hancock, for whom only proxy data was used), the Committee considered information from data disclosed in company proxy statements of appropriate peer companies (Proxy Data), as well as information from the 2009 Hewitt TCM Financial Services Executive Survey (Survey Data). The companies used to analyze compensation for each of AIG’s current named executives were:

Mr. Benmosche. Proxy Data: ACE Ltd., AFLAC, The Allstate Corporation, Chubb Group, Hartford Financial Services, Loews Corporation, MetLife Inc., Prudential Financial Inc. and The Travelers Companies Inc.

Mr. Herzog. Proxy Data: ACE Ltd., AFLAC, The Allstate Corporation, Chubb Group, Hartford Financial Services, Loews Corporation, MetLife Inc., Prudential Financial Inc. and The Travelers Companies Inc. Survey Data: American Express Company, Bank of America Corporation, Citigroup Inc., JP Morgan Chase & Co., MetLife Inc., Prudential Financial Inc., The Travelers Companies Inc. and Wells Fargo & Company.

Mr. Hancock. Proxy Data: Citigroup Inc., JP Morgan Chase & Co., Prudential Financial Inc. and The Travelers Companies Inc.

Mr. Moor. Proxy Data: ACE Ltd., AFLAC, The Allstate Corporation, Chubb Group, Hartford Financial Services, Loews Corporation, MetLife Inc., Prudential Financial Inc. and The Travelers Companies Inc. Survey Data: American Express Company, Bank of America Corporation, Citigroup Inc., JP Morgan Chase & Co., MetLife Inc., Prudential Financial Inc., The Travelers Companies Inc. and Wells Fargo & Company.

Mr. Wintrob. Proxy Data: ACE Ltd., AFLAC, The Allstate Corporation, Chubb Group, Hartford Financial Services, Loews Corporation, MetLife Inc., Prudential Financial Inc. and The Travelers Companies Inc. Survey Data: American Express Company, Bank of America Corporation, Citigroup Inc., JP Morgan Chase & Co., MetLife Inc., Prudential Financial Inc., The Travelers Companies Inc. and Wells Fargo & Company.

Consultations with Stakeholders. AIG’s compensation decisions in 2010 were guided by discussions with a number of outside stakeholders. AIG spoke frequently with the Special Master both while formulating its proposals and while implementing the Special Master’s decisions. AIG also regularly consulted with the FRBNY and the Department of the Treasury regarding compensation matters. For certain compensation actions, AIG also sought and obtained the consent of the trustees of the AIG Credit Facility.

Consideration of Prior Years’ Compensation. When deciding on appropriate amounts and/or structures of compensation to approve, the Special Master is permitted to take into account prior years’ compensation, including legally binding rights under valid employment contracts that are not themselves subject to review by the Special Master. The Special Master was provided with information on prior years’ compensation, and indicated that the information was considered when making decisions.

Consideration of Risk Management. As required by the TARP Standards, the Committee reviewed the compensation arrangements of AIG’s employees, including the current named executives, with AIG’s senior risk officer at least every six months. For further discussion of the risk review process, see the Report of the Compensation and Management Resources Committee.

Other Considerations

Other Treasury Limits. The agreements pursuant to which the Department of the Treasury agreed to purchase preferred stock from AIG placed additional compensation limits on the 2010 compensation of AIG employees, including Messrs. Herzog, Moor, and Wintrob. These limits included limiting the 2010 annual bonuses and cash performance awards paid to executive officers and Senior Partners to the aggregate adjusted net income for 2010 of AIG’s insurance company subsidiaries included in AIG’s 2010 consolidated financial statements (excluding certain amounts distributed to AIG in the form of dividends and other distributions). Each of Messrs. Herzog, Moor, and Wintrob is a Senior Partner. The compensation for AIG’s current named executives was designed to comply with these limits.

Aggregate Limit on Incentives. As part of the approved compensation structure for the Top 26-100, the Special Master limited total incentives for that group to a percentage of AIG’s earnings determined by the Committee. Based on an assessment of historic and current incentive levels and a range of performance

51


scenarios, the Committee limited total incentives for the Top 26-100 to three percent of AIG’s eligible earnings, defined as the aggregate adjusted net income from AIG’s insurance company subsidiaries included in AIG’s consolidated financial statements. The aggregate actual incentive compensation awarded to all members of the Top 26-100 for 2010 did not exceed the limit.

Deductibility of Executive Compensation. As a participant in TARP, AIG is subject to Section 162(m)(5) of the Internal Revenue Code of 1986, as amended, which limits AIG’s ability to take a federal income tax deduction for compensation paid to the current named executives. Section 162(m)(5) generally lowers the cap on the deductibility of compensation paid to these individuals from $1,000,000 to $500,000 per year and removes the exemption for compensation determined to be “performance-based” under applicable tax regulations. As a result of these limitations, deductibility was not taken into account in making compensation decisions.

Share Ownership Guidelines and No-Hedging Policy. AIG’s share ownership guidelines establish levels of ownership of AIG Common Stock at five times salary for the Chief Executive Officer and three times salary for other officers at the level of Senior Vice President and above, which includes the remaining current named executives. Until the guidelines are met, such employees are required to retain 50 percent of the shares of AIG Common Stock received upon the exercise of stock options or upon the vesting of restricted stock units granted by AIG. Shares held for purposes of the guidelines include stock owned outright by the officer or his or her spouse and earned but unvested share-based awards. In July 2010, the Committee extended the share ownership guidelines to Top 25 and Top 26-100 employees not already covered and amended the guidelines to provide that vested LTPUs qualify as shares held for purposes of the guidelines.

AIG’s Code of Conduct prohibits employees from engaging in any hedging transactions with respect to any of AIG’s securities including trading in any derivative security relating to AIG’s securities.

Adjustment and Recovery of Awards. Both the Partners Plan and the Senior Partners Plan provide that the Committee can adjust outstanding awards for any restatement of financial results. The Senior Partners Plan specifically notes that adjustments may take into account the fact that prior vested awards may have been overpaid. No misconduct on the part of a participant is required for the Committee to exercise this authority. Because of the vesting periods applicable to the Senior Partners Plan, a significant amount of each Senior Partner’s compensation is subject to these provisions.

Additionally, as noted above, the incentive compensation paid to each of the current named executives will be subject to clawback by AIG if it is based on materially inaccurate financial statements or any other materially inaccurate performance metrics or if the current named executive is terminated for misconduct that occurred during the period in which the incentive compensation was earned.

Conclusion

Over 2010, AIG has rebuilt many key functions, including Human Resources, and adopted a comprehensive compensation philosophy. The Human Resources team, AIG senior management and the Committee expect to build on this foundation in the coming year to support and incentivize AIG’s independence from government support, including continuing to strengthen our performance management systems to differentiate performance and reward exceptional, long-term achievement.

2010 COMPENSATION

Summary Compensation Table

The following tables contain information with respect to AIG’s named executive officers. As required by SEC rules, AIG’s named executives include the Chief Executive Officer, Chief Financial Officer and three other most highly paid executive officers, as well as an additional individual who served as an executive officer during a part of 2010.

The presentation below differs substantially from the manner in which AIG and the Special Master administered the compensation of named executive officers. The most significant differences are:

 

 

 

 

For Messrs. Benmosche and Wilson, amounts for 2010 include equity incentive awards for 2009 performance. Conversely, for Mr. Benmosche, amounts listed for 2010 exclude equity incentive awards for 2010 performance, while Mr. Wilson did not receive an award from AIG for 2010 performance.

52


 

 

 

 

Mr. Wilson’s amounts for 2010 include year-end compensation and severance arrangements (as well as certain salary changes) that were determined by AIA, after consultation with AIG and after AIA ceased to be a subsidiary of AIG, and were not subject to supervision by the Special Master.

 

 

 

 

For Messrs. Herzog, Moor and Wintrob, amounts for 2010 include certain payments that were originally intended to be made with respect to 2009. At the request of the Department of the Treasury, the service period for these amounts was extended and the payments were subjected to additional performance review. These amounts were detailed in proxy statements for the past two years and were specifically considered by the Special Master.

 

 

 

 

Mr. Moor’s equity incentive award for 2010 performance is shown at target, although the final award was 90 percent of the target amount.

Please see “Compensation Discussion and Analysis” for detail regarding the manner in which the compensation of the named executives was administered.

2010 Summary Compensation Table

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name and
 Principal Position

 

Year

 

Salary

 

Bonus(1)

 

Stock
Awards(2)

 

Non-Equity
Incentive Plan
Compensation(3)

 

Change in
Pension
Value(4)

 

All Other
Compensation(5)

 

Total

Robert H. Benmosche

 

 

 

2010

 

 

 

$

 

3,000,000

 

 

 

$

 

0

 

 

 

$

 

5,380,802

 

 

 

$

 

0

 

 

 

$

 

18,467

 

 

 

$

 

25,000

 

 

 

$

 

8,424,269

 

Chief Executive Officer

 

 

 

2009

 

 

 

$

 

1,153,964

 

 

 

$

 

0

 

 

 

$

 

1,538,402

 

 

 

$

 

0

 

 

 

$

 

0

 

 

 

$

 

14,164

 

 

 

$

 

2,706,530

 

David L. Herzog

 

 

 

2010

 

 

 

$

 

492,769

 

 

 

$

 

1,000,000

 

 

 

$

 

5,656,588

 

 

 

$

 

0

 

 

 

$

 

112,279

 

 

 

$

 

10,408

 

 

 

$

 

7,272,044

 

Executive Vice President

 

 

 

2009

 

 

 

$

 

625,000

 

 

 

$

 

1,500,000

 

 

 

$

 

3,937,470

 

 

 

$

 

0

 

 

 

$

 

78,488

 

 

 

$

 

5,876

 

 

 

$

 

6,146,834

 

and Chief Financial Officer

 

 

 

2008

 

 

 

$

 

675,000

 

 

 

$

 

0

 

 

 

$

 

0

 

 

 

$

 

27,164

 

 

 

$

 

111,400

 

 

 

$

 

14,626

 

 

 

$

 

828,190

 

Peter D. Hancock

 

 

 

2010

 

 

 

$

 

1,326,923

 

 

 

$

 

0

 

 

 

$

 

5,464,938

 

 

 

$

 

1,080,000

 

 

 

$

 

0

 

 

 

$

 

212,256

 

 

 

$

 

8,084,117

 

Executive Vice President—
Finance, Risk and Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kris P. Moor

 

 

 

2010

 

 

 

$

 

696,154

 

 

 

$

 

1,600,000

 

 

 

$

 

7,068,672

 

 

 

$

 

0

 

 

 

$

 

379,804

 

 

 

$

 

39,990

 

 

 

$

 

9,784,620

 

Executive Vice President—

 

 

 

2009

 

 

 

$

 

915,385

 

 

 

$

 

2,400,000

 

 

 

$

 

6,691,640

 

 

 

$

 

0

 

 

 

$

 

354,874

 

 

 

$

 

37,229

 

 

 

$

 

10,399,128

 

General Insurance

 

 

 

2008

 

 

 

$

 

959,615

 

 

 

$

 

561,563

 

 

 

$

 

0

 

 

 

$

 

163,338

 

 

 

$

 

535,339

 

 

 

$

 

38,990

 

 

 

$

 

2,258,845

 

Jay S. Wintrob

 

 

 

2010

 

 

 

$

 

493,154

 

 

 

$

 

1,200,000

 

 

 

$

 

6,479,016

 

 

 

$

 

0

 

 

 

$

 

165,580

 

 

 

$

 

41,683

 

 

 

$

 

8,379,433

 

Executive Vice President—
Domestic Life and
Retirement Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Former Executive Officer

 

 

 

 

 

 

 

 

 

 

Mark A. Wilson

 

 

 

2010

 

 

 

$

 

1,162,852

 

 

 

$

 

4,280,000

 

 

 

$

 

6,069,453

 

 

 

$

 

0

 

 

 

$

 

0

 

 

 

$

 

1,793,071

 

 

 

$

 

13,305,376

 

Footnotes to 2010 Summary Compensation Table

 

(1)

 

 

 

The amounts in this column for Messrs. Herzog, Moor and Wintrob in 2010 represent only the payment of extended and performance-earned retention awards.

 

 

 

 

 

These payments were originally scheduled to be made with respect to 2009. However, the date on which these awards were payable was subsequently extended and payment was made only after a determination of satisfactory progress under AIG’s restructuring plans. After consulting with officials at the FRBNY and officials at the Department of the Treasury, and considering their opinions, the Special Master concluded that, due to the unique financial circumstances existing at AIG, and the need to retain the services of employees deemed to be particularly critical to AIG’s long-term financial success, further restructuring the retention awards would not be consistent with the public interest. Instead, the Special Master was permitted to take the awards into consideration when deciding compensation amounts for Messrs. Herzog, Moor and Wintrob.

 

(2)

 

 

 

2010 Amounts. For Mr. Benmosche, the amount represents the grant date fair value of Stock Salary paid during 2010 in AIG Common Stock and TARP RSUs awarded in March 2010 for 2009 performance, and includes $414 in cash paid in lieu of fractional shares. For Messrs. Herzog, Moor and Wintrob, the amounts represent the grant date fair value of Stock Salary paid during 2010 in LTPUs and TARP RSUs awarded in December 2010 for 2010 performance. Although Mr. Moor’s TARP RSUs award is shown at its full target amount ($1,900,000), his final award was only 90 percent of target ($1,710,000). For Mr. Hancock, the amount represents the grant date fair value of Stock Salary paid during 2010 in LTPUs, Variable Stock Incentive for 2010 performance awarded in December 2010 and half of the Variable Cash Incentive award amount for 2010 performance that was awarded in December 2010 and denominated in immediately vested restricted stock transferable in the first quarter of 2012, as described in footnote 3. For Mr. Wilson, the amount represents the grant date fair value of Stock Salary paid during 2010 in LTPUs and a restricted stock grant awarded in March 2010 for 2009 performance, fifty percent of which was immediately vested and fifty

53


Footnotes to 2010 Summary Compensation Table, continued

 

 

 

 

percent of which vested on the nine-month anniversary of the date of grant. In light of the Hong Kong tax regime, a portion of the immediately vested restricted stock was paid in cash ($614,000) so that Mr. Wilson could meet his tax obligations on the award.

 

 

 

 

 

Calculation. The amount shown for the awards granted by AIG was calculated using the assumptions described in Note 19 to the Consolidated Financial Statements included in AIG’s 2010 Annual Report on Form 10-K (in the case of awards granted in 2010) and the assumptions described in Note 18 to the Consolidated Financial Statements included in AIG’s Annual Report on Form 10-K for the year ended December 31, 2009 and Note 17 to the Consolidated Financial Statements included in AIG’s Annual Report on Form 10-K for the year ended December 31, 2008 (in the case of awards granted prior to 2010).

 

(3)

 

 

 

The amount shown for Mr. Hancock represents 2010 year-end Variable Cash Incentive pay. Messrs. Benmosche, Herzog, Moor and Wintrob were not eligible under the TARP Standards to receive any 2010 cash incentive pay. Mr. Hancock received a 2010 Variable Cash Incentive award of $2,160,000 based on his performance against objective metrics reviewed favorably by the Office of the Special Master. In light of the restrictions applicable to Mr. Hancock because he was expected to enter the Top 25 for 2011, half of the Variable Cash Incentive ($1,080,000) was paid in cash in December 2010, whereas the remaining half was paid in the form of immediately vested restricted stock that cannot be transferred until the first quarter of 2012 and is shown in the Stock Awards column.

 

(4)

 

 

 

The amounts in this column do not represent amounts that were paid to the named executives. Rather, the amounts represent the total change of the actuarial present value of the accumulated benefit under AIG’s defined benefit (pension) plans, including the U.S. qualified and excess plans and the SERP (AIG and/or American General Corporation), if applicable. These plans are described in “Post-Employment Compensation—Pension Benefits.” (For Messrs. Herzog and Moor, the amounts previously reported in AIG’s 2010 Proxy Statement were overstated by small amounts as the three-year average earnings used for that proxy calculation included three years of base salary paid though October 31, 2009. The calculation should have been based upon three years of base salary paid through October 22, 2009 to reflect the date their non qualified pension benefits were frozen.)

 

 

 

 

 

Mr. Hancock was not yet a participant in the AIG qualified pension plan at December 31, 2010. Mr. Hancock became a participant in AIG’s qualified pension plan effective March 1, 2011, after he completed one year of service with AIG, with service credited retroactive to September 1, 2010. Mr. Wilson did not participate in any defined benefit or actuarial pension plans.

 

 

 

 

 

Pursuant to the Determination Memoranda issued by the Office of the Special Master on October 22, 2009, December 11, 2009, March 23, 2010 and April 16, 2010 (the Memoranda), there is a freeze on future benefit accruals with regard to the benefits provided under the Excess Retirement Income Plan and the SERP. The Memoranda require AIG to cease any future benefit accruals for executives while they are among the top 100 paid employees under TARP. Benefit accruals in these plans ceased on October 22, 2009 for Messrs. Benmosche, Herzog, Moor and Wintrob. Mr. Hancock commenced employment after the freeze and therefore did not accrue any benefits in these plans.

 

(5)

 

 

 

Perquisites. This column includes the incremental costs of perquisites and benefits. The following table details the incremental cost to AIG of perquisites received by each named executive.

54


Footnotes to 2010 Summary Compensation Table, continued

Perquisites and Benefits

 

 

 

 

 

 

 

 

 

 

 

Name

 

Personal Use of
Car Service/Car
Allowance/Parking(a)

 

Financial,
Tax and Legal
Planning(b)

 

Personal Use of
Club Memberships
and Recreational
Opportunities

 

Assignee
Benefits(c)

 

Total

Robert H. Benmosche

 

 

$

 

 24,390

 

 

 

$

 

0

 

 

 

$

 

0

 

 

 

$

 

0

 

 

 

$

 

24,390

 

David L. Herzog

 

 

$

 

9,469

 

 

 

$

 

0

 

 

 

$

 

0

 

 

 

$

 

0

 

 

 

$

 

9,469

 

Peter D. Hancock

 

 

$

 

5,594

 

 

 

$

 

203,596

 

 

 

$

 

0

 

 

 

$

 

0

 

 

 

$

 

209,190

 

Kris P. Moor

 

 

$

 

6,300

 

 

 

$

 

15,600

 

 

 

$

 

0

 

 

 

$

 

0

 

 

 

$

 

21,900

 

Jay S. Wintrob

 

 

$

 

18,594

 

 

 

$

 

5,000

 

 

 

$

 

0

 

 

 

$

 

0

 

 

 

$

 

23,594

 

Former Executive Officer

 

 

 

 

Mark A. Wilson

 

 

$

 

15,659

 

 

 

$

 

0

 

 

 

$

 

8,423

 

 

 

$

 

261,344

 

 

 

$

 

285,426

 


 

 

(a)

 

 

 

For Messrs. Benmosche and Wilson, who were each provided with a dedicated car and driver, car use reflects the incremental cost of driver overtime compensation, fuel and maintenance attributable to personal use. Although this benefit was provided to enhance the security and efficient travel of Messrs. Benmosche and Wilson, SEC rules require that costs of commuting and other uses not directly and integrally related to business be disclosed as compensation to the executive. For the other named executives, the incremental cost for car-related perquisites represents AIG’s direct expenditures.

 

(b)

 

 

 

Incremental costs related to financial, tax and legal planning represent AIG’s direct expenditures. Under the structure the Special Master approved, Mr. Hancock was entitled to payment of legal fees incurred in connection with his hire in early 2010 and the amount shown represents those fees.

 

(c)

 

 

 

Assignee Benefits include housing reimbursement ($205,269), educational expenses for children ($36,109), and travel for home leave ($19,966).

Other Benefits. This column also includes life insurance premiums paid for the benefit of the named executives. All current named executives are covered under the AIG Basic Group Life Insurance Plan. For group life insurance, the 2010 company-paid costs were: Benmosche — $610; Herzog — $939; Hancock — $759; Moor — $940; Wintrob — $939; and Wilson — $1,722. The cost for Mr. Wilson is attributable to the life insurance plan provided to AIA employees.

This column also includes matching contributions by AIG under its 401(k) plan and, for Mr. Wilson, the defined contribution plan in which he participated in Hong Kong. These matching contributions include the following amounts in 2010: Benmosche — $0; Herzog — $0; Hancock — $2,307; Moor — $17,150; Wintrob — $17,150; and Wilson — $39,502. See “Post-Employment Compensation—Nonqualified Deferred Compensation” for additional details. Mr. Wilson participated in a different defined contribution plan in connection with his years of service in Hong Kong as described in greater detail in “Post Employment Compensation—Nonqualified Deferred Compensation.” The amount of the contribution included in “All Other Compensation” in the 2010 Summary Compensation Table for 2010 for Mr. Wilson reflects conversion to U.S. dollars at a rate of HK$7.7725 per U.S. dollar, the month-end rate for December 2010.

For Mr. Wilson, this column also includes the following payments made to Mr. Wilson by AIA, in connection with his January 2011 departure: a payment in lieu of a pension benefit Mr. Wilson forfeited with his prior employer ($520,000), a payment to settle a disputed claim under his employment agreement with AIA ($450,000), severance ($309,247), accrued and unpaid vacation ($161,524) and monetization of unvested restricted stock units (RSUs) ($25,650).

AIG maintains a policy of directors and officers liability insurance for itself, its directors and officers, its subsidiaries and their directors and officers. The premium for this policy for the year ended September 22, 2010 was approximately $52.2 million, and for the year ending September 22, 2011 was approximately $51 million. In addition, AIG purchased coverage in 2008 that will be in effect until 2014 and will allow AIG and its subsidiaries to report claims that relate to director and officer conduct during the period from May 24, 2005 to September 22, 2008, at a total cost of approximately $75.1 million.

55


2010 Grants of Plan-Based Awards

Total 2010 Grants. The following table details all equity and non-equity plan-based awards granted to each of the named executives in 2010.

2010 Grants of Plan-Based Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name

 

Grant
Date

 

Committee
Action
Date(1)

 

Estimated Possible
Payouts Under
Non-equity
Incentive Plan
Awards

 

Estimated Possible
Payouts Under Equity
Incentive Plan Awards

 

All
Other
Stock
Awards
(# of
AIG
Shares)

 

All Other
Awards
(# of LTPUs)(2)

 

Exercise
Price of
Option
Awards
($/Sh)

 

Grant Date
Fair Value
of Equity
Awards
($)(3)

 

Threshold

 

Target

 

Maximum

Robert H. Benmosche
Stock Salary paid in
restricted stock(4)

 

 

 

01/07/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,383

 

 

 

 

 

 

 

 

 

 

 

$

 

153,846

 

 

 

 

 

01/21/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,584

 

 

 

 

 

 

 

 

 

 

 

$

 

153,839

 

 

 

 

02/04/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,810

 

 

 

 

 

 

 

 

 

 

 

$

 

153,838

 

 

 

 

 

02/18/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,759

 

 

 

 

 

 

 

 

 

 

 

$

 

153,823

 

 

 

 

03/04/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,759

 

 

 

 

 

 

 

 

 

 

 

$

 

153,823

 

 

 

 

 

03/18/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,441

 

 

 

 

 

 

 

 

 

 

 

$

 

153,836

 

 

 

 

04/01/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,510

 

 

 

 

 

 

 

 

 

 

 

$

 

153,836

 

 

 

 

 

04/15/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,848

 

 

 

 

 

 

 

 

 

 

 

$

 

153,843

 

 

 

 

04/29/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,824

 

 

 

 

 

 

 

 

 

 

 

$

 

153,840

 

 

 

 

 

05/13/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,784

 

 

 

 

 

 

 

 

 

 

 

$

 

153,820

 

 

 

 

05/27/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,219

 

 

 

 

 

 

 

 

 

 

 

$

 

153,825

 

 

 

 

 

06/10/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,358

 

 

 

 

 

 

 

 

 

 

 

$

 

153,837

 

 

 

 

06/24/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,184

 

 

 

 

 

 

 

 

 

 

 

$

 

153,846

 

 

 

 

 

07/08/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,332

 

 

 

 

 

 

 

 

 

 

 

$

 

153,829

 

 

 

 

07/22/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,216

 

 

 

 

 

 

 

 

 

 

 

$

 

153,842

 

 

 

 

 

08/05/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,855

 

 

 

 

 

 

 

 

 

 

 

$

 

153,815

 

 

 

 

08/19/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,327

 

 

 

 

 

 

 

 

 

 

 

$

 

153,825

 

 

 

 

 

09/02/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,283

 

 

 

 

 

 

 

 

 

 

 

$

 

153,845

 

 

 

 

09/16/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,308

 

 

 

 

 

 

 

 

 

 

 

$

 

153,839

 

 

 

 

 

09/30/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,934

 

 

 

 

 

 

 

 

 

 

 

$

 

153,819

 

 

 

 

10/14/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,668

 

 

 

 

 

 

 

 

 

 

 

$

 

153,836

 

 

 

 

 

10/28/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,664

 

 

 

 

 

 

 

 

 

 

 

$

 

153,815

 

 

 

 

11/10/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,578

 

 

 

 

 

 

 

 

 

 

 

$

 

153,818

 

 

 

 

 

11/24/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,684

 

 

 

 

 

 

 

 

 

 

 

$

 

153,844

 

 

 

 

12/09/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,219

 

 

 

 

 

 

 

 

 

 

 

$

 

153,804

 

 

 

 

 

12/23/10

 

 

 

 

11/24/09

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,831

 

 

 

 

 

 

 

 

 

 

 

$

 

153,808

 

TARP RSUs

 

 

 

03/15/10

 

 

 

 

03/09/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40,233

 

 

 

 

 

 

 

 

 

 

 

$

 

1,380,797

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

152,595

 

 

 

 

 

 

 

 

 

$

 

5,380,388

 

David L. Herzog
Stock Salary paid in LTPUs

 

 

 

05/28/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30,824

 

 

 

 

 

 

 

$

 

1,868,750

 

 

 

 

 

06/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,923

 

 

 

 

 

 

 

$

 

186,875

 

 

 

 

06/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,924

 

 

 

 

 

 

 

$

 

186,875

 

 

 

 

 

07/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,788

 

 

 

 

 

 

 

$

 

186,875

 

 

 

 

07/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,685

 

 

 

 

 

 

 

$

 

186,875

 

 

 

 

 

08/13/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,662

 

 

 

 

 

 

 

$

 

186,875

 

 

 

 

08/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,741

 

 

 

 

 

 

 

$

 

186,875

 

 

 

 

 

09/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,649

 

 

 

 

 

 

 

$

 

186,875

 

 

 

 

09/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,454

 

 

 

 

 

 

 

$

 

186,875

 

 

 

 

 

10/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,296

 

 

 

 

 

 

 

$

 

186,875

 

 

 

 

10/29/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,260

 

 

 

 

 

 

 

$

 

186,875

 

 

 

 

 

11/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,700

 

 

 

 

 

 

 

$

 

338,515

 

 

 

 

11/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,330

 

 

 

 

 

 

 

$

 

186,875

 

 

 

 

 

12/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,164

 

 

 

 

 

 

 

$

 

186,875

 

 

 

 

12/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,062

 

 

 

 

 

 

 

$

 

186,875

 

TARP RSUs

 

 

 

12/20/10

 

 

 

 

12/20/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,093

 

 

 

 

 

 

 

 

 

 

 

$

 

1,019,948

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,093

 

 

 

 

67,462

 

 

 

 

 

$

 

5,656,588

 

Peter D. Hancock
Stock Salary paid in LTPUs

 

 

 

05/28/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,135

 

 

 

 

 

 

 

$

 

735,714

 

 

 

 

06/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,564

 

 

 

 

 

 

 

$

 

100,000

 

 

 

 

 

06/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,565

 

 

 

 

 

 

 

$

 

100,000

 

 

 

 

07/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,492

 

 

 

 

 

 

 

$

 

100,000

 

 

 

 

 

07/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,437

 

 

 

 

 

 

 

$

 

100,000

 

 

 

 

08/13/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,425

 

 

 

 

 

 

 

$

 

100,000

 

 

 

 

 

08/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,467

 

 

 

 

 

 

 

$

 

100,000

 

 

 

 

09/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,418

 

 

 

 

 

 

 

$

 

100,000

 

56


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name

 

Grant
Date

 

Committee
Action
Date(1)

 

Estimated Possible
Payouts Under
Non-equity
Incentive Plan
Awards

 

Estimated Possible
Payouts Under Equity
Incentive Plan Awards

 

All
Other
Stock
Awards
(# of
AIG
Shares)

 

All Other
Awards
(# of LTPUs)(2)

 

Exercise
Price of
Option
Awards
($/Sh)

 

Grant Date
Fair Value
of Equity
Awards
($)(3)

 

Threshold

 

Target

 

Maximum

 

 

 

09/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,313

 

 

 

 

 

 

 

$

 

100,000

 

 

 

 

 

10/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,229

 

 

 

 

 

 

 

$

 

100,000

 

 

 

 

10/29/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,209

 

 

 

 

 

 

 

$

 

100,000

 

 

 

 

 

11/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,872

 

 

 

 

 

 

 

$

 

169,582

 

 

 

 

11/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,247

 

 

 

 

 

 

 

$

 

100,000

 

 

 

 

 

12/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,158

 

 

 

 

 

 

 

$

 

100,000

 

 

 

 

12/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,319

 

 

 

 

 

 

 

$

 

119,666

 

Restricted Stock(5)

 

 

 

12/20/10

 

 

 

 

12/20/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

60,651

 

 

 

 

 

 

 

 

 

 

 

$

 

3,239,976

 

Variable Cash Incentive Award

 

 

 

12/20/10

 

 

 

 

12/20/10

   

$1,080,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

$1,080,000

 

 

 

 

 

 

 

 

 

60,651

 

 

 

 

31,850

 

 

 

 

 

$

 

5,464,938

 

Kris P. Moor
Stock Salary paid in LTPUs

 

 

 

05/28/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34,364

 

 

 

 

 

 

 

$

 

2,083,333

 

 

 

 

 

06/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,259

 

 

 

 

 

 

 

$

 

208,333

 

 

 

 

06/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,259

 

 

 

 

 

 

 

$

 

208,333

 

 

 

 

 

07/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,108

 

 

 

 

 

 

 

$

 

208,333

 

 

 

 

07/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,993

 

 

 

 

 

 

 

$

 

208,333

 

 

 

 

 

08/13/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,968

 

 

 

 

 

 

 

$

 

208,333

 

 

 

 

08/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,056

 

 

 

 

 

 

 

$

 

208,333

 

 

 

 

 

09/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,953

 

 

 

 

 

 

 

$

 

208,333

 

 

 

 

09/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,736

 

 

 

 

 

 

 

$

 

208,333

 

 

 

 

 

10/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,560

 

 

 

 

 

 

 

$

 

208,333

 

 

 

 

10/29/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,520

 

 

 

 

 

 

 

$

 

208,333

 

 

 

 

 

11/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,121

 

 

 

 

 

 

 

$

 

377,021

 

 

 

 

11/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,597

 

 

 

 

 

 

 

$

 

208,333

 

 

 

 

 

12/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,413

 

 

 

 

 

 

 

$

 

208,333

 

 

 

 

12/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,299

 

 

 

 

 

 

 

$

 

208,333

 

TARP RSUs(6)

 

 

 

12/20/10

 

 

 

 

12/20/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35,567

 

 

 

 

 

 

 

 

 

 

 

$

 

1,899,989

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35,567

 

 

 

 

75,206

 

 

 

 

 

$

 

7,068,672

 

Jay S. Wintrob

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Salary paid in LTPUs

 

 

 

05/28/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35,388

 

 

 

 

 

 

 

$

 

2,145,417

 

 

 

 

 

06/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,356

 

 

 

 

 

 

 

$

 

214,542

 

 

 

 

06/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,357

 

 

 

 

 

 

 

$

 

214,542

 

 

 

 

 

07/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,200

 

 

 

 

 

 

 

$

 

214,542

 

 

 

 

07/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,082

 

 

 

 

 

 

 

$

 

214,542

 

 

 

 

 

08/13/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,056

 

 

 

 

 

 

 

$

 

214,542

 

 

 

 

08/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,147

 

 

 

 

 

 

 

$

 

214,542

 

 

 

 

 

09/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,041

 

 

 

 

 

 

 

$

 

214,542

 

 

 

 

09/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,818

 

 

 

 

 

 

 

$

 

214,542

 

 

 

 

 

10/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,636

 

 

 

 

 

 

 

$

 

214,542

 

 

 

 

10/29/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,595

 

 

 

 

 

 

 

$

 

214,542

 

 

 

 

 

11/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,247

 

 

 

 

 

 

 

$

 

388,598

 

 

 

 

11/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,674

 

 

 

 

 

 

 

$

 

214,542

 

 

 

 

 

12/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,484

 

 

 

 

 

 

 

$

 

214,542

 

 

 

 

12/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,368

 

 

 

 

 

 

 

$

 

214,542

 

TARP RSUs

 

 

 

12/20/10

 

 

 

 

12/20/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21,639

 

 

 

 

 

 

 

 

 

 

 

$

 

1,155,955

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21,639

 

 

 

 

77,449

 

 

 

 

 

$

 

6,479,016

 

Former Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mark A. Wilson

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Salary paid in LTPUs

 

 

 

05/28/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,859

 

 

 

 

 

 

 

$

 

658,333

 

 

 

 

06/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,030

 

 

 

 

 

 

 

$

 

65,833

 

 

 

 

 

06/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,030

 

 

 

 

 

 

 

$

 

65,833

 

 

 

 

07/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

982

 

 

 

 

 

 

 

$

 

65,833

 

 

 

 

 

07/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

946

 

 

 

 

 

 

 

$

 

65,833

 

 

 

 

08/13/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

938

 

 

 

 

 

 

 

$

 

65,833

 

 

 

 

 

08/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

966

 

 

 

 

 

 

 

$

 

65,833

 

 

 

 

09/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

933

 

 

 

 

 

 

 

$

 

65,833

 

 

 

 

 

09/30/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

865

 

 

 

 

 

 

 

$

 

65,833

 

 

 

 

10/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

809

 

 

 

 

 

 

 

$

 

65,833

 

 

 

 

 

10/29/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

796

 

 

 

 

 

 

 

$

 

65,833

 

 

 

 

11/15/10

 

 

 

 

05/28/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

495

 

 

 

 

 

 

 

$

 

52,848

 

Restricted Stock

 

 

 

03/29/10

 

 

 

 

03/29/10

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

118,605

 

 

 

 

 

 

 

 

 

 

 

$

 

4,699,942

(7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

118,605

 

 

 

 

20,649

 

 

 

 

 

$

 

6,069,453

 

57



 

 

(1)

 

 

 

Date on which grants were approved by the Compensation and Management Resources Committee.

 

(2)

 

 

 

Each LTPU has a grant date notional value of $1,000, representing 20 percent AIG Common Stock and 80 percent debt securities by value. At any other time, the value of an LTPU is based on the value of the underlying securities. Both components of the LTPU are market observable. LTPUs issued as Stock Salary will be settled in three equal installments on the first, second and third anniversary of the date of grant other than LTPUs issued to Mr. Wilson, which settle on the first or third anniversary of the date of grant. As a result of the Recapitalization, on April 14, 2011, the debt securities portion of outstanding LTPUs will be converted into AIG Common Stock based on the values of the debt securities and AIG Common Stock at the time of conversion.

 

(3)

 

 

 

Calculated based on the following closing prices of AIG Common Stock and the debt securities at the grant date:

 

 

 

 

 

 

 

 

 

 

 

Grant Date

 

Closing Price

 

Debt
Security Price

 

Grant Date

 

Closing Price

 

Debt
Security Price

 

01/07/10

 

 

 

$

 

28.58

 

 

 

 

 

 

 

 

08/05/10

 

 

 

$

 

39.90

 

 

 

 

 

 

 

01/21/10

 

 

 

$

 

27.55

 

 

 

 

 

 

 

 

08/13/10

 

 

 

$

 

36.67

 

 

 

$

 

90.9926

 

 

02/04/10

 

 

 

$

 

22.59

 

 

 

 

 

 

 

 

08/19/10

 

 

 

$

 

35.55

 

 

 

 

 

 

 

02/18/10

 

 

 

$

 

26.71

 

 

 

 

 

 

 

 

08/30/10

 

 

 

$

 

34.00

 

 

 

$

 

91.0580

 

 

03/04/10

 

 

 

$

 

26.71

 

 

 

 

 

 

 

 

09/02/10

 

 

 

$

 

35.92

 

 

 

 

 

 

 

03/15/10

 

 

 

$

 

34.32

 

 

 

 

 

 

 

 

09/15/10

 

 

 

$

 

36.16

 

 

 

$

 

92.5458

 

 

03/18/10

 

 

 

$

 

34.64

 

 

 

 

 

 

 

 

09/16/10

 

 

 

$

 

35.71

 

 

 

 

 

 

 

03/29/10

 

 

 

$

 

34.45

 

 

 

 

 

 

 

 

09/30/10

 

 

 

$

 

39.10

 

 

 

$

 

99.7592

 

 

04/01/10

 

 

 

$

 

34.11

 

 

 

 

 

 

 

 

10/14/10

 

 

 

$

 

41.94

 

 

 

 

 

 

 

04/15/10

 

 

 

$

 

39.98

 

 

 

 

 

 

 

 

10/15/10

 

 

 

$

 

41.47

 

 

 

$

 

107.1738

 

 

04/29/10

 

 

 

$

 

40.23

 

 

 

 

 

 

 

 

10/28/10

 

 

 

$

 

41.98

 

 

 

 

 

 

 

05/13/10

 

 

 

$

 

40.65

 

 

 

 

 

 

 

 

10/29/10

 

 

 

$

 

42.01

 

 

 

$

 

109.0798

 

 

05/27/10

 

 

 

$

 

36.46

 

 

 

 

 

 

 

 

11/01/10

 

 

 

$

 

42.99

 

 

 

 

 

 

 

05/28/10

 

 

 

$

 

35.38

 

 

 

$

 

73.7900

 

 

 

 

11/15/10

 

 

 

$

 

42.42

 

 

 

$

 

106.8345

 

 

06/10/10

 

 

 

$

 

35.30

 

 

 

 

 

 

 

 

11/24/10

 

 

 

$

 

41.76

 

 

 

 

 

 

 

06/15/10

 

 

 

$

 

37.88

 

 

 

$

 

77.2000

 

 

 

 

11/30/10

 

 

 

$

 

41.29

 

 

 

$

 

104.9609

 

 

06/24/10

 

 

 

$

 

36.77

 

 

 

 

 

 

 

 

12/09/10

 

 

 

$

 

47.78

 

 

 

 

 

 

 

06/30/10

 

 

 

$

 

34.44

 

 

 

$

 

81.3168

 

 

 

 

12/15/10

 

 

 

$

 

51.19

 

 

 

$

 

104.2593

 

 

07/08/10

 

 

 

$

 

35.51

 

 

 

 

 

 

 

 

12/20/10

 

 

 

$

 

53.42

 

 

 

 

 

 

 

07/15/10

 

 

 

$

 

37.38

 

 

 

$

 

83.6270

 

 

 

 

12/23/10

 

 

 

$

 

54.33

 

 

 

 

 

 

07/22/10

 

 

 

$

 

36.49

 

 

 

 

 

 

 

 

12/30/10

 

 

 

$

 

57.53

 

 

 

$

 

105.8252

 

 

 

07/30/10

 

 

 

$

 

38.47

 

 

 

$

 

87.2582

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4)

 

 

 

Amounts do not include cash paid in lieu of fractional shares.

 

(5)

 

 

 

Consists of Mr. Hancock’s Variable Stock Incentive award and the portion of Mr. Hancock’s Variable Cash Incentive award denominated in immediately vested restricted stock.

 

(6)

 

 

 

Although Mr. Moor’s TARP RSUs award is shown at its full target amount, his final award was 90 percent of target.

 

(7)

 

 

 

Represents Mr. Wilson’s $4,700,000 restricted stock award for 2009 performance, including $614,000 paid in cash to enable him to meet his Hong Kong tax obligations on the award and excluding $58 in fractional shares.

EXERCISES AND HOLDINGS OF PREVIOUSLY AWARDED EQUITY

Outstanding Equity Awards at December 31, 2010

Equity-based awards held at the end of 2010 by each named executive, including awards under AIG’s Partners Plan and the DCPPP, were issued under the incentive plans and arrangements described below. Shares of AIG Common Stock deliverable under the Partners Plan or the DCPPP and AIG’s time-vested equity and option awards will be delivered under the 2007 Stock Incentive Plan, AIG’s Amended and Restated 2002 Stock Incentive Plan or AIG’s Amended and Restated 1999 Stock Option Plan, as applicable. Also included in outstanding equity-based awards are grants historically made by Starr International Company, Inc. (SICO) under a series of two-year Deferred Compensation Profit Participation Plans.

58


The following table sets forth outstanding equity-based awards held by each named executive as of December 31, 2010.

Outstanding Equity Awards at December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name

 

Option Awards(1)

 

Stock Awards

 

Unvested (No Longer Subject
to Performance Conditions)

 

Year
Granted(1)

 

Number
Exercisable

 

Number
Unexercisable

 

Exercise
Price

 

Expiration
Date

 

Plan(2)(3)(4)

 

Number

 

Market
Value(5)

Robert H. Benmosche

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

TARP RSUs

 

 

 

40,233

 

 

 

$

 

2,318,225

 

David L. Herzog

 

 

 

2007

 

 

 

 

1,312

 

 

 

 

437

 

 

 

$

 

1,140.99

   

12/13/2017

 

TARP RSUs

 

 

 

45,548

 

 

 

$

 

2,624,476

 

 

 

 

2006

 

 

 

 

1,499

 

 

 

 

 

 

 

$

 

1,420.00

   

12/11/2016

 

2006 PP

 

 

 

123

 

 

 

$

 

7,087