PRE 14A
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

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

Exchange Act of 1934 (Amendment No.       )

Filed by the Registrant þ

 Filed by a Party other than the Registrant  ¨

Check the appropriate box:

þ  Preliminary Proxy Statement

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

¨  Definitive Proxy Statement

¨  Definitive Additional Materials

¨  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)

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Table of Contents

Preliminary Proxy Materials

Subject to Completion

 

LOGO

AMERICAN INTERNATIONAL GROUP, INC.

175 Water Street, New York, N.Y. 10038

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD MAY 12, 2014

, 2014

To the Shareholders of

AMERICAN INTERNATIONAL GROUP, INC.:

The Annual Meeting of Shareholders of AMERICAN INTERNATIONAL GROUP, INC. (AIG) will be held at 175 Water Street, New York, New York, on May 12, 2014, at 9:00 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, on a non-binding advisory basis, to approve executive compensation;

 

  3.

To act upon a proposal to amend and restate AIG’s Restated Certificate of Incorporation to continue 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 amendment to extend the expiration of 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 2014; and

 

  6.

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

Shareholders of record at the close of business on March 17, 2014 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 12, 2014. The Proxy Statement, 2013 Annual Report to Shareholders and other Soliciting Material are available in the Investors section of AIG’s corporate website at www.aig.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 must bring an account statement or other acceptable evidence of ownership of AIG Common Stock as of the close of business on March 17, 2014. If you cannot be present at the meeting, please sign and date your proxy and return it at once or vote your shares by telephone or through the internet.


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LOGO

AMERICAN INTERNATIONAL GROUP, INC.

175 Water Street, New York, N.Y. 10038

PROXY STATEMENT

, 2014

 

TIME AND DATE    9:00 a.m. on Monday, May 12, 2014.
PLACE    175 Water Street, New York, New York 10038.
MAILING DATE    This Proxy Statement, 2013 Annual Report and proxy card or voting instructions were either made available to you over the internet or mailed to you on or about , 2014.
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, on a non-binding advisory basis, to approve executive compensation;

  

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

  

•    To act upon a proposal to ratify the amendment to extend the expiration of 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 2014; 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 17, 2014.
INSPECTION OF LIST OF SHAREHOLDERS OF RECORD    A list of the shareholders of record as of March 17, 2014 will be available for inspection during ordinary business hours during the ten days prior to the meeting at AIG’s offices, 175 Water Street, New York, New York 10038.
ADDITIONAL INFORMATION    Additional information regarding the matters to be acted on at the meeting is included in this proxy statement.
PROXY VOTING    YOU CAN VOTE YOUR SHARES OVER THE INTERNET OR BY TELEPHONE. IF YOU RECEIVED A PAPER PROXY CARD BY MAIL, YOU MAY ALSO VOTE BY SIGNING, DATING AND RETURNING THE PROXY CARD IN THE ENVELOPE PROVIDED.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

EXECUTIVE SUMMARY

    3   

VOTING INSTRUCTIONS AND INFORMATION

    8   

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

    12   

ELECTION OF DIRECTORS

    13   

CORPORATE GOVERNANCE

    21   

Governance

    21   

Report of the Nominating and Corporate Governance Committee

    23   

Committees

    24   

Compensation of Directors

    27   

Compensation and Management Resources Committee Interlocks and Insider Participation

    29   

OWNERSHIP OF CERTAIN SECURITIES

    30   

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

    32   

RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

    32   

EXECUTIVE COMPENSATION

    33   

Report of the Compensation and Management Resources Committee

    33   

Compensation Discussion and Analysis

    35   

2013 Compensation

    49   

Holdings of and Vesting of Previously Awarded Equity

    52   

Post-Employment Compensation

    53   

Potential Payments on Termination

    60   

PROPOSAL 2—NON-BINDING ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

    66   

BACKGROUND TO PROPOSALS 3 AND 4

    67   

PROPOSAL 3—APPROVAL OF AMENDMENT AND RESTATEMENT OF AIG'S RESTATED CERTIFICATE OF INCORPORATION

    69   

PROPOSAL 4—RATIFICATION OF AMENDMENT NO. 1 TO THE TAX ASSET PROTECTION PLAN

    73   

REPORT OF AUDIT COMMITTEE AND RATIFICATION OF SELECTION OF ACCOUNTANTS

    76   

Report of the Audit Committee

    76   

PROPOSAL 5—RATIFICATION OF SELECTION OF PRICEWATERHOUSECOOPERS LLP

    78   

Fees Paid to PricewaterhouseCoopers LLP

    78   

EQUITY COMPENSATION PLAN INFORMATION

    80   

OTHER MATTERS

    81   

Other Matters to be Presented at the 2014 Annual Meeting of Shareholders

    81   

Shareholder Proposals for the 2015 Annual Meeting

    81   

Communications with the Board of Directors

    81   

Electronic Delivery of Proxy Materials

    81   

Important Notice Regarding Delivery of Shareholder Documents

    81   

Incorporation by Reference

    82   

CORPORATE GOVERNANCE GUIDELINES

    A-1   

NON-GAAP FINANCIAL MEASURES

    B-1   

PROPOSED AMENDMENT TO AMERICAN INTERNATIONAL GROUP, INC.'S RESTATED CERTIFICATE OF INCORPORATION (AMENDING ARTICLE THIRTEEN) RELATING TO PROPOSAL 3

    C-1   

AMERICAN INTERNATIONAL GROUP, INC. TAX ASSET PROTECTION PLAN

    D-1   

AMENDMENT NO. 1 TO THE AMERICAN INTERNATIONAL GROUP, INC. TAX ASSET PROTECTION PLAN

    E-1   
 

 

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LOGO

EXECUTIVE SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement. We hope this summary will be helpful to our shareholders in reviewing the proposals. This summary does not contain all of the information you should consider in making a voting decision, and you should read the entire Proxy Statement carefully before voting. These proxy materials are first being sent to shareholders of AIG commencing on or about , 2014. For information on the details of the voting process and how to attend the Annual Meeting, please see “Voting Instructions and Information” on page 8.

Voting Matters and Vote Recommendation

 

Proposal

  

Board Vote
Recommendation

  

For More Information, see:

1.

 

Election of 14 Directors

   FOR EACH DIRECTOR NOMINEE    Election of Directors, page 13

2.

  Advisory vote on executive compensation    FOR    Proposal 2-Non-Binding Advisory Vote to Approve Executive Compensation, page 66

3.

  Approval of amendment and restatement of AIG's Restated Certificate of Incorporation to continue to restrict certain transfers of AIG Common Stock in order to protect AIG’s tax attributes    FOR    Proposal 3-Approval of Amendment and Restatement of AIG's Restated Certificate of Incorporation, page 69

4.

  Ratification of the amendment to extend the expiration of the American International Group, Inc. Tax Asset Protection Plan    FOR    Proposal 4-Ratification of Amendment No. 1 to the Tax Asset Protection Plan, page 73

5.

  Ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2014    FOR    Proposal 5-Ratification of Selection of PricewaterhouseCoopers LLP, page 78

 

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Performance Highlights

 

LOGO

 

 

(a) Insurance pre-tax operating income, accident year loss ratio, as adjusted, and book value per share excluding AOCI are “non-GAAP financial measures.” For how these measures are calculated, see Appendix B (for insurance pre-tax operating income) and pages 56-57 of AIG’s 2013 Annual Report on Form 10-K (for accident year loss ratio, as adjusted, and book value per share excluding AOCI).

 

(b) Based on AerCap’s pre-announcement closing price per share of $24.93 as of December 13, 2013.

 

(c) AIG did not receive any proceeds from the sale of AIG Common Stock by the Department of the Treasury. See Notes 4, 16, 17 and 24 to the Consolidated Financial Statements included in AIG’s 2013 Annual Report on Form 10-K for further discussion of the government support provided to AIG and the Recapitalization.

 

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PROPOSAL 1—ELECTION OF 14 DIRECTORS

The following table provides summary information about each director nominee. Each director is elected annually by a majority of votes cast.

 

Name

  Age     Director
Since
   

Occupation/Background

 

Indepen-
dent

 

Other Public Boards

  Current Committee
Memberships

Robert H. Benmosche

    69        2009      President and CEO, AIG     International Lease Finance Corporation (an AIG subsidiary)  

W. Don Cornwell

    66        2011      Former Chairman and CEO of Granite Broadcasting Corporation   ü   Avon Products, Inc.; Pfizer Inc.   Compensation and Management
Resources Committee;

Nominating and Corporate
Governance Committee

Peter R. Fisher

    57        N/A      Senior Fellow at the Center for Global Business and Government, and Senior Lecturer, at the Tuck School of Business at Dartmouth College; Former Head of Fixed Income Portfolio Management of BlackRock, Inc.   ü     N/A

John H. Fitzpatrick

    57        2011      Secretary General of The Geneva Association (term ends May 2014); Former Chief Financial Officer, Head of the Life and Health Reinsurance Business Group and Head of Financial Services of Swiss Re   ü     Audit Committee;

Finance and Risk Management
Committee (Chair)

William G. Jurgensen

    62        2013      Former CEO of Nationwide Insurance   ü   ConAgra Foods, Inc.   Audit Committee;

Regulatory, Compliance and
Public Policy Committee

Christopher S. Lynch

    56        2009      Independent consultant and former National Partner in Charge of Financial Services of KPMG LLP   ü   Federal Home Loan Mortgage Corporation   Audit Committee (Chair);

Finance and Risk Management
Committee

Arthur C. Martinez

    74        2009      Former Chairman, President and CEO of Sears, Roebuck and Co.   ü   Abercrombie & Fitch Co.; HSN, Inc.; IAC/ InterActive Corp*; International Flavors & Fragrances Inc.; Kate Spade & Co.*   Compensation and Management
Resources Committee (Chair);

Nominating and Corporate
Governance Committee;

Technology Committee

George L. Miles, Jr.

    72        2005      Chairman Emeritus of Chester Engineers, Inc.; Former President and CEO of WQED Multimedia   ü   EQT Corporation; Harley-Davidson, Inc.; HFF, Inc.; WESCO International, Inc.*   Audit Committee;

Nominating and Corporate
Governance Committee;

Technology Committee

Henry S. Miller

    68        2010      Chairman of Marblegate Asset Management, LLC; Former Chairman and Managing Director of Miller Buckfire & Co., LLC   ü   Ally Financial Inc.   Finance and Risk Management
Committee;

Regulatory, Compliance and
Public Policy Committee

Robert S. Miller

    72        2009      Former CEO of Hawker Beechcraft, Inc.; Former Executive Chairman of Delphi Corporation   ü   Symantec Corporation   **

Suzanne Nora Johnson

    56        2008      Former Vice Chairman of The Goldman Sachs Group, Inc.   ü   Intuit Inc.; Pfizer Inc.; Visa Inc.   Compensation and Management
Resources Committee;

Nominating and Corporate
Governance Committee (Chair)

Ronald A. Rittenmeyer

    66        2010      Chairman, President and CEO of Expert Global Solutions, Inc.; Former Chairman, CEO and President of Electronic Data Systems Corporation   ü   Avaya Inc.; Tenet Healthcare Corporation   Audit Committee;

Compensation and Management
Resources Committee;

Technology Committee (Chair)

Douglas M. Steenland

    62        2009      Former President and CEO of Northwest Airlines Corporation   ü   Chrysler Group LLC; Digital River, Inc.; Hilton Worldwide Holdings Inc.; Travelport Limited; International Lease Finance Corporation (an AIG subsidiary)   Finance and Risk Management
Committee;

Regulatory, Compliance and
Public Policy Committee (Chair)

Theresa M. Stone

    69        2013      Former Executive Vice President and Treasurer of the Massachusetts Institute of Technology; Former Executive Vice President and Chief Financial Officer of Jefferson-Pilot Corporation; Former President of Chubb Life Insurance Company   ü     Audit Committee;

Finance and Risk Management
Committee

 

 

* Not standing for re-election in 2014.

 

** Mr. Robert Miller, as Chairman of the Board, is an ex-officio, non-voting member of each of the Committees.

 

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PROPOSAL 2—NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION

2013 marked the first year of our executive compensation program following the end of Troubled Asset Relief Program (TARP) related restrictions and entailed the following:

 

• Balanced Structure: Total compensation consists of market-competitive base salary, 25% to 35% target short-term incentive opportunity and at least 40% target long-term incentive opportunity.

 

• Emphasis on Long-Term Incentives: At least 70% of each executive’s total target compensation is “at risk” and based on performance, and the majority of his or her incentive pay opportunity is based on performance over a 3-year period and paid over a 5-year period.

 

• Deferred Payouts: At least 75% of target incentives and 55% of target total compensation is deferred and subject to our clawback policy.

 

• Direct Link to AIG Performance: Long-term incentives are in the form of performance share units (PSUs) that, for 2013, are earned based on achieving total shareholder return (TSR) and growth in tangible book value per share (excluding AOCI) (TBVPS) measured relative to our peers over a 3-year period, with above-median performance required for target payout.

 

• Share Ownership Requirements: Our Chief Executive Officer is subject to a five times base salary guideline and our other executive officers subject to a three times guideline; 50% of net shares must be retained until the applicable guideline is achieved.

  

LOGO  

For 2013, approximately 85% of our Chief Executive Officer’s total target compensation was “at risk” and earned based on performance:

 

 

In March 2014, the Compensation and Management Resources Committee of the Board approved, and the Board ratified, an award to Mr. Benmosche of 150% of his 2013 target short-term cash incentive opportunity, based on an overall business unit performance modifier of 110% and an individual performance modifier of 136%. AIG’s overall business unit performance is determined based on the average of the performance modifiers for AIG Property Casualty, AIG Life and Retirement and United Guaranty Corporation (UGC), weighted 56%, 41% and 3%, respectively. In evaluating Mr. Benmosche’s individual performance, the Committee considered his key financial, strategic, operational and organizational achievements during 2013. Payment of 50% of Mr. Benmosche’s earned award is deferred until March 2015.

 

 

Mr. Benmosche’s long-term equity incentive opportunity is earned based on performance (measured by our TSR and growth in TBVPS) over a 3-year period, 2013 through 2015, relative to a comparison peer group.

 

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PROPOSALS 3 AND 4—PRESERVATION OF LONG-TERM BENEFITS OF AIG TAX ATTRIBUTES

AIG has significant deferred tax assets, which AIG may be able to use to offset future taxable income. At December 31, 2013, AIG had a U.S. federal net operating loss carryforward of approximately $34.2 billion, $1.1 billion in capital loss carryforwards and $5.8 billion in foreign tax credits carryforward (collectively, Tax Attributes). If AIG were to experience an “ownership change” as defined under Section 382 of the Internal Revenue Code, it is possible that a significant portion of the Tax Attributes would expire before AIG would be able to use them to offset future taxable income.

After careful consideration, the Board of Directors believes the most effective way to continue to preserve the benefits of the Tax Attributes for long-term shareholder value is to (i) amend AIG’s Restated Certificate of Incorporation to adopt a “Protective Amendment” that is a successor to, and is substantively the same as, current Article Thirteen of AIG’s Restated Certificate of Incorporation, except that the Protective Amendment would expire on the third anniversary of the date of the 2014 Annual Meeting (current Article Thirteen will expire by its terms on May 11, 2014) and (ii) amend AIG’s Tax Asset Protection Plan to extend the expiration date by approximately three years to January 8, 2017, and make other minor technical changes to such Plan. These measures serve as important tools to help prevent an ownership change that could substantially reduce or eliminate the significant long-term potential benefits of the Tax Attributes. Accordingly, the Board of Directors recommends that shareholders amend AIG’s Restated Certificate of Incorporation to adopt the Protective Amendment and ratify Amendment No. 1 to the Tax Asset Protection Plan.

PROPOSAL 5—RATIFICATION OF SELECTION OF PRICEWATERHOUSECOOPERS LLP

We are asking shareholders to ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2014.

 

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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 12, 2014, or at any adjournment thereof (Annual Meeting or 2014 Annual Meeting of Shareholders).

When and where is our Annual Meeting?

We will hold our Annual Meeting on Monday, May 12, 2014 at 9:00 a.m., Eastern Daylight Time, at our offices at 175 Water Street, New York, New York 10038.

How are we distributing our proxy materials?

We are using the rule of the United States Securities and Exchange Commission (SEC) that allows companies to furnish proxy materials to their shareholders over the internet. In accordance with this rule, on or about , 2014, we sent shareholders of record at the close of business on March 17, 2014, a Notice of Internet Availability of Proxy Materials (Notice) or a full set of proxy materials. The Notice contains instructions on how to access our Proxy Statement and Annual Report for the year ended December 31, 2013 (2013 Annual Report) via the internet and how to vote. If you receive a Notice, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice instructs you on how to access and review all of the important information contained in the proxy materials. The Notice also instructs you on how you may submit your proxy via the internet. If you received a Notice and would like to receive a copy of our proxy materials, follow the instructions contained in the Notice to request a copy electronically or in paper form on a one-time or ongoing basis. Shareholders who do not receive the Notice will receive either a paper or electronic copy of our Proxy Statement and 2013 Annual Report, which will be sent on or about , 2014.

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 17, 2014. 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 175 Water Street, 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.”

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 must bring an account statement or other acceptable evidence of ownership of AIG Common Stock as of the close of business on March 17, 2014, 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, on a non-binding advisory basis, to approve executive compensation;

 

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  3. To act upon a proposal to amend and restate AIG's Restated Certificate of Incorporation to continue 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 amendment to extend the expiration of 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 2014.

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

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 proposal to approve, on a non-binding advisory basis, executive compensation.

 

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

 

  4. FOR” the proposal to ratify the amendment to extend the expiration of 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 2014.

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.proxyvote.com. You may submit a proxy by internet 24 hours a day. To be valid, your proxy by internet must be received by 11:59 p.m., Eastern Daylight Time, on May 11, 2014. Please have your Notice or your proxy card in hand when you access the website and follow the instructions to create an electronic voting instruction form.

 

   

By Submitting a Proxy by Telephone. To submit a proxy using the telephone, call 1-800-690-6903 any time on a touch-tone telephone. 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. You may submit a proxy by telephone 24 hours a day, 7 days a week. Follow the simple instructions provided by the recorded message. To be valid, your proxy by telephone must be received by 11:59 p.m., Eastern Daylight Time, on May 11, 2014.

 

   

By Submitting a Proxy by Mail. Mark your proxy card, sign and date it, and return it in the prepaid envelope that has been provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. To be valid, your proxy by mail must be received by 8:00 a.m., Eastern Daylight Time, on May 12, 2014.

 

   

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 that is received by 11:59 p.m., Eastern Daylight Time, on May 11, 2014; or

 

   

Executing and mailing a later-dated proxy card that is received prior to 8:00 a.m., Eastern Daylight Time, on May 12, 2014; or

 

   

Voting in person at the Annual Meeting.

 

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For a Proxy Submitted by Mail

 

   

Subsequently executing and mailing another proxy card bearing a later date that is received prior to 8:00 a.m., Eastern Daylight Time, on May 12, 2014; or

 

   

Giving written notice of revocation to AIG’s Secretary at 175 Water Street, New York, New York 10038 that is received by AIG prior to 8:00 a.m., Eastern Daylight Time, on May 12, 2014; or

 

   

Voting in person at the Annual Meeting.

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 and restatement of AIG’s Restated Certificate of Incorporation to continue to restrict certain transfers of AIG Common Stock in order to protect AIG’s tax attributes; FOR the ratification of the amendment to extend the expiration 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 2014; 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 and restatement of AIG's Restated Certificate of Incorporation to continue 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 that 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 Advisory Vote to Approve Executive Compensation. Adoption of the resolution on the non-binding advisory 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 and Restatement of AIG’s Restated Certificate of Incorporation to Continue to Restrict Certain Transfers of AIG Common Stock in order to Protect AIG’s Tax Attributes. Approval of the amendment and restatement requires a “for” vote of a majority of the outstanding shares of AIG Common Stock.

 

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Proposal 4—Ratification of the amendment to extend the expiration of the American International Group, Inc. Tax Asset Protection Plan. Ratification of the amendment to extend the expiration 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 amendment.

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 Restated Certificate of Incorporation nor AIG’s By-laws require that the shareholders ratify the selection of PricewaterhouseCoopers LLP as its independent registered public 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.

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 advisory vote to approve executive compensation, the ratification of the amendment to extend the expiration 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 the proposal to amend and restate AIG’s Restated Certificate of Incorporation to continue to restrict certain transfers of AIG Common Stock in order to protect AIG’s tax attributes, 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 2013 Annual Report, which includes AIG’s Annual Report on Form 10-K for the year ended December 31, 2013 (AIG’s 2013 Annual Report on Form 10-K) filed with the SEC, has been delivered or made available to shareholders. You also may obtain, free of charge, a copy of the 2013 Annual Report and AIG’s 2013 Annual Report on Form 10-K by writing to American International Group, Inc., 175 Water Street, New York, New York 10038, Attention: Investor Relations. These documents also are available in the Investors section of AIG’s corporate website at www.aig.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 $20,000 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.

 

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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, goals, assumptions and statements that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These projections, goals, assumptions 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, goals, assumptions and statements include statements preceded by, followed by or including words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “view,” “target” or “estimate.” These projections, goals, assumptions and statements may address, among other things:

 

   

the monetization of AIG’s interests in ILFC, including whether AIG’s proposed sale of ILFC will be completed and if completed, the timing and final terms of such sale;

 

   

AIG’s exposures to subprime mortgages, monoline insurers, the residential and commercial real estate markets, state and municipal bond issuers and sovereign bond issuers;

 

   

AIG’s exposure to European governments and European financial institutions;

   

AIG’s strategy for risk management;

 

   

AIG’s generation of deployable capital;

 

   

AIG’s return on equity and earnings per share;

 

   

AIG’s strategies to grow net investment income, efficiently manage capital and reduce expenses;

 

   

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

 

   

the revenues and combined ratios of AIG’s subsidiaries.

 

 

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

 

   

changes in market conditions;

 

   

the occurrence of catastrophic events, both natural and man-made;

 

   

significant legal proceedings;

 

   

the timing and applicable requirements of any new regulatory framework to which AIG is subject as a savings and loan holding company, as a systemically important financial institution, and as a global systemically important insurer;

 

   

concentrations in AIG’s investment portfolios;

 

   

actions by credit rating agencies;

   

judgments concerning casualty insurance under- writing and insurance liabilities;

 

   

judgments concerning the recognition of deferred tax assets; and

 

   

such other factors discussed in:

 

   

Part I, Item 1A. Risk Factors in AIG’s 2013 Annual Report on Form 10-K; and

 

   

Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in AIG’s 2013 Annual Report on Form 10-K.

 

 

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

 

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ELECTION OF DIRECTORS

AIG’s Board of Directors currently consists of thirteen directors. All directors serve a one-year term. We are asking our shareholders to elect fourteen directors 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, except for Mr. Fisher, 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.

The Board believes that, if elected, the nominees will continue to provide effective oversight of AIG’s business and continue to advance our shareholders’ interests by drawing upon their collective qualifications, skills and experiences. The following table highlights certain key attributes of our director nominees:

 

 

ü      Experience managing large, complex, international institutions

    

Professional experience in:

 

 

ü      High level of financial and accounting literacy

    

ü      insurance and reinsurance

 

ü      Risk oversight/management expertise

    

ü      the financial services industry

 

ü      Corporate governance and strategic oversight experience

    

ü      operations and technology

 

ü      Experience with global consumer, commercial and industrial customers

    

ü      academia, research and regulation

 

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Below are biographies of each of the nominees for director, including the principal occupation or affiliation and directorships held by each nominee during the past five years.

 

LOGO   

ROBERT H. BENMOSCHE

 

Director since 2009

  

President and Chief Executive Officer, AIG

 

Age 69

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 February 2006 (Chairman until April 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 joined PaineWebber Group Incorporated in 1982 and his last position was Executive Vice President from 1989 to 1995. Mr. Benmosche has been a director of ILFC, an AIG subsidiary, since June 2010. He also served as a director of Credit Suisse Group AG from 2002 until April 2013, where from 2003 to 2013 he served as a member of the Compensation Committee. 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.

 

LOGO   

W. DON CORNWELL

 

Director since 2011

  

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

 

Age 66

Mr. Cornwell is the former Chairman of the Board and Chief Executive Officer of Granite Broadcasting Corporation, serving 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 Chairman of the Finance Committee and a member of the Audit Committee, and Pfizer Inc., where he is Chairman of the Audit Committee and a member of the Compensation, Regulatory and Compliance and Science and Technology 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 light of Mr. Cornwell’s experience in finance and strategic business transformations, as well as his professional experience across the financial services industry, AIG’s Board has concluded that Mr. Cornwell should be re-elected to the Board.

 

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LOGO    PETER R. FISHER   

Senior Fellow at the Center for Global Business and Government, and Senior Lecturer, at the Tuck School of Business at Dartmouth College; Former Head of Fixed Income Portfolio Management of BlackRock, Inc.

 

Age 57

Mr. Fisher is a Senior Fellow at the Center for Global Business and Government, and also a Senior Lecturer, at the Tuck School of Business at Dartmouth College, positions he has held since July 2013. Mr. Fisher previously served as an officer of BlackRock, Inc. and certain of its subsidiaries (BlackRock) from 2004 through 2013, as a Senior Managing Director (2010 to 2013) and a Managing Director (2004 to 2009). While at BlackRock, Mr. Fisher served as Head (2010 to 2013) and as Co-Head (2008 to 2009) of BlackRock’s Fixed Income Portfolio Management Group, overseeing portfolio managers responsible for more than $1 trillion of fixed income client accounts and funds, and as Chairman of BlackRock Asia (2005 to 2007). Mr. Fisher has been a Senior Director of the BlackRock Investment Institute since March 2013, and has served in such capacity as an independent consultant since January 2014. Prior to joining BlackRock in 2004, Mr. Fisher served as Under Secretary of the U.S. Department of the Treasury for Domestic Finance from 2001 to 2003, and, in that capacity, served on the board of the Securities Investor Protection Corporation, as a member of the Airline Transportation Stabilization Board and as the U.S. Treasury representative to the Pension Benefit Guaranty Corporation. From 2007 to 2013, Mr. Fisher was a non-executive director of the Financial Services Authority of the United Kingdom, where he was a member of the Risk Committee. Mr. Fisher also worked at the Federal Reserve Bank of New York from 1985 to 2001, ending his service there as an Executive Vice President and Manager of the System Open Market Account. In light of Mr. Fisher’s broad experience in asset management and government and his knowledge of the regulation of financial services companies, AIG’s Board has concluded that Mr. Fisher should be elected to the Board.

 

LOGO   

JOHN H. FITZPATRICK

 

Director since 2011

  

Secretary General of The Geneva Association; Former Chief Financial Officer, Head of the Life and Health Reinsurance Business Group and Head of Financial Services of Swiss Re

 

Age 57

Mr. Fitzpatrick is serving a two-year term as Secretary General of The Geneva Association that ends in May 2014. Mr. Fitzpatrick has also been Chairman of Oak Street Management Co., LLC, a commercial real estate investment firm, and Oak Family Advisors, LLC, a private wealth management firm since 2010. 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 Reinsurance 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. From February 2010 until March 2011, Mr. Fitzpatrick was a director of Validus Holdings, Ltd., where he served on the Audit and Finance Committees. 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, as well as his professional experience in insurance policy and regulation, AIG’s Board has concluded that Mr. Fitzpatrick should be re-elected to the Board.

 

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LOGO   

WILLIAM G. JURGENSEN

 

Director since 2013

  

Former Chief Executive Officer of Nationwide Insurance

 

Age 62

Mr. Jurgensen is the former Chief Executive Officer of Nationwide Mutual Insurance Company and Nationwide Financial Services, Inc., serving from May 2000 to February 2009. During this time, he also served as director and Chief Executive Officer of several other companies within the Nationwide enterprise. Prior to his time in the insurance industry, he spent 27 years in the commercial banking industry. Before joining Nationwide, Mr. Jurgensen was an Executive Vice President with BankOne Corporation (now a part of JPMorgan Chase & Co.) where he was responsible for corporate banking products, including capital markets, international banking and cash management. He managed the merger integration between First Chicago Corporation and NBD Bancorp, Inc. and later was Chief Executive Officer for First Card, First Chicago’s credit card subsidiary. At First Chicago, he was responsible for retail banking and began his career there as Chief Financial Officer in 1990. Mr. Jurgensen started his banking career at Norwest Corporation (now a part of Wells Fargo & Company) in 1973. The majority of Mr. Jurgensen’s career has involved capital markets, securities trading and investment activities, with the balance in corporate banking. Mr. Jurgensen has been a director of ConAgra Foods, Inc. since 2002, where he has served on the Audit Committee and currently serves on the Human Resources and the Nominating, Governance and Public Affairs Committees. He was also a director of The Scotts Miracle-Gro Company from 2009 to 2013, where he served on the Audit, Finance, and Governance and Nominating Committees. In light of Mr. Jurgensen’s experience in insurance, financial services and risk management, AIG’s Board has concluded that Mr. Jurgensen should be re-elected to the Board.

 

LOGO   

CHRISTOPHER S. LYNCH

 

Director since 2009

  

Former National Partner in Charge of Financial Services, KPMG LLP

 

Age 56

Mr. Lynch has been an independent consultant since 2007, providing a variety of services to public and privately held financial intermediaries, including corporate restructuring, 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 National Department of Professional Practice and as a Practice Fellow at the Financial Accounting Standards Board. Mr. Lynch is a member of the Advisory Board of the Stanford Institute for Economic Policy Research and a member of the National Audit Committee Chair Advisory Council of the National Association of Corporate Directors. Mr. Lynch is currently Non-Executive Chairman of the Federal Home Loan Mortgage Corporation, where he is also a member of the Audit and Compensation Committees. In light of Mr. Lynch’s experience in finance, accounting and risk management and strategic business transformations, 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.

 

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LOGO   

ARTHUR C. MARTINEZ

 

Director since 2009

  

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

 

Age 74

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 Abercrombie & Fitch Co., where he is Non-Executive Chairman, HSN, Inc., where he is Non-Executive Chairman, and International Flavors & Fragrances Inc., where he is the Lead Director and a member of the Audit and the Nominating and Governance Committees. He is also currently a director of IAC/InterActive Corp, where he is Chairman of the Compensation and Human Resources Committee, and Kate Spade & Co. (formerly Fifth & Pacific Companies, Inc.), where he is Chairman of the Compensation Committee and a member of the Audit Committee; Mr. Martinez does not intend to stand for re-election as a director of either company at their annual meetings of shareholders in June 2014 and May 2014, respectively. In the past five years, Mr. Martinez has also served as a director of PepsiCo, Inc. from 1999 to 2012 and ABN AMRO Holding N.V. from 2002 to 2010 and was also Chairman from 2006 until 2010. In light of Mr. Martinez’s experience in finance and strategic business transformations, AIG’s Board has concluded that Mr. Martinez should be re-elected to the Board.

 

LOGO   

GEORGE L. MILES, JR.

 

Director since 2005

  

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

 

Age 72

Mr. Miles has been Chairman Emeritus since April 2012 and is the former Executive Chairman of Chester Engineers, Inc. serving from October 2010 to April 2012 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, EQT Corporation, where he serves on the Executive Committee and as Chairman of the Corporate Governance Committee, and WESCO International, Inc., where he serves on the Compensation Committee; Mr. Miles will not be standing for re-election as a director of WESCO International, Inc. at its annual meeting of shareholders in May 2014. 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.

 

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LOGO   

HENRY S. MILLER

 

Director since 2010

  

Chairman, Marblegate Asset Management, LLC; Former Chairman and Managing Director, Miller Buckfire & Co., LLC

 

Age 68

Mr. Miller has been Chairman of Marblegate Asset Management, LLC since 2009. Mr. Miller was co-founder, Chairman and a Managing Director of Miller Buckfire & Co., LLC, an investment bank, from 2002 to 2011 and Chief Executive Officer from 2002 to 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. Mr. Miller is currently a director of Ally Financial Inc., where he serves on the Risk and Compliance Committee. In light of Mr. Miller’s experience in strategic business transformations 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.

 

LOGO   

ROBERT S. MILLER

 

Director since 2009

  

Former Chief Executive Officer, Hawker Beechcraft, Inc.; Former Executive Chairman, Delphi Corporation

 

Age 72

Mr. Miller is the former Chief Executive Officer of Hawker Beechcraft, Inc., a manufacturer of aircraft, serving from February 2012 to February 2013. Mr. Miller has also 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 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, Sbarro, Inc. and UAL Corporation (United Airlines). Mr. Miller was Chief Executive Officer of Hawker Beechcraft, Inc. and Chairman and Chief Executive Officer of Delphi Corporation when those companies filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code in October 2005 and May 2012, respectively. In light of Mr. Miller’s experience in managing large, complex, international institutions, his experience in finance, accounting and risk management and strategic business transformations, 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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LOGO   

SUZANNE NORA JOHNSON

 

Director since 2008

  

Former Vice Chairman, The Goldman Sachs Group, Inc.

 

Age 56

Ms. Nora Johnson is the 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 Investment Banking Healthcare Business. Ms. Nora Johnson is currently a director of Intuit Inc., where she is Chairman of the Acquisitions Committee and serves on the Audit and Risk Committee, 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 is Chairman of 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.

 

LOGO   

RONALD A. RITTENMEYER

 

Director since 2010

  

Chairman, President and Chief Executive Officer, Expert Global Solutions, Inc.; Former Chairman, Chief Executive Officer and President, Electronic Data Systems Corporation

 

Age 66

Mr. Rittenmeyer is Chairman, President and Chief Executive Officer of Expert Global Solutions, Inc. (formerly known as NCO Group, Inc.), a global provider of business process outsourcing services since 2011. Mr. Rittenmeyer is also 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 Avaya Inc. and of Tenet Healthcare Corporation, where he serves on the Audit, Compensation and Executive Committees. In light of Mr. Rittenmeyer’s experience in managing large, complex, international institutions, his experience in finance and strategic business transformations as well as his professional experience across the financial services industry and technology industry, AIG’s Board has concluded that Mr. Rittenmeyer should be re-elected to the Board.

 

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LOGO   

DOUGLAS M. STEENLAND

 

Director since 2009

  

Former President and Chief Executive Officer, Northwest Airlines Corporation

 

Age 62

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 Digital River, Inc., where he is Chairman of the Compensation Committee and serves on the Nominating and Corporate Governance Committee, Travelport Limited, where he serves as Chairman of the Board and Chairman of the Compensation Committee and is a member of the Audit Committee, Chrysler Group LLC, where he serves as Chairman of the Audit Committee, Hilton Worldwide Holdings Inc., where he serves as Chairman of the Audit Committee and a member of the Nominating and Corporate Governance Committee, and ILFC, an AIG subsidiary, where he previously served as Non-Executive Chairman. In the past five years, Mr. Steenland has also served as a director of Delta Air Lines, Inc., and he served until 2008 as a director of Northwest Airlines Corporation. Mr. Steenland was President and Chief Executive Officer of Northwest Airlines Corporation when it filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code in 2005. In light of Mr. Steenland’s experience in managing large, complex, international institutions and his experience in strategic business transformations 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.

 

LOGO   

THERESA M. STONE

 

Director since 2013

  

Former Executive Vice President and Treasurer of the Massachusetts Institute of Technology; Former Executive Vice President and Chief Financial Officer of Jefferson-Pilot Corporation; Former President of Chubb Life Insurance Company

 

Age 69

Ms. Stone is the former Executive Vice President and Treasurer of the Massachusetts Institute of Technology (MIT), serving from February 2007 until October 2011. In her role as Executive Vice President and Treasurer, Ms. Stone served as MIT’s Chief Financial Officer and was also responsible for MIT’s operations, including capital projects, campus planning, facilities operations, information technology, environmental health and safety, human resources, medical services and police. Ms. Stone also served as the Special Assistant to the President of MIT from October 2011 to January 2012. From November 2001 to March 2006, Ms. Stone served as Executive Vice President and Chief Financial Officer of Jefferson-Pilot Corporation (now Lincoln Financial Group). Ms. Stone also served as the President of Chubb Life Insurance Company from 1994 to 1997. Ms. Stone also served as a director of the Federal Reserve Bank of Richmond from 2003 to 2007 and as Deputy Chairman from 2005 to 2007. Ms. Stone began her career as an investment banker, advising clients primarily in the insurance and financial services industries on financial and strategic matters. Ms. Stone served as a director of Progress Energy, Inc. from 2005 to 2012, where she served as Chairman of the Audit and Corporate Performance Committee and a member of the Executive, Finance and Governance Committees. She also served as a director of Duke Energy Corporation during July 2012 following the company’s merger with Progress Energy Inc. In light of Ms. Stone’s broad experience in both business and academia and her expertise in insurance, finance and management, AIG’s Board has concluded that Ms. Stone 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/or as a result of 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 current 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, the Regulatory, Compliance and Public Policy Committee, and the Technology Committee are available in the Corporate Governance section of AIG’s corporate website at www.aig.com or in print by writing to American International Group, Inc., 175 Water Street, 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.aig.com or in print by writing to American International Group, Inc., 175 Water Street, 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 AIG Director Independence Standards, the Board, on the recommendation of the Nominating and Corporate Governance Committee, determined that Mss. Nora Johnson and Stone and Messrs. Cornwell, Fisher, Fitzpatrick, Jurgensen, Lynch, Martinez, Miles, Henry Miller, Robert Miller, Rittenmeyer and Steenland are independent under NYSE listing standards and the AIG Director Independence Standards. Mr. Morris W. Offit, who retired from the Board at the 2013 Annual Meeting of Shareholders, was also determined by the Board, on the recommendation of the Nominating and Corporate Governance Committee, to be independent under NYSE listing standards and the AIG Director Independence Standards.

In making the independence determinations, the Nominating and Corporate Governance Committee and the Board of Directors considered relationships arising from: (1) contributions by AIG to charitable organizations with which Mss. Nora Johnson and Stone and Messrs. Henry Miller and Offit or members of their immediate families are affiliated; (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; (3) in the case of Mr. Fisher, payments made in the ordinary course of business between AIG and BlackRock, Inc.; and (4) in the case of Mr. Fitzpatrick, membership fees to The Geneva Association. None of these relationships exceeded the thresholds set forth in the AIG Director Independence Standards.

The Nominating and Corporate Governance Committee and the Board of Directors also considered the relationships between AIG and MidOcean, a private equity firm. Mr. Robert Miller is the Chairman of the investment advisor of MidOcean and several AIG affiliates are committed to invest an aggregate of $110,000,000 in two funds advised by the investment advisor of MidOcean and made capital contributions to these funds of $5,959,197 and $439,826 in 2013 and 2014, respectively, pursuant to these commitments. AIG’s commitments to invest predate Mr. Miller becoming a director of AIG and his involvement with MidOcean. Mr. Miller has relinquished any profit interest in these funds to the extent arising from any funds contributed by AIG or affiliates of AIG.

AIG’s current policy, as reflected in its By-laws, is that the role of the Chairman should be separate from that of the Chief Executive Officer 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 focus on the governance of the Board and to deal with AIG’s various stakeholders while permitting the Chief Executive Officer 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 (ERM) 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. The Compensation

 

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and Management Resources Committee, in conjunction with AIG’s Chief Risk Officer, is responsible for reviewing the relationship between AIG's risk management policies and practices and the incentive compensation arrangements applicable to senior executives.

There were thirteen meetings of the Board during 2013. The non-management directors meet in executive session, without any management directors present, in conjunction with each regularly scheduled Board meeting. Mr. Robert Miller, as Non-Executive Chairman of the Board, presided at the executive sessions. For 2012 and 2013, 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 total regular meetings of the Board and the meetings of all committees of which such director is a voting member will not be nominated for re-election 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.

Directors are expected to attend the 2014 Annual Meeting of Shareholders. All directors serving at the time of the 2013 Annual Meeting of Shareholders attended the 2013 Annual Meeting of Shareholders.

AIG has adopted procedures on reporting of concerns regarding accounting and other matters and on communicating with non-management directors. These procedures are available in the Corporate Governance section of AIG’s corporate website at www.aig.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 Vice President—Corporate Governance, American International Group, Inc., 175 Water Street, New York, New York 10038 or by email to: boardofdirectors@aig.com.

 

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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, 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.

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.aig.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 2013, the Nominating and Corporate Governance Committee held six 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 Vice President—Corporate Governance met and consulted frequently with the other Committee and Board members.

Board Membership and Composition

Nomination and Election of Directors. The Nominating and Corporate Governance Committee evaluated and recommended to the Board of Directors the fourteen nominees under “Election of Directors” that are standing for election at the 2014 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.”

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

Nomination of Mr. Fisher. The Nominating and Corporate Governance Committee evaluated and recommended to the Board that Mr. Fisher be nominated for election to the Board. A director search firm that the Committee engaged to assist in identifying potential director nominees brought Mr. Fisher to the Committee’s attention as a potential candidate. The Committee believes that Mr. Fisher brings to the Board his experience in asset management and government and his knowledge of the regulation of financial services companies. The Board determined, on the recommendation of the Nominating and Corporate Governance Committee, to nominate Mr. Fisher for election to the Board at the 2014 Annual Meeting of Shareholders. For more information on the experience and background of Mr. Fisher, see “Election of Directors.”

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 minority status and gender 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 2013, 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.

Suzanne Nora Johnson, Chairman

W. Don Cornwell

Arthur C. Martinez

George L. Miles, Jr.

 

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COMMITTEES

The following table sets forth the current membership on each standing committee of the Board and the number of committee meetings held in 2013. Mr. Benmosche does not serve on any committees of the Board. Mr. Robert Miller serves as an ex-officio member of each Committee.

 

Director   Audit
Committee
  Compensation
and
Management
Resources
Committee
  Finance
and Risk
Management
Committee
  Nominating
and
Corporate
Governance
Committee
  Regulatory,
Compliance
and Public Policy
Committee
  Technology
Committee

W. Don Cornwell

      ü       ü        

John H. Fitzpatrick

  ü            ü(C)            

William G. Jurgensen

  ü               ü    

Christopher S. Lynch

       ü(C)       ü            

Arthur C. Martinez

            ü(C)       ü       ü

George L. Miles, Jr.

  ü           ü       ü

Henry S. Miller

          ü       ü    

Robert S. Miller

  *   *   *   *   *   *

Suzanne Nora Johnson

      ü             ü(C)        

Ronald A. Rittenmeyer

  ü   ü                    ü(C)

Douglas M. Steenland

          ü             ü(C)    

Theresa M. Stone

  ü       ü            

Number of meetings in 2013

  13   10   15   6   5   3

ü = Member

C = Chairman

 

 

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

Audit Committee

The Audit Committee, which held thirteen meetings during 2013, assists the Board in its oversight of AIG’s financial statements, including internal control over financial reporting, and compliance with legal and regulatory requirements, the qualifications, independence 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 the appointment or removal, performance reviews and determining the 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 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.

 

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Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee held six meetings in 2013. The Board of Directors 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 individuals qualified to become Board members and recommend these 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 Nominating and Corporate Governance Committee also periodically reviews and makes recommendations to the Board regarding the form and amount of director compensation.

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. AIG’s Corporate Governance Guidelines are included as Appendix A. 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 2015 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 2015 Annual Meeting” in this Proxy Statement.

Compensation and Management Resources Committee

The Compensation and Management Resources Committee, which held ten meetings during 2013, is responsible for determining and approving the compensation awarded to AIG’s Chief Executive Officer (subject to ratification or approval by the Board), approving the compensation awarded to the other senior executives under its purview and reviewing and approving the performance measures and goals relevant to such 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 reviewing, in conjunction with AIG’s Chief Risk Officer, the relationship between AIG's risk management policies and practices and the incentive compensation arrangements applicable to senior executives, 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.aig.com.

Forty-three key employees are currently under the purview of the Compensation and Management Resources Committee, including all of the current executive officers named in the 2013 Summary Compensation Table. 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.

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 $193,739 in 2013.

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 provided any other services to AIG.

 

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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 and SEC rules.

Other Committees

The Finance and Risk Management Committee held fifteen meetings in 2013. 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 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 ERM, 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.aig.com.

The Regulatory, Compliance and Public Policy Committee held five meetings in 2013. 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.aig.com.

The Technology Committee held three meetings in 2013. The Technology Committee assists the Board in its oversight of AIG's information technology projects and initiatives. The Technology Committee’s charter is available in the Corporate Governance section of AIG’s corporate website at www.aig.com.

 

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COMPENSATION OF DIRECTORS

In 2013, the annual retainer for each non-management director consisted of $150,000 cash and an annual award of Deferred Stock Units (DSUs) in an amount of $90,000. Mr. Robert Miller, as Chairman and an ex-officio member of all standing committees of the Board, received an additional annual retainer of $250,000. In 2013, the chairman of each committee received an annual committee retainer of $15,000, except the chairman of the Compensation and Management Resources Committee, who received $20,000, and the chairman of the Audit Committee, who received $25,000. For each other member of each committee, the annual committee retainer was $5,000. Non-management directors can elect to receive annual retainer amounts and committee retainer amounts in the form of DSUs and are also eligible for the AIG Matching Grants Program on the same terms and conditions that apply to AIG employees. See “Committees” for information on current committee memberships and committee memberships during 2013.

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 are granted under the American International Group, Inc. 2013 Omnibus Incentive Plan (2013 Omnibus Incentive Plan).

In March 2014, the Nominating and Corporate Governance Committee completed a review of AIG non-management director compensation. Based on this review, the Nominating and Corporate Governance Committee recommended to the Board, and the Board approved, in each case effective as of the date of the Annual Meeting:

 

   

an increase in the DSU portion of the non-management director annual retainer amount from $90,000 to $100,000;

 

   

an increase in the additional annual retainer for the Chairman of the Board from $250,000 to $260,000;

 

   

an increase in the annual retainer for the Chairman of the Audit Committee from $25,000 to $40,000;

 

   

an increase in the annual retainer for the Chairman of the Finance and Risk Management Committee from $15,000 to $40,000;

 

   

an increase in the annual retainer for the Chairman of the Compensation and Management Resources Committee from $20,000 to $30,000; and

 

   

an increase in the annual retainers for each of the Chairman of the Nominating and Corporate Governance Committee, the Chairman of the Regulatory, Compliance and Public Policy Committee and the Chairman of the Technology Committee from $15,000 to $20,000.

Under director stock ownership guidelines, non-management directors should own a number of shares of AIG Common Stock (including deferred stock and DSUs) with a value equal to at least five times the annual retainer for non-management directors.

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

The Cook firm provided advice to the Nominating and Corporate Governance Committee with respect to AIG director compensation and related market practices.

 

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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 2013.

2013 Non-Management Director Compensation

 

Non-Management Members of the Board in 2013

   Fees
Earned or
Paid in
Cash(1)
     Stock
Awards(2)
     All Other
Compensation(3)
     Total  

W. Don Cornwell

   $ 160,000       $ 89,975       $ 10,000       $ 259,975   

John H. Fitzpatrick

   $ 166,154       $ 89,975       $ 0       $ 256,129   

William G. Jurgensen

   $ 98,462       $ 89,975       $ 0       $ 188,437   

Christopher S. Lynch

   $ 180,000       $ 89,975       $ 0       $ 269,975   

Arthur C. Martinez

   $ 178,077       $ 89,975       $ 10,000       $ 278,052   

George L. Miles, Jr.

   $ 165,000       $ 89,975       $ 0       $ 254,975   

Henry S. Miller

   $ 160,000       $ 89,975       $ 0       $ 249,975   

Robert S. Miller

   $ 400,000       $ 89,975       $ 10,000       $ 499,975   

Suzanne Nora Johnson

   $ 170,000       $ 89,975       $ 10,000       $ 269,975   

Morris W. Offit

   $ 65,385       $ 0       $ 0       $ 65,385   

Ronald A. Rittenmeyer

   $ 175,000       $ 89,975       $ 0       $ 264,975   

Douglas M. Steenland

   $ 320,000       $ 89,975       $ 0       $ 409,975   

Theresa M. Stone

   $ 98,462       $ 89,975       $ 10,000       $ 198,437   

 

 

(1) This column represents annual retainer fees and committee and committee chairman retainer fees. For Mr. Fitzpatrick, the amount includes a prorated annual committee chairman retainer fee for his service as Chairman of the Finance and Risk Management Committee. For Mr. Jurgensen and Ms. Stone, the amount includes a prorated annual retainer fee and prorated committee retainer fees for their service as directors from the date of the 2013 Annual Meeting of Shareholders. For Mr. Martinez, the amount includes a prorated annual increased retainer fee, effective from the date of the 2013 Annual Meeting of Shareholders, for his service as Chairman of the Compensation and Management Resources Committee. For Mr. Offit, the amount does not include $60,999, which represents the value of shares of AIG Common Stock delivered when he ceased to be a member of the Board in accordance with the terms of DSUs previously granted and reported. For Mr. Steenland, the amount includes $150,000, which represents the annual retainer fees for his service as a director of ILFC.

 

(2) This column represents the grant date fair value of DSUs granted in 2013 to directors, based on the closing sale price of AIG Common Stock on the date of grant.

 

(3) This column represents charitable contributions by AIG under AIG’s Matching Grants Program.

 

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The following table sets forth information with respect to the option and stock awards outstanding at December 31, 2013 for the non-management directors of AIG.

Stock and Option Awards Outstanding at December 31, 2013

 

Non-Management Members of the Board in 2013

   Option Awards(1)      Deferred
Stock(2)
     Deferred
Stock Units(3)
 

W. Don Cornwell

     0         0         5,943   

John H. Fitzpatrick

     0         0         5,257   

William G. Jurgensen

     0         0         1,978   

Christopher S. Lynch

     0         0         6,467   

Arthur C. Martinez

     0         0         6,467   

George L. Miles, Jr.

     250         90         6,725   

Henry S. Miller

     0         0         6,467   

Robert S. Miller

     0         0         6,467   

Suzanne Nora Johnson

     0         0         9,562   

Morris W. Offit

     250         0         0   

Ronald A. Rittenmeyer

     0         0         6,467   

Douglas M. Steenland

     0         0         6,467   

Theresa M. Stone

     0         0         3,201   

 

 

(1) Represents outstanding option awards made by AIG in 2005 and 2006. All options are exercisable, but have exercise prices far in excess of the value of AIG Common Stock at year-end 2013 ($51.05). The exercise price of the options ranges from $1,250.00 to $1,253.39.

 

(2) No deferred stock was awarded in 2013. 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 2013 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. DSUs granted prior to April 2010 were granted under the Amended and Restated 2007 Stock Incentive Plan (2007 Stock Incentive Plan). DSUs granted after April 2010 and prior to May 15, 2013 were granted under the 2010 Stock Incentive Plan and DSUs granted commencing on or after May 15, 2013 were granted under the 2013 Omnibus Incentive Plan.

COMPENSATION AND MANAGEMENT RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During his or her service on the Compensation and Management Resources Committee, no member served as an officer or employee of AIG at any time or had any relationship with AIG requiring disclosure as a related-party transaction under SEC rules. During 2013, 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.

 

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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, 2014.

 

     Shares of Common Stock
Beneficially Owned
 

Name and Address

       Number             Percent      

Fairholme Capital Management, L.L.C. (FCM); Bruce R. Berkowitz;

    

Fairholme Funds, Inc. (FFI)

    

4400 Biscayne Blvd., 9th Floor

    

Miami, FL 33137

     104,002,195 (1)      6.9

BlackRock, Inc.

    

40 East 52nd Street

    

New York, NY 10022

     84,112,893 (2)      5.7

 

 

(1) Based on a Schedule 13G/A filed on February 14, 2014 by each entity or individual listed. Item 4 to this Schedule 13G/A provides details as to the voting and investment power of each entity or individual as well as the right of each to acquire AIG Common Stock within 60 days. Each of FCM, Mr. Berkowitz and FFI disclaims beneficial ownership of these shares, except to the extent of their pecuniary interest. All information provided in “Ownership of Certain Securities” with respect to the group is provided based solely on the information set forth in the Schedule 13G/A. In each case, this information may not be accurate or complete and AIG takes no responsibility therefor and makes no representation as to its accuracy or completeness as of the date hereof or any subsequent date. Includes 24,250,009 shares issuable upon the exercise of warrants to purchase AIG Common Stock at an exercise price of $45 per share.

 

(2) Based on a Schedule 13G filed on February 12, 2014 by BlackRock, Inc. Item 4 to this Schedule 13G provides details as to the voting and investment power of BlackRock, Inc. as well as the right to acquire AIG Common Stock within 60 days. All information provided in “Ownership of Certain Securities” with respect to this entity is provided based solely on information set forth in the Schedule 13G. This information may not be accurate or complete and AIG takes no responsibility therefor and makes no representation as to its accuracy or completeness as of the date hereof or any subsequent date.

 

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The following table summarizes the ownership of AIG Common Stock by the current and nominee directors, by the executive officers named in the 2013 Summary Compensation Table in “Executive Compensation—2013 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, 2014
 
     Amount and Nature
of Beneficial
Ownership(1)(2)
     Percent
of
Class(3)
 

Robert H. Benmosche

     186,886         0.01

W. Don Cornwell

     8,651         (3

William N. Dooley

     47,675         (3

Peter R. Fisher

     0         0   

John H. Fitzpatrick

     5,266         (3

Peter D. Hancock

     50,032         (3

David L. Herzog

     7,071         (3

William G. Jurgensen

     11,981         (3

Christopher S. Lynch

     9,648         (3

Arthur C. Martinez

     6,478         (3

George L. Miles, Jr.

     7,076         (3

Henry S. Miller

     6,478         (3

Robert S. Miller

     6,478         (3

Suzanne Nora Johnson

     9,579         (3

Ronald A. Rittenmeyer

     6,478         (3

Douglas M. Steenland

     6,478         (3

Theresa M. Stone

     3,996         (3

Jay S. Wintrob

     153,903         0.01

All Directors and Executive Officers of AIG as a group (26 individuals)

     753,969         0.05

 

 

(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—5,996 shares, Dooley—9,996 shares, Miles—250 shares, Wintrob—13,996 shares and all directors and current executive officers of AIG as a group—39,489 shares; (ii) shares receivable upon the exercise of warrants which may be exercised within 60 days as follows: Benmosche—400 warrants, Herzog—293 warrants, Dooley—13,797 warrants, Hancock—17,415 warrants, Wintrob—49,230 warrants and all directors and current executive officers of AIG as a group—111,987 warrants; (iii) 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: Cornwell—6,151 shares, Fitzpatrick—5,266 shares, Jurgensen—1,981 shares, Lynch—6,478 shares, Martinez—6,478 shares, Miles—6,736 shares, Henry Miller—6,478 shares, Robert Miller—6,478 shares, Nora Johnson—9,579 shares, Rittenmeyer—6,478 shares, Steenland—6,478 shares, and Stone—3,996 shares; and (iv) 90 shares granted to Miles as a non-employee director with delivery deferred until he ceases to be a member of the Board. Excludes TARP RSUs that were settled in cash. For details on TARP RSUs, see “Compensation Discussion and Analysis—Historic Compensation Components—TARP RSUs."

 

(2) Amount of equity securities shown 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: Dooley—404 shares underlying warrants, Hancock—32 shares, Wintrob—200 shares and 106 shares underlying warrants and all directors and current executive officers of AIG as a group—232 shares and 510 shares underlying warrants.

 

(3) Less than .01 percent.

 

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 (Exchange Act) requires directors, certain 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 deficiencies under Section 16(a) by its directors, officers, and greater than ten percent holders during 2013 were one late filing by Mr. Michael R. Cowan for an award of stock appreciation rights (SARs) upon adjudication of performance under the 2010-2011 Long-Term Incentive Plan and one late filing by each of Mr. Joseph Cook and Mr. Charles S. Shamieh, in each case, for an automatic exercise of SARs earned under the 2009 Long-Term Incentive Plan.

RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

Co-Investments with AIG

AIG previously 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. A named executive invested in one such fund, the SunAmerica Venture Fund 2000, L.P., and received tax distributions related to such fund in 2013. See the 2013 Summary Compensation Table, note 4 in “2013 Compensation.”

Employment of a Family Member

An adult child of Mr. Benmosche joined AIG as a non-executive employee in September 2013 and received compensation for 2013 of approximately $. He also received benefits generally available to all employees. The compensation for this employee was determined in accordance with our standard employment and compensation practices applicable to employees with similar responsibilities and positions.

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 considers:

 

   

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.

 

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EXECUTIVE COMPENSATION

REPORT OF THE COMPENSATION AND MANAGEMENT RESOURCES COMMITTEE

Overview

The Compensation and Management Resources Committee determines and approves the compensation awarded to AIG’s Chief Executive Officer (subject to ratification or approval by the Board) and approves the compensation awarded to the other key employees under its purview, oversees AIG’s compensation and benefits programs for key and other employees and makes recommendations to the Board with respect to these programs 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 key employees.

Risk and Compensation Plans

AIG remains committed to continually evaluating and enhancing our risk management control environment, risk management processes and enterprise risk management functions, including through enhancements to its risk governance framework. AIG’s compensation practices are integral parts of the company’s approach to risk management, and the Committee regularly monitors AIG’s compensation programs to ensure they align with sound risk management principles. Since 2009, the Committee has followed a practice of meeting 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.

Consistent with AIG's compensation philosophy, our executive compensation program is designed to avoid incentives that would encourage employees to take unnecessary or excessive risks that could threaten the value of AIG. In particular, our executive compensation program includes the following features:

 

   

Balanced mix of base, short-term and long-term pay. Target long-term incentive opportunity comprises the largest component of an executive’s total target direct compensation under our pay structure, which also includes a market-competitive base salary and target short-term incentive opportunity. We believe this structure provides an appropriate balance of fixed and variable compensation, drives achievement of AIG’s short- and long-term business strategies and aligns the economic interests of our executives with the long-term interests of AIG and our shareholders.

 

   

Defined earn-out ranges for incentive awards. Executive incentive awards are subject to a defined earn-out framework. Earned short-term incentive awards range from 0 to 187.5% of target and long-term incentive awards range from 0 to 150% of target, in each case, taking into account performance.

 

   

At least 75% of target incentives and 55% of target total compensation is deferred and subject to clawback. 50% of any earned short-term incentive award is deferred for one year following the end of the annual performance period, and 100% of any long-term incentive award is earned and paid over five years.

 

   

Long-term incentives use multiple performance measures. 2013 long-term incentives are 100% in the form of performance share units that will be earned based on achieving total shareholder return and growth in tangible book value per share, each measured relative to AIG’s peers.

 

   

Share ownership requirements. Under the 2013 structure, executive officers must retain 50% of the after-tax shares they receive as compensation until they achieve a specified ownership level of AIG Common Stock, further fostering an ownership culture focused on long-term performance.

Although AIG is no longer subject to the TARP Standards for Compensation and Corporate Governance (the TARP Standards), Enterprise Risk Management (ERM) prepares an annual risk assessment of AIG’s incentive compensation plans for review with the Committee. In July 2013, the Committee conducted its annual consultation with the Chief Risk Officer to review and discuss this risk assessment and the relationship between AIG’s risk management policies and practices and senior executive incentive arrangements. As a result of AIG human resources’ efforts to streamline and reduce the total number of incentive-based compensation plans, ERM's 2013 review covered AIG's 99 active incentive-based compensation plans with approximately 84,000 eligible plan participants. (Some employees are eligible to participate in more than one plan.) ERM's review was guided by the work of AIG human resources professionals, who developed a profile for each plan based on evaluation of features such as number of participants, mix of incentive pay compared to salary, performance and vesting periods and performance goals. AIG risk officers worked with human resources and assigned a risk rating

 

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of low, intermediate or high to each plan. After taking into account the information received from AIG human resources, risk officers reviewed all new plans as well as any plans previously classified as high risk or intermediate risk, as well as a sampling of low-risk plans.

As of July 2013, no plans were categorized as high risk. More than 95 percent of all plans, including all plans established during 2013, were categorized as low risk based on the evaluation of the total mix of features of each plan. 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, clawbacks and use of equity and deferrals. As part of this risk review, and as discussed with the Committee, ERM concluded that AIG’s compensation policies and practices are not reasonably likely to have a material adverse effect on AIG. ERM expects to update its risk score criteria in 2014 to take account of evolution in industry practice and updated regulatory guidance.

Compensation Discussion and Analysis

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 2013 Annual Report on Form 10-K.

 

Compensation and Management Resources Committee

American International Group, Inc.

Arthur C. Martinez, Chairman

W. Don Cornwell

Suzanne Nora Johnson

Ronald A. Rittenmeyer

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

2013 Pay for Performance Highlights

Compensation Program

2013 marked the first year of our executive compensation program following the end of TARP-related restrictions and entailed the following:

 

• Balanced Structure: Total compensation consists of market-competitive base salary, 25% to 35% target short-term incentive opportunity and at least 40% target long-term incentive opportunity.

 

• Emphasis on Long-Term Incentives: At least 70% of each executive’s total target compensation is “at risk” and based on performance, and the majority of his or her incentive pay opportunity is based on performance over a 3-year period and paid over a 5-year period.

 

• Deferred Payouts: At least 75% of target incentives and 55% of target total compensation is deferred and subject to our clawback policy.

 

• Direct Link to AIG Performance: Long-term incentives are in the form of performance share units (PSUs) that, for 2013, are earned based on achieving total shareholder return (TSR) and growth in tangible book value per share (excluding AOCI) (TBVPS) measured relative to our peers over a 3-year period, with above-median performance required for target payout.

  

 

LOGO  

  
  

We believe our program provides an appropriate balance of fixed and variable pay, drives achievement of AIG’s short- and long-term business strategies and aligns the economic interests of our executives with the long-term interests of AIG and our shareholders.

2013 Performance

Our compensation program is designed to align pay with performance. 2013 marked another strong year of strategic transformation and execution at AIG, with a focus on our core businesses. Our 2013 accomplishments include:

 

• Achieved two-year TSR(a) of 113.9% and one-year TSR of 42.4%

 

• Achieved insurance pre-tax operating income(b) of $10.1 billion, representing an improvement of $4.1 billion over prior year

 

• Grew net premiums written by 4%, excluding the effect of foreign exchange

 

• Improved 2013 current accident year loss ratio, as adjusted,(b) by 1.4 points

 

• Increased net flows on investment products by $5.9 billion over prior year

  

 

LOGO

  
  

 

 

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• Improved base spread rates for both the Fixed Annuities and Group Retirement product lines

 

• Achieved growth in 2013 book value per share excluding AOCI (b) from 2012 of about 11%

 

• Paid $294 million in cash dividends to shareholders, representing first regular dividends post-TARP

  

•    Entered into agreement to sell ILFC to a wholly owned subsidiary of AerCap Holdings N.V.

 

•    Achieved $8.7 billion in cash distributions from subsidiaries

 

•    Decreased outstanding debt by $6.8 billion and repurchased approximately 12 million shares of AIG Common Stock

  
  

 

 

 

(a) Calculated as described below in “—2013 Compensation Structure—Direct Compensation Components—Long-Term Incentive.”

 

(b) Insurance pre-tax operating income, accident year loss ratio, as adjusted, and book value per share excluding AOCI are “non-GAAP financial measures.” For how these measures are calculated, see Appendix B (for insurance pre-tax operating income) and pages 56-57 of AIG’s 2013 Annual Report on Form 10-K (for accident year loss ratio, as adjusted, and book value per share excluding AOCI).

Paying our CEO for Performance.

For 2013, approximately 85% of our Chief Executive Officer’s total target compensation was “at risk” and earned based on performance:

 

   

In March 2014, the Committee approved, and the Board ratified, a 2013 short-term cash incentive award of $6 million, representing 150% of Mr. Benmosche’s target opportunity. Under AIG’s short-term incentive program, earned awards are based on both business unit and individual performance. For Mr. Benmosche, the Committee applied a business unit modifier of 110%, based on the weighted average of the performance modifiers for AIG’s three core business units (AIG Property Casualty, AIG Life and Retirement and UGC, weighted 56%, 41% and 3%, respectively), each of which achieved above target performance in 2013. The Committee then applied an individual performance modifier of 136% based on Mr. Benmosche’s key AIG-wide financial, strategic, operational and organizational achievements, as described below. Payment of 50% of Mr. Benmosche’s earned award is deferred until March 2015.

 

   

In April 2013, the Committee granted Mr. Benmosche a target 2013 long-term equity incentive opportunity of $7 million in the form of PSUs. Under AIG’s long-term incentive program, the PSUs are earned from 0% to 150% of target based on AIG’s achievement of TSR and growth in TBVPS over a 3-year period compared to a peer group. The Committee will adjudicate performance against these two equally weighted metrics at the end of 2015, with performance at no less than the 55th percentile required for target achievement under each metric. Mr. Benmosche’s earned PSUs, if any, will vest one-third in January of each of 2016, 2017 and 2018.

 

 

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Compensation Philosophy

We structure our compensation program and make enterprise-wide compensation decisions consistent with our compensation philosophy. Our compensation philosophy centers around the following objectives:

 

   

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.

 

 

Compensation Best Practices

 

   

What we do:

 

ü     Pay for performance

 

ü     Comprehensive clawback policy

 

ü     Share ownership requirements

 

ü     No hedging policy

 

ü     Double-trigger change-in-control benefits

 

ü     Annual risk assessment of compensation plans

 

ü     Independent compensation consultant

  

What we don’t do:

 

×    No tax gross-ups on severance payments or perquisites

 

×    No excessive pension payments or perquisites or other benefits

 

×    No equity grants below 100% of fair market value

 

×    No dividends or dividend equivalents paid on PSUs

 

×    No repricing of underwater stock options or stock appreciation rights

 

2013 Compensation Structure—Direct Compensation Components

Before 2013, the compensation structure and amounts for our named executives were prescribed by the TARP Standards, as interpreted by the Special Master for TARP Executive Compensation (the Special Master). These restrictions resulted in a compensation structure that had limited incentives and comprised mostly salary (cash and stock). When the Department of the Treasury completed its final sale of AIG Common Stock in December 2012, the TARP-related restrictions ceased to apply and we established a new executive compensation structure for 2013 consistent with our compensation philosophy.

Our 2013 structure consists of market-competitive base salary, 25% to 35% target short-term incentive opportunity and at least 40% target long-term incentive opportunity. An executive’s total direct compensation target is determined based on his or her position, skills and experience, demonstrated performance and market practice and is then allocated in accordance with the compensation structure. We believe this structure provides an appropriate balance of fixed and variable pay, drives achievement of AIG’s short- and long-term business strategies and aligns the economic interests of our executives with the long-term interests of AIG and our shareholders.

As we discussed in last year’s proxy statement, the 2013 total direct compensation opportunity for each of our named executives is set forth in the following table. The Committee determined these annual base salaries,

 

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short-term incentive opportunities and long-term incentive opportunities, including the grant of PSUs, in April 2013, based on a review of market compensation data and our new compensation structure. The 2013 base salaries were effective on April 1, 2013 for Messrs. Benmosche and Hancock and January 1, 2013 for the other named executives.

 

Named Executive Officer

   Annual
Base Salary
     Target
Short-Term
Incentive
     Target
Long-Term

Incentive
     Total  

Robert H. Benmosche,

    President and Chief Executive Officer

   $ 2,000,000       $ 4,000,000       $ 7,000,000       $ 13,000,000   

David L. Herzog,

    Chief Financial Officer

   $ 1,000,000       $ 2,000,000       $ 4,000,000       $ 7,000,000   

William N. Dooley,

    Executive Vice President, Investments

   $ 1,000,000       $ 2,000,000       $ 4,000,000       $ 7,000,000   

Peter D. Hancock,

    Executive Vice President, Property and Casualty Insurance

   $ 1,350,000       $ 2,700,000       $ 4,950,000       $ 9,000,000   

Jay S. Wintrob,

    Executive Vice President, Life and Retirement

   $ 1,200,000       $ 2,400,000       $ 4,400,000       $ 8,000,000   

Base Salary. Annual base salary is paid in cash and is the sole fixed component of an executive’s total direct compensation. An executive’s base salary is established based on his or her experience, performance and salaries for comparable positions at competitors, but will not exceed 30% of the executive’s total direct compensation opportunity. This allocation is intended to fairly compensate the executive for the responsibilities of his or her position, achieve an appropriate balance of fixed and variable pay and provide the executive with sufficient liquidity to discourage excessive risk-taking.

Short-Term Incentive. Our short-term incentive, which represents approximately 30% of an executive’s compensation opportunity, is designed to reward annual performance and drive near-term business strategies. It consists of a discretionary annual cash award earned based on both business unit/function performance and absolute and relative individual performance. Earned awards can range from 0% to 187.5% of target, and for our named executives in 2013, one half of any amount earned is deferred for one year and subject to clawback.

 

LOGO

Business Unit or Function Performance. The business/function performance modifier that applies to a named executive ranges from 0% to 125% and (other than for the Chief Executive Officer) depends on the business unit or function for which the executive is responsible. For 2013, the business units were AIG Property Casualty (led by Mr. Hancock); AIG Life and Retirement (led by Mr. Wintrob); and UGC. Messrs. Herzog and Dooley lead the Global Finance and the Investment & Financial Services functions, respectively. The performance metrics for each business unit reflect annual financial objectives specific to the business, while the performance metrics for each function consist of an overall AIG business unit performance metric (weighted 75%) and function-specific metrics (weighted 25% in total). AIG’s overall business unit performance is determined based on the average of the performance modifiers for AIG Property Casualty, AIG Life and Retirement and UGC, weighted 56%, 41% and

 

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3%, respectively. As Chief Executive Officer, Mr. Benmosche’s business/function performance modifier is based solely on the overall AIG business unit performance metric.

In the first quarter of 2014, each business unit and function reported its performance compared to pre-established performance criteria that were reviewed and approved by the Committee in early 2013. The reported performance results were verified by AIG’s internal audit function or financial planning & analysis group. The Committee also retained the discretion to adjust the performance criteria and results.

Individual Performance. The individual performance modifier that applies to a named executive is determined by the Committee in its discretion and ranges from 0% to 150%. In evaluating individual performance, the Committee considers a named executive’s key financial, strategic, operational and organizational achievements and, for the named executives other than the Chief Executive Officer, Mr. Benmosche’s evaluation of the named executive.

The Chief Executive Officer’s evaluation of the other named executives is developed as part of AIG’s company-wide relative performance rating (RPR) process, which ranks relative individual performance using a guideline distribution. The RPR process compares individual performance (taking into account the pre-established metrics) against a comparison group generally comprising at least 30 individuals with similar job grades within the business units and functions. Approximately 10% of employees in a grouping receive a “1” (highest) ranking, 20% a “2”, 50% a “3” and 20% a “4” or “5”. The RPR results in a range of guideline individual performance modifiers; an RPR of “1” results in a guideline modifier of 130-150%, a “2” 120-140%, a “3” 80-120%, a “4” 20-80% and a “5” 0%.

The comparison group for the named executives (other than the Chief Executive Officer) consists of the ten direct reports to our Chief Executive Officer. Because this group is significantly smaller than the typical comparison group size, assignment of a guideline modifier by the Chief Executive Officer for this group does not strictly follow the guideline distribution. Our Chief Executive Officer does not participate in the RPR process because there is no applicable comparison group.

Long-Term Incentive. Long-term incentives comprise the largest percentage of an executive’s compensation opportunity, representing at least 40% of his or her total target pay. We believe that providing a significant portion of executives’ compensation based on performance metrics over a three-year period and subject to an additional vesting period will drive long-term value creation for our shareholders and appropriately account for the time horizon of risks.

Our 2013 long-term incentive program consists of PSU awards that are earned based on AIG performance over a three-year period. The Committee approves the target dollar amount of an executive’s long-term incentive award, which is then converted to a number of PSUs based on the average closing price of AIG Common Stock over the calendar month preceding the grant date, rounded down to the nearest whole unit. Earned PSUs range from 0% to 150% of the target grant based on achieving relative TSR and relative growth in TBVPS, with above median performance required, in each case, for payout at target. Once earned, PSUs vest one-third in January of each of 2016, 2017 and 2018 and are settled in AIG Common Stock (or at the election of AIG, in cash).

The table below summarizes the two performance metrics used for the 2013 to 2015 performance period. Each performance metric is equally weighted, and actual performance below threshold will result in a 0% payout for that metric. If AIG achieves target performance in one metric, but not in the other metric, the number of PSUs earned will be less than 100%.

 

Performance Metric    Threshold     Target     Maximum  

Relative TSR

     25th percentile         55th percentile         75th percentile    

Relative Growth in TBVPS

     25th percentile         55th percentile         75th percentile    
  

 

 

   

 

 

   

 

 

 

Payout

     50%        100%        150%   

For the 2013 to 2015 performance period, TSR and growth in TBVPS are measured relative to a group constructed from the following 15 peers.

 

Property Casualty Peers    Life and Retirement Peers    AIG-wide Peers

ACE Limited

The Chubb Corporation

CNA Financial Corporation

Hartford Financial Services Group Inc.

The Travelers Companies, Inc.

XL Group Public Limited Company

Zurich Financial Services AG

  

AEGON, N.V.

Aflac Incorporated

Lincoln National Corporation

MetLife, Inc.

Principal Financial Group, Inc.

Prudential Financial, Inc.

  

Allianz Group

AXA Group

 

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The peer group above includes public companies against which AIG benchmarks financial performance and competes for market share and talent. The split between the number of Property Casualty peers and the number of Life and Retirement peers reflects the structure of AIG’s core businesses. TSR and growth in TBVPS are measured against the results of the two AIG-wide peers noted in the table above and against the results of 42 synthetic peers. Synthetic peers are constructed by combining the results of one Property Casualty peer and one Life and Retirement peer. For each of the 42 synthetic peers, the Property Casualty results are weighted 60% and the Life and Retirement results are weighted 40%. For each company in the peer group, TSR will be measured by (1) the sum of (a) the company’s adjusted share price at the end of the performance period minus the company’s adjusted share price at the beginning of the performance period (in each case, as reported by Bloomberg, adjusted for stock dividend distributions and stock splits and using a 30-day period prior to quarter close for the beginning and end of the performance period) plus (b) non-stock dividends declared during the performance period and reinvested in the company’s shares on the ex-dividend date, divided by (2) the company’s adjusted share price at the end of the performance period (as reported by Bloomberg, adjusted for stock dividend distributions and stock splits and using a 30-day period prior to quarter close for the end of the performance period). For each company in the peer group, growth in TBVPS is expressed as a percentage and determined by comparing the company’s TBVPS at the end of the performance period to its TBVPS at the beginning of the performance period, with TBVPS measured by (1) the company’s shareholders’ equity less goodwill and accumulated other comprehensive income, divided by (2) the company’s common shares outstanding. TBVPS is a “non-GAAP financial measure.” See Appendix B for an explanation of how this measure is calculated for AIG from our audited financial statements.

Results will be certified in the first quarter of 2016, and one-third of any earned PSUs will vest and be paid in January of each of 2016, 2017 and 2018. Once earned, PSUs are settled in AIG Common Stock (or at the election of AIG, in cash). The structure of our long-term incentives results in a five-year time horizon to earn and receive our PSUs.

LOGO

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). These plans can be either tax-qualified or non-qualified.

AIG’s only active defined contribution plan for the named executives is a 401(k) plan, which is tax-qualified. The plan was amended effective January 1, 2012 to provide all participants a match of 100% of the first 6% of their eligible compensation contributed up to the Internal Revenue Service (IRS) compensation limit ($255,000 for 2013). Accordingly, for the named executives in 2013, AIG matched a percentage of their contributions to the 401(k) plan up to $15,300. In addition, some 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 the AIG Retirement Plan (the Qualified Retirement Plan), the AIG Non-Qualified Retirement Income Plan (the Non-Qualified Retirement Plan) and the Supplemental Executive Retirement Plan (the SERP). Each of these plans provides for a yearly benefit based on years of service and average final salary and, for the Qualified Retirement Plan and the Non-Qualified Retirement Plan, also based on pay credits and interest credits. 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, including the named executives, with aircraft usage, automobile allowances, car and driver or parking, annual health exams, legal services, financial, estate and tax planning and other benefits categorized as “perquisites” or “other” compensation under the SEC rules.

 

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Termination Benefits and Policies. Our Chief Executive Officer does not participate in AIG’s severance programs. AIG provides severance benefits to other executives in order to offer competitive total compensation packages, ensure executives’ ongoing retention when considering potential transactions that may create uncertainty as to their future employment with AIG and enable AIG to obtain a release of employment-related claims.

In 2012, the Committee established the 2012 Executive Severance Plan (the 2012 ESP), which replaced AIG’s prior Executive Severance Plan established in March 2008. The 2012 ESP extends to AIG executives in grade level 27 or above and other executives who participated in the prior plan. Each of our named executives (other than our Chief Executive Officer) is eligible based on both his grade level and eligibility under the prior plan. Under the terms of his employment agreement, Mr. Benmosche is not permitted to participate in the 2012 ESP.

The 2012 ESP provides for severance payments and benefits upon a termination by AIG without “Cause” or if a qualifying executive terminates for “Good Reason,” including, for qualifying executives, after a “Change in Control.” In the event of a qualifying termination, a participant is generally eligible to receive severance in an amount equal to the product of a multiplier times the sum of salary and three-year-average annual incentives. The multiplier is either 1 or 1.5 depending on the executive’s grade level and increases to 1.5 or 2 for qualifying terminations within two years following a Change in Control. However, in any event, executives in grade level 27 or above who participated in the prior plan, which includes our named executives (other than our Chief Executive Officer), may not receive less than the severance they would have received under the prior plan. In April 2013, the 2012 ESP was amended for better consistency across participants in calculating the three-year-average annual incentives portion of the severance formula. For any year in which a participant was in the “Top 25 group” while AIG was subject to the TARP Standards, this calculation will use the participant’s annual short-term incentive target for the year of termination (rather than the participant’s “TARP RSUs,” as described under “—Historic Compensation Components”). The Top 25 group for any year while AIG was subject to the TARP Standards comprised our named executives and the 20 other most highly paid employees, based on prior year compensation. For more detail regarding our named executives’ severance payments and benefits, see “—Potential Payments on Termination.”

Determination of Earned Short-Term Incentive Awards

As described above under “2013 Compensation Structure—Direct Compensation Components—Short-Term Incentive,” the Committee approves earned awards for our named executives in accordance with our short-term incentive structure that considers both business unit/function and individual performance. In February 2014, the Committee determined the following earned short-term incentive amounts. Payment of 50% of each named executive’s earned award is deferred until March 2015.

 

Named Executive Officer

   Individual
Target
Amount
     Business/
Function
Modifier
    Individual
Performance
Modifier
    Earned
Award
Amount
 

Robert H. Benmosche

   $ 4,000,000         110     136   $ 6,000,000   

David L. Herzog

   $ 2,000,000         113     100   $ 2,260,000   

William N. Dooley

   $ 2,000,000         114     105   $ 2,400,000   

Peter D. Hancock

   $ 2,700,000         102     127   $ 3,500,000   

Jay S. Wintrob

   $ 2,400,000         121     131   $ 3,800,000   

Chief Executive Officer. Mr. Benmosche’s business/function modifier is based on AIG’s overall business unit performance (110%), which represents the average of the performance modifiers for AIG Property Casualty, AIG Life and Retirement and UGC, weighted 56%, 41% and 3%, respectively. As detailed below, AIG Property Casualty and AIG Life and Retirement achieved performance modifiers of 102% and 121%, respectively, and UGC achieved a performance modifier of 117%.

 

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In determining the individual performance modifier for Mr. Benmosche, the Committee considered his contributions to AIG, including the following key AIG-wide financial, strategic, operational and organizational achievements:

 

Metric

  

Significant Achievements

Financial    Exceeded target for AIG adjusted pre-tax operating income (AIG Adjusted PTOI) (26% above target of $7.7 billion); achieved growth in TBVPS above the 55th percentile through the first nine months of 2013, based on 2013 Long-Term Incentive Plan peers (full year data is not yet available for all peer companies); achieved TSR of 42.4% for 2013 (41st percentile) evaluated in light of 2012-2013 two-year performance (TSR of 113.9%, representing the 95th percentile); demonstrated progress toward improving ratings agency outlooks on AIG by improving AIG’s fixed charge coverage ratio (AIG’s 2013 ratio was more than twice that of prior year 2.4x); exceeded expectations by retiring $5.3 billion of liabilities (excluding scheduled maturities) funded by cash or new debt issuances (78% above target of $3 billion).
Strategic    On track to successfully divest ILFC to AerCap Holdings N.V., as announced in December 2013, for consideration of approximately $5.4 billion (based on AerCap’s pre-announcement closing stock price on December 13, 2013 of $24.93 for the approximately 97.6 million shares of AerCap common stock to be received by AIG).
Operational    Implemented and maintained business continuity management program across AIG, with emergency notification system implemented in 46 countries and more than 95% of business continuity compliance objectives satisfied (exceeding target). Implemented and maintained active information technology risk program across AIG and ensured substantially all related action plans were implemented by their deadlines. Continued to enhance AIG’s reserving and capital planning policies and procedures, including approval of a reserving policy and capital management policies by the Board or applicable Board committee and Board review of a capital plan. Increased the development and use of shared services across all operations and information technology functions by adding more than 1,900 positions. Ensured that all key cross-functional projects identified by AIG leadership receive priority with respect to investments, resources and oversight, with 100% completion on two projects in 2013.
Organizational    Continued to drive the diversity of AIG’s workforce by focusing on diverse internal and external candidates for AIG’s executive hires, although retention of high-performing employees throughout AIG did not meet target annualized attrition rate of 5%. Exceeded expectations by implementing and participating in leadership development programs for employees in grade level 24 and above, facilitating training modules and launching a senior leadership pilot program. Partially achieved internal mobility goal by filling 44% of job vacancies in grade level 24 and above with internal hires and 24% for all grade levels.

Chief Financial Officer. In approving the business/function modifier for the AIG Finance function, the Committee considered overall performance for AIG’s core business units (110%, as discussed above), as well as metrics and actual results specific to the AIG Finance function, as follows:

 

     AIG Finance Function ($ in millions)  

Performance Metric

   Weighting     Threshold
(50%)
   Target
(100%)
   Maximum
(125%)
   Actual    %
Achieved
(Weighted)
 

Overall business unit performance

     75   N/A    N/A    N/A    110%      82.5%   

Enterprise finance transformation*

     12.5   50% of

milestones

achieved

   75% of

milestones
achieved

   100% of

milestones
achieved

   >75% of

milestones
achieved

     14.5%   

Adjusted general operating expenses

     12.5   $1,510    $1,438    $1,366    $1,363      15.6%   

AIG Finance Function Modifier:

     113%   

 

* Enterprise finance transformation milestones consist of more than 20 financial projects across Finance and AIG’s business units.

 

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In determining the individual performance modifier for Mr. Herzog, the Committee considered the Chief Executive Officer’s evaluation of Mr. Herzog’s absolute and relative contributions to AIG’s performance, including the following key financial, strategic, operational and organizational achievements:

 

Metric

  

Significant Achievements

Financial   

Exceeded target AIG Adjusted PTOI (26% above target of $7.7 billion); achieved growth in TBVPS above the 55th percentile through the first nine months of 2013, based on 2013 Long-Term Incentive Plan peers (full year data is not yet available for all peer companies); and achieved TSR of 42.4% for 2013 (41st percentile) evaluated in light of 2012-2013 two-year performance (TSR of 113.9%, representing the 95th percentile).

 

In addition to the adjusted general operating expenses results for AIG Finance shown above, exceeded consultant spending goal by ensuring spending was in compliance with AIG policy regarding sourcing and approvals and was at or below budget.

Strategic    In addition to the enterprise finance transformation results for AIG Finance shown above, exceeded the following capital management goals: dividends from insurance companies (40% above target of $6.35 billion); excess capital released from Direct Investment book (79% above target of $400 million); and liability management (78% above target of $3 billion of liabilities retired (excluding scheduled maturities) funded by cash and new debt issuances).
Operational    Exceeded business continuity goals by, among other things, leading business continuity testing exercises to stress recovery strategies, establishing centralized oversight to evaluate and update continuity plans for largest Finance hubs, rolling out a standard business continuity training program, and satisfying all quarterly business continuity compliance objectives for Finance. Established internal quarterly reporting of Finance key performance indicators and management reporting for expenses with additional enhancements planned for 2014. Exceeded expectations by implementing and maintaining active information technology risk program across AIG Finance and ensuring all related action plans were implemented by their deadlines; and partially achieved voluntary implementation of 2013 comprehensive capital analysis and review and support for capital planning inspection.
Organizational    Executed on rotation opportunities for high potential employees within the Finance function and effectively managed low-performing employees. Demonstrated high performance by participating in and sponsoring women’s initiatives and recruiting women internally and externally for senior roles. Completed build-out of actuarial target operating model, including through new organizational structure for AIG Life and Retirement and filling senior positions.

Executive Vice President, Investments. In approving the business/function modifier for the AIG Investments function, the Committee considered overall performance for AIG’s core business units (110%, as discussed above), as well as metrics and actual results specific to the AIG Investments function, as follows:

 

     AIG Investments Function

Performance Metric

   Weighting    Threshold
(50%)
  Target
(100%)
  Maximum
(125%)
  Actual   %
Achieved
(Weighted)

Overall business unit performance

   75%    N/A   N/A   N/A   110%   82.5%

Relative Strategic Asset Allocation (total risk-adjusted return)

   12.5%    25th

percentile

  55th

percentile

  75th

percentile

  98th

percentile

  15.6%

Relative Sub-asset Class Allocation

   12.5%    25th

percentile

  55th

percentile

  75th

percentile

  99th

percentile

  15.6%

AIG Investments Function Modifier:

  114%

 

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In determining the individual performance modifier for Mr. Dooley, the Committee considered the Chief Executive Officer’s evaluation of Mr. Dooley’s absolute and relative contributions to AIG’s performance, including the following key financial, strategic, operational and organizational achievements of the AIG Investments function:

 

Metric

  

Significant Achievements

Financial    Implemented AIG’s 2013 investment plan and exceeded core results (6% above target of $15.4 billion, excluding strategic investments at AIG parent). Partially achieved 2013 AIG Investments cost reductions (74% below target of $25 million) while providing additional services to increase efficiency. Achieved general operating expenses for AIG Investments below budget. Exceeded consultant spending goal by ensuring that spending was in compliance with AIG policy regarding sourcing and approvals and was at or below budget.
Strategic    Exceeded expectations by structuring and executing commercial transactions that maximized the utilization of deferred tax assets scheduled to expire. Partnered with ERM and actuarial and value management teams with respect to a consolidated asset liability management infrastructure, including completing key pilot projects. Developed a framework to bring AIG’s global assets under AIG Asset Management’s direct management and enhanced investment controls and exceeded target by migrating more than $10 billion of assets to the platform in 2013. Supported and maintained business continuity management program within AIG Investments & Financial Services with compliance testing above target. Implemented and maintained active information technology risk program across AIG Investments and ensured substantially all related action plans were implemented by their deadlines.
Operational    Significantly improved AIG’s readiness for Federal Reserve Board supervision and met substantially all deadlines. Implemented and extended core analytical tools and platforms within the asset management business.
Organizational    Implemented a succession plan for senior positions in AIG Investments.

Executive Vice President, Property and Casualty Insurance. In approving the business/function modifier for the AIG Property Casualty business unit, the Committee considered the following metrics and actual results:

 

     AIG Property Casualty ($ in millions)  

Performance Metric

   Weighting    Threshold
(50%)
  Target
(100%)
   Maximum
(125%)
   Actual   %
Achieved
(Weighted)
 

Normalized Risk Adjusted Profit (RAP)*

   60%    $(325)   $325    $650    $272     57.5%   

Loss mitigation**

   10%    Partially
Achieved
  Achieved    Exceeded    Exceeded     12.5%   

Expense Management Savings

   10%    $(200)   $0    $100    $(130)     6.8%   

Distributions to AIG

   10%    $2,250   $2,750    $3,000    $4,300     12.5%   

Maintain or improve financial strength ratings by the four major ratings agencies

   10%    Maintain and

achieve £ 2

downward

revisions in

outlook

  Maintain and

achieve no

downward

revisions in

outlook

   Maintain and

achieve ³ 1

positive

upgrade in

outlook

   Maximum     12.5%   

AIG Property Casualty Business Modifier:

    102%   

 

* The Committee determined to adjust the RAP metric to normalize for certain legacy environmental losses reported in Property Casualty—Other and for certain severe losses to align with the treatment of catastrophic losses.

 

** Loss mitigation metrics consist of (1) use structural drivers for at least 50% of more complex reserves, (2) implement loss mitigation financial and operation metrics for legal and medical management, and (3) rollout of claims initiatives on track.

 

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In determining the individual performance modifier for Mr. Hancock, the Committee considered the Chief Executive Officer’s evaluation of Mr. Hancock’s absolute and relative contributions to AIG’s performance, including the following key strategic, operational and organizational achievements of the AIG Property Casualty business unit:

 

Metric

  

Significant Achievements

Financial    The results for RAP, loss mitigation, expense management savings, distributions to AIG and financial strength ratings for AIG Property Casualty are shown above. RAP achievement represented significant improvement from 2012 level (which was below breakeven).
Strategic    Achieved growth in net premiums written, excluding the effect of foreign exchange, of 4% over prior year (20% below target of 5%). Grew net premiums written and headcount in growth economies and, among other strategic business expansion achievements, entered into a joint venture in China and commenced a ten-year exclusive distribution partnership in Turkey.
Operational    Exceeded business continuity management goal by satisfying all quarterly business continuity compliance objectives for AIG Property Casualty. Exceeded goal by implementing new underwriting tools for more than 75% of net premiums written; designed and launched five new technical training programs for commercial underwriters. Supported and promoted a robust compliance framework and Federal Reserve Board supervision program by implementing a governance structure and leading the steering committee on compliance, dedicating staff to Federal Reserve Board supervision and leading a senior executive training on reputational risk. Enhanced AIG Property Casualty’s reserving policies and procedures. Exceeded expectations by implementing and maintaining active information technology risk program across AIG Property Casualty and ensuring all related action plans were implemented by their deadlines.
Organizational    Filled the CEO of Global Consumer Insurance position and supported a successful transition. Improved retention of high performing employees with an annualized attrition rate of less than 8%; exceeded diversity recruiting goals; participated in leadership trainings.

Executive Vice President, Life and Retirement. In approving the business/function modifier for the AIG Life and Retirement business unit, the Committee considered the following metrics and actual results:

 

     AIG Life and Retirement ($ in millions)

Performance Metric

   Weighting   Threshold
(50%)
   Target
(100%)
   Maximum
(125%)
   Actual    %
Achieved
(Weighted)

Adjusted premiums,

deposits and other considerations (PDOC)

   15%   $20,547    $25,684    $27,610    $28,809    18.75%

Adjusted Value of New Business (VoNB)

   15%   $86    $171    $214    $382    18.75%

Adjusted pre-tax operating income (L&R Adjusted PTOI)

   40%   $3,366    $3,960    $4,257    $4,889    50%

Adjusted general operating expenses*

   10%   $1,662    $1,614    $1,566    $1,629    8.4%

Distributions to AIG

   10%   $2,500    $3,600    $4,000    $4,433    12.5%

Maintain or improve financial strength ratings by the four major ratings agencies

   10%   Maintain and
achieve £ 2
downward
revisions in
outlook
   Maintain and
achieve no
downward
revisions in
outlook
   Maintain and
achieve ³ 1
positive
upgrade in
outlook
   Maximum    12.5%

AIG Life and Retirement Business Modifier:

   121%

 

 

* The Committee determined to adjust the general operating expenses metric to normalize for significant and unexpected expenses related to the right-sizing of certain areas of the business in 2013.

 

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In determining the individual performance modifier for Mr. Wintrob, the Committee considered the Chief Executive Officer’s evaluation of Mr. Wintrob’s absolute and relative contributions to AIG’s performance, including the following key financial, strategic, operational and organizational achievements of the AIG Life and Retirement business unit:

 

Metric

  

Significant Achievements

Financial    In addition to the achievements with respect to PDOC, VoNB, L&R Adjusted PTOI, adjusted general operating expenses, distributions to AIG and financial strength ratings for AIG Life and Retirement shown above, achieved Life and Retirement adjusted return on equity of 9.8% (10% above target of 8.9%). Exceeded consultant spending goal by ensuring that spending was in compliance with AIG policy regarding sourcing and approval and was at or below budget.
Strategic   

Began executing on strategy to modernize and consolidate operating platform for AIG Life and Retirement’s life insurance business, which will result in lower costs, increased speed to market for product enhancements and increased responsiveness to customers and producers; established strategy to convert legacy American General Life in-force policy systems and implemented first stage of plan; implemented operating model to establish new business and underwriting relationship service teams for independent brokerage and new career distribution; migrated positions to lower cost locations; and designed and launched an innovative rider for life insurance products.

 

Significantly increased cross-sell of AIG Life and Retirement products within affiliated distribution channels compared to prior year; launched 60 new AIG Life and Retirement products to strategic partners; successfully integrated acquired business Woodbury Financial with the existing AIG Advisor Group, and leveraged Woodbury Financial as a life distribution center of excellence; established an Enterprise General Agency to encourage increased life insurance sales through all affiliated distribution channels and hired new personnel and leveraged existing talent for staffing; designed and launched a strategy to transform the legacy American General Life and Accident Insurance Company career distribution channel into a full-service, retail financial services model; hired a Human Resources Business Partner for AIG Financial Distributors to be responsible for all sales recruiting and began the design and implementation of a comprehensive sales training program; increased advisor and agent productivity by more than 15% on average, and increased AIG Advisor Group retention by 2 percentage points, The Variable Annuity Life Insurance Company retention by 10 percentage points and AIG Financial Network retention by 7 percentage points.

Operational    Launched a center of excellence focused on risk selection to enhance AIG Life and Retirement’s ability to accurately assess mortality and morbidity risks through data-driven analysis and provided increasing support for the structured settlement business and AIG Benefit Solutions’ medically underwritten business through the center of excellence. Migrated positions to lower cost locations and implemented productivity tracking system.

Organizational

   Strengthened competitive position of AIG Benefits Solutions in the group benefits market by, among other things, selecting a new administrative platform, continuing to fill key positions and performing a comprehensive strategic review of the broad product portfolio which resulted in discontinuing certain non-core products, eliminating certain duplicative products and re-pricing and re-launching certain core products. Exceeded business continuity goals by, among other things, initiating unannounced, self-administered continuity testing exercises, directing in-depth business continuity program reviews; implementing and maintaining active information technology risk program across AIG Life and Retirement and ensuring all related action plans were implemented by their deadlines.

Non-GAAP Financial Measures

Certain of the operating performance measurements used by AIG management are “non-GAAP financial measures” under SEC rules and regulations. See Appendix B to this proxy statement for an explanation of how these measures are calculated from our audited financial statements.

 

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Historic Compensation Components

Senior Partners Plan. In January 2013, Messrs. Herzog, Dooley, and Wintrob received $339,625, $1,018,875 and $1,358,500, respectively, upon the vesting of awards previously earned for the 2005-2007 performance period under AIG’s Senior Partners Plan. These awards are described in greater detail in “Post-Employment Compensation—Nonqualified Deferred Compensation.” No awards remain outstanding under the Senior Partners Plan.

Stock Salary. From 2009 to 2012, AIG maintained a program of regular bi-weekly or semi-monthly grants of vested stock or units generally referred to as “Stock Salary.” In large part, Stock Salary took the place of what would otherwise have been annual and long-term cash, stock and performance-based incentive programs while AIG was subject to the TARP Standards. Grants of Stock Salary remained subject to transfer or payment restrictions over a multi-year period and, as of year-end 2013, each of our named executives held vested Stock Salary awards still subject to transfer or payment restrictions. These awards are described in greater detail in “Post-Employment Compensation—Nonqualified Deferred Compensation.”

TARP RSUs. While AIG was subject to the TARP Standards, named executives eligible for incentives could receive such pay only in the form of TARP RSUs. In order to qualify as TARP RSUs under the applicable regulation, the award was generally required to have at least a two-year vesting period and become payable only in 25% increments in proportion to AIG’s repayment of its TARP obligations. Because AIG fully repaid its TARP obligations as of December 14, 2012, 100% of the TARP RSUs that had not vested will be paid on the scheduled vesting date for such awards. The shares underlying TARP RSUs that vested in 2013 are included in “2013 Compensation—Holdings of and Vesting of Previously Awarded Equity—Vesting of Stock-Based Awards During 2013.”

Process for Compensation Decisions

Role of the Committee. The Committee determines and approves 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 approves the compensation of other key employees under its purview, which includes all of the other named executives. Currently, there are 43 employees under the Committee’s purview. 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 members of the executive team, including representatives from internal legal and human resources, outside counsel, and the Committee’s independent consultant.

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 views of how the program and proposals compare to market practices in financial services and general industry and to “best practices.” 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, including the 2013 executive compensation structure. The Cook firm also participated in the Committee meetings in which the compensation risk assessment was conducted and previously advised that the process was thorough and well designed. In compliance with SEC and NYSE rules, in March 2014, the Committee reviewed various items related to the Cook firm’s relationship to AIG, the members of the Committee and AIG’s executive officers. The Committee confirmed that neither the Cook firm nor any of its affiliates provides any other services to AIG or its management except with respect to director compensation, and that the Cook firm had no business or personal relationship with any member of the Committee or executive officer that raised a conflict of interest with respect to the Cook firm’s work for the AIG Board. The Committee also received information on the fees paid to the Cook firm by AIG as a percentage of the Cook firm’s total revenue and the Cook firm’s ownership of any AIG Common Stock. Considering this information, the Committee determined that the Cook firm is independent and that its work has not raised any conflict of interest.

In 2013, the Committee also considered materials prepared by Johnson Associates related to market compensation levels. Johnson Associates was engaged by AIG to assist with this work. In particular, Johnson Associates prepared reports presenting market comparisons of total compensation levels for existing employees, new hires and promotions with respect to positions within the Committee’s purview. The Committee performed a review of Johnson Associates’ services similar to the review of the Cook firm described above. The Committee

 

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noted that the Cook firm reviewed the reports prepared by Johnson Associates prior to consideration by the Committee and determined that this appropriately addressed any conflict of interest raised by Johnson Associates’ work or business relationship with AIG.

Consideration of Shareholder Feedback. The Committee values regular feedback from AIG’s shareholders, including the feedback received through our say-on-pay advisory vote. As a TARP participant, AIG held an annual say-on-pay advisory vote beginning in 2010, and, following our repayment of our TARP obligations, the Board unanimously recommended, and our shareholders agreed, that the say-on-pay advisory vote continue to occur annually (rather than every two years or every three years) as a corporate governance best practice. More than 98% of the votes cast by shareholders were in favor of the 2012 compensation of our named executives as disclosed in our 2013 Proxy Statement. Although the Committee reviewed the outcome of the vote, the result did not impact compensation decisions because the Special Master determined the specific 2012 compensation structures and amounts payable or potentially payable for AIG’s named executives. In reviewing the vote, the Committee noted that our executive compensation program established in 2013 builds upon certain principles of the 2012 structures with a greater emphasis on performance-based pay, long-term incentives and alignment with sound risk management.

Consideration of Competitive Compensation Levels. In 2013, the Committee considered information from data disclosed in surveys, market practices and levels disclosed in proxy statements and employment contracts from a number of peer companies (Broad Data), as well as Johnson Associates’ benchmarks which reflect proprietary data, third-party references and market impressions and judgment. The companies used in the Broad Data set were: Aetna, Inc., AFLAC, The Allstate Corporation, American Express Company, Ameriprise Financial, Inc., Bank of America Corporation, Bank of New York Mellon, BlackRock, Inc., Capital One Financial Corp., CIGNA Corporation, Citigroup Inc., Chubb Group, Hartford Financial Services, Invesco Ltd., JP Morgan Chase & Co., Lincoln National Corporation, Marsh & McLennan Companies, Inc., MetLife Inc., Principal Financial Group, Inc., Prudential Financial Inc., T. Rowe Price Group, Inc., The Travelers Companies Inc., U.S. Bancorp and Wells Fargo & Company.

Consideration of Risk Management. The Committee discusses and reviews annually, in consultation with AIG’s senior risk officer, the relationship between AIG’s risk management policies and practices and senior executive incentive compensation. For further discussion of the consultation process and ERM’s risk assessment, see the Report of the Compensation and Management Resources Committee.

Other Considerations

Clawback Policy. In 2013, the Committee adopted and implemented a comprehensive Clawback Policy to encourage sound risk management and individual accountability. The Clawback Policy covers all executive officers and any other employee as determined by the Committee and applies to covered compensation for such executive officers and employees. Covered compensation generally includes any bonus, equity or equity-based award or other incentive compensation granted to an executive officer or employee while he or she is subject to the policy, which includes our 2013 incentive awards. In the event that the Committee determines that a triggering event under the Clawback Policy has occurred, the Committee may require an executive officer or other covered employee to forfeit and/or repay all or any portion of any unpaid covered compensation or covered compensation paid in the twelve months (or such longer period of time as required by any applicable statute or government regulation) preceding the event. Triggering events generally include a material financial restatement; the award or receipt of covered compensation based on materially inaccurate financial statements or performance metrics that are materially inaccurately determined; a failure of risk management, including in a supervisory role, or material violation of AIG’s risk policies; and an action or omission that results in material financial or reputational harm to AIG.

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 executive officers, which include the other named executives. Until the guidelines are met, such employees are required to retain 50% of the shares of AIG Common Stock received upon the exercise, vesting or payment of certain equity-based awards granted by AIG. Shares held for purposes of the guidelines may include stock owned outright by the officer or his or her spouse and earned but unvested share-based awards. The guidelines apply to all of AIG’s executive officers. Executive officers are required to comply with the guidelines until six months after they cease to be executive officers.

AIG’s Code of Conduct and Insider Trading Policy prohibit employees from engaging in any hedging transactions with respect to any of AIG’s securities, including by trading in any derivative security relating to AIG’s securities.

 

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Deductibility of Executive Compensation. Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code), generally limits the tax deductibility of compensation in excess of $1 million per year paid by a public company to its chief executive officer and three other most highly compensated executive officers (other than the chief financial officer), subject to certain exceptions, including an exception for qualifying “performance-based compensation” (as defined under applicable tax regulations). During the period that AIG was subject to TARP, AIG was subject to Section 162(m)(5) of the Code, which removed the “performance-based compensation” exception and lowered the cap on deductibility from $1 million to $500,000 per year. Accordingly, while subject to TARP, deductibility was not taken into account in making compensation decisions. Following our repayment of our TARP obligations in December 2012, the Board approved the AIG 2013 Omnibus Incentive Plan, an omnibus incentive plan designed to replace the 2010 Stock Incentive Plan and allow for the issuance of awards that satisfy the “performance-based compensation” exception under Section 162(m). Our shareholders approved the 2013 Plan at AIG’s 2013 Annual Meeting, and the Committee intends that short-term and long-term incentives awarded to covered employees for 2014 will qualify for this exception. However, the Committee retains the ability to pay compensation that exceeds $1 million and does not constitute qualifying “performance-based compensation” when it determines that such payments are in the best interest of AIG and our shareholders. The Committee believes that retaining the flexibility to attract, retain and motivate our employees with a compensation program that supports long-term value creation, even though some compensation awards may not be deductible, is in the best interests of our shareholders.

Conclusion

Our 2013 compensation program reflects our commitment to comprehensive pay-for-performance standards throughout AIG. We believe AIG’s compensation program properly motivates our employees and appropriately rewards them for their efforts to balance profit, growth, and risk.

2013 COMPENSATION

Summary Compensation Table

The following tables contain information with respect to AIG’s named executives, who are the Chief Executive Officer, Chief Financial Officer and the three other most highly paid executive officers.

2013 Summary Compensation Table

 

Name and
Principal Position
  Year     Salary     Bonus     Stock
Awards(1)
    Non-Equity
Incentive Plan
Compensation(2)
    Change in
Pension
Value(3)
    All Other
Compensation(4)
    Total  

Robert H. Benmosche

    2013      $ 2,269,231      $ 0      $ 6,452,514      $ 6,000,000      $ 60,123      $ 52,694      $ 14,834,562   

Chief Executive Officer

    2012      $ 3,000,000      $ 0      $ 7,500,000      $ 0      $ 33,412      $ 40,498      $ 10,573,910   
    2011      $ 3,000,000      $ 0      $ 10,932,677      $ 0      $ 28,576      $ 22,928      $ 13,984,181   

David L. Herzog

    2013      $ 988,346      $ 0      $ 3,687,129      $ 2,260,000      $ 0      $ 36,737      $ 6,972,212   

Executive Vice President

    2012      $ 495,000      $ 0      $ 5,804,973      $ 0      $ 191,345      $ 27,109      $ 6,518,427   

and Chief Financial Officer

    2011      $ 495,000      $ 0      $ 5,804,999      $ 0      $ 174,075      $ 21,775      $ 6,495,849   

William N. Dooley

    2013      $ 987,308      $ 0      $ 3,687,129      $ 2,400,000      $ 0      $ 43,666      $ 7,118,103   

Executive Vice President—

    2012      $ 450,000      $ 0      $ 5,550,000      $ 0      $ 595,778      $ 31,723      $ 6,627,501   

Investments

    2011      $ 450,000      $ 0      $ 5,550,000      $ 0      $ 602,981      $ 39,642      $ 6,642,623   

Peter D. Hancock

    2013      $ 1,471,154      $ 0      $ 4,562,843      $ 3,500,000      $ 52,252      $ 61,941      $ 9,648,190   

Executive Vice President—

    2012      $ 1,800,000      $ 0      $ 6,199,995      $ 0      $ 25,364      $ 21,583      $ 8,046,942   

Property and Casualty Insurance

    2011      $ 1,794,231      $ 0      $ 5,199,990      $ 0      $ 28,475      $ 11,942      $ 7,034,638   

Jay S. Wintrob

    2013      $ 1,183,731      $ 0      $ 4,055,842      $ 3,800,000      $ 334,923      $ 62,498      $ 9,436,994   

Executive Vice President—

    2012      $ 495,000      $ 0      $ 6,504,972      $ 0      $ 306,082      $ 81,257      $ 7,387,311   

Life and Retirement

    2011      $ 495,000      $ 0      $ 6,504,993      $ 0      $ 276,420      $ 60,466      $ 7,336,879   

Footnotes to 2013 Summary Compensation Table

 

(1) 2013 Amounts. The amounts represent the grant date fair value of PSUs granted for the 2013–2015 performance period under the 2013 AIG Long-Term Incentive Plan (the 2013 LTIP) based on target performance determined in accordance with FASB ASC Topic 718. At the maximum level of performance, the grant date fair value would be: Benmosche—$8,182,828; Herzog—$4,675,870; Dooley—$4,675,870; Hancock—$5,786,417; and Wintrob—$5,143,461. All amounts are subject to clawback under the AIG Clawback Policy.

2012 Amounts. For Mr. Benmosche, the amount represents the grant date fair value of Stock Salary paid during 2012 in AIG Common Stock, which is restricted from transfer until August 10, 2014, and includes $393 in cash paid in lieu of fractional shares. For Messrs. Herzog, Dooley, Hancock and Wintrob, the amounts

 

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represent the grant date fair value of Stock Salary paid during 2012 in restricted stock units (RSUs) and, except for Mr. Dooley, TARP RSUs awarded in December 2012 for 2012 performance.

2011 Amounts. For Mr. Benmosche, the amount represents the grant date fair value of Stock Salary paid during 2011 in AIG Common Stock, which is restricted from transfer until August 10, 2014, and TARP RSUs awarded in March 2011 for 2010 performance, and includes $474 in cash paid in lieu of fractional shares. For Messrs. Herzog, Dooley, Hancock and Wintrob, the amounts represent the grant date fair value of Stock Salary paid during 2011 in RSUs and, except for Mr. Dooley, TARP RSUs awarded in December 2011 for 2011 performance.

Calculation. The amount shown for the awards granted by AIG was calculated using the assumptions described in Note 20 to the Consolidated Financial Statements included in AIG’s 2013 Annual Report on Form 10-K (for awards granted in 2013), Note 21 to the Consolidated Financial Statements included in AIG’s 2012 Annual Report on Form 10-K (for awards granted in 2012) and Note 19 to the Consolidated Financial Statements included in AIG’s 2011 Annual Report on Form 10-K (for awards granted in 2011).

 

(2) The amounts represent the full amount of the awards earned under the AIG 2013 Short-Term Incentive Plan for 2013 performance. 50% of the award was paid in March 2014 and payment of the remaining 50% of the award is deferred until March 2015. 100% of the award is fully vested at the time of the first payment. All amounts are subject to clawback under the AIG Clawback Policy.

 

(3) 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 Qualified Retirement Plan, the Non-Qualified Retirement Plan and the SERP and/or the American General Corporation Supplemental Executive Retirement Plan, as applicable. These plans are described in “Post-Employment Compensation—Pension Benefits.” Mr. Herzog had a negative change in pension value of $24,779 and Mr. Dooley had a negative change in pension value of $11,782 because, although each of them actually accrued additional pension benefits for 2013, there was an increase in the discount rate in 2013 that resulted in a decrease in the present values, which more than offset the additional benefit accrued in 2013.

While AIG was subject to the TARP restrictions on executive compensation, there was a freeze on future benefit accruals with regard to the benefits provided under the Non-Qualified Retirement Plan and the SERP. Benefit accruals in these plans ceased on October 22, 2009 for Messrs. Herzog and Wintrob and on December 11, 2009 for Mr. Dooley. Because the TARP restrictions ceased to apply to AIG as of December 14, 2012, the freeze on benefit accruals in the Non-Qualified Retirement Plan and the SERP ended and benefit accruals commenced again under these plans after this date. In addition, benefit accruals commenced after December 14, 2012 for Messrs. Benmosche and Hancock under the Non-Qualified Retirement Plan, as they had not accrued any benefits under this plan prior to the TARP restrictions. We are not permitted to restore service for benefit accruals for the length of time during which these executives were subject to the freeze.

 

(4) 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.

Perquisites and Benefits

 

Name

   Personal Use of
Car Service/Car
Allowance/Parking(a)
     Financial,
Tax and Legal
Planning(b)
     Other(c)      Total  

Robert H. Benmosche

   $ 33,398       $ 0       $ 3,516       $ 36,914   

David L. Herzog

   $ 6,678       $ 10,000       $ 4,279       $ 20,957   

William N. Dooley

   $ 1,190       $ 16,209       $ 10,487       $ 27,886   

Peter D. Hancock

   $ 6,921       $ 10,000       $ 29,240       $ 46,161   

Jay S. Wintrob

   $ 6,786       $ 10,000       $ 12,138       $ 28,924   

 

 

  (a) Includes the incremental cost of driver overtime compensation, fuel and maintenance attributable to personal use of company cars. Mr. Benmosche was provided with a dedicated car and driver to enhance his security and efficient travel.

 

  (b) Incremental costs related to financial, tax and legal planning represent AIG’s direct expenditures.

 

  (c) Includes travel, meals and entertainment for the named executives and spouses and, for certain named executives, the cost of an annual medical examination paid for by the company.

 

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Other Benefits. This column also includes life insurance premiums paid for the benefit of the named executives. All named executives are covered under the AIG Basic Group Life Insurance Plan. For group life insurance, the 2013 company-paid costs were: Benmosche—$480; Herzog—$480; Dooley—$480; Hancock—$480; and Wintrob—$480.

This column also includes matching contributions by AIG under its 401(k) plan. These matching contributions include the following amounts in 2013: Benmosche—$15,300; Herzog—$15,300; Dooley—$15,300; Hancock—$15,300; and Wintrob—$15,300 (plus $285 attributable to a matching contribution payment for 2012). See “Post-Employment Compensation—Nonqualified Deferred Compensation” for additional details.

For Mr. Wintrob, this column includes special tax distributions of $17,509 in 2013 related to his investment in an employee co-investment fund, SunAmerica Venture Fund 2000, L.P.

AIG maintains a policy of directors and officers liability insurance for itself, its directors and officers and its subsidiaries and their directors and officers. The premium for this policy for the year ended September 22, 2013 was approximately $30 million and for the year ending September 22, 2014 was approximately $24.3 million. In addition, AIG purchased coverage in 2008 that will be in effect until September 22, 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 million.

2013 Grants of Plan-Based Awards

Total 2013 Grants. The following table details all equity and non-equity plan-based awards granted to each of the named executives in 2013. (No option awards were granted to the named executives in 2013.)

2013 Grants of Plan-Based Awards

 

Name

  Grant
Date
    Estimated Possible
Payouts Under Non-Equity
Plan Awards(1)
    Estimated Possible
Payouts Under Equity
Incentive Plan Awards
(Performance Share Units)(2)
    All
Other
Stock
Awards
(# of
AIG
Shares)
    Grant Date
Fair Value
of Equity
Awards
($)(3)
 
    Threshold     Target     Maximum     Threshold     Target     Maximum      

Robert H. Benmosche

                 

2013 STI

    04/01/13      $ 0      $ 4,000,000      $ 7,500,000                                      

2013 LTIP

    04/01/13                             91,551        183,102        274,653             $ 6,452,514   

David L. Herzog

                 

2013 STI

    04/01/13      $ 0      $ 2,000,000      $ 3,750,000                                      

2013 LTIP

    04/01/13                             52,315        104,629        156,944             $ 3,687,129   

William N. Dooley

                 

2013 STI

    04/01/13      $ 0      $ 2,000,000      $ 3,750,000                                      

2013 LTIP

    04/01/13                             52,315        104,629        156,944             $ 3,687,129   

Peter D. Hancock

                 

2013 STI

    04/01/13      $ 0      $ 2,700,000      $ 5,062,500                                      

2013 LTIP

    04/01/13                             64,740        129,479        194,219             $ 4,562,843   

Jay S. Wintrob

                 

2013 STI

    04/01/13      $ 0      $ 2,400,000      $ 4,500,000                                      

2013 LTIP

    04/01/13                             57,546        115,092        172,638             $ 4,055,842   

 

 

(1) Amounts shown reflect the range of possible cash payouts under the 2013 Short-Term Incentive Plan. Actual amounts earned, as determined by the Committee in the first quarter of 2014, are reflected in the 2013 Summary Compensation Table under Non-Equity Incentive Plan Compensation.

 

(2) Amounts shown reflect the potential range of 2013 PSU awards under the 2013 LTIP. Actual amounts earned are based on achieving relative TSR and relative growth in TBVPS over the 2013 to 2015 performance period. Results will be certified by the Committee in the first quarter of 2016. For more information on the LTIP awards, including the applicable performance metrics, please see “Compensation Discussion and Analysis—2013 Compensation Structure—Direct Compensation Components—Long-Term Incentive.” Holders of PSUs are not entitled to dividend or dividend equivalents.

 

(3) Amounts shown represent the grant date fair value of the PSU awards for the 2013-2015 performance period determined in accordance with FASB ASC Topic 718 using the assumptions presented in Note 20 to the Consolidated Financial Statements in AIG’s 2013 Annual Report on Form 10-K.

 

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HOLDINGS OF AND VESTING OF PREVIOUSLY AWARDED EQUITY

Outstanding Equity Awards at December 31, 2013

Equity-based awards held at the end of 2013 by each named executive were issued under the incentive plans and arrangements described below. Shares of AIG Common Stock deliverable under AIG’s time-vested equity and option awards will be delivered under the 2013 Omnibus Incentive Plan, 2010 Stock Incentive Plan, 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 (the SICO Plans).

The following table sets forth outstanding equity-based awards held by each named executive as of December 31, 2013.

Outstanding Equity Awards at December 31, 2013

 

        Stock Awards  
     Option Awards(1)             Unvested (No Longer
Subject to Performance
Conditions)
    Equity Incentive Plan
Awards (Unearned
and Unvested)
 

Name

  Year
Granted(1)
    Number
Exercisable
    Exercise
Price
    Expiration
Date
         Plan(2)(3)(4)   Number      Market
Value(5)
    Number     Market
Value(2)
 

Robert H. Benmosche

                                  2013 LTIP          274,653      $ 14,021,036   
 

David L. Herzog

    2007        1,749      $ 1,140.99        12/13/2017          2013 LTIP          156,944      $ 8,011,991   
   

 

 

 

2006

2005

2005

2004

  

  

  

  

   

 

 

 

1,499

1,249

750

749

  

  

  

  

  $

$

$

$

1,420.00

1,319.79

1,187.00

1,289.39

  

  

  

  

   

 

 

 

12/11/2016

12/14/2015

09/01/2015

12/16/2014

  

  

  

  

      TARP RSUs     54,592       $ 2,786,922       
              SICO Plans     729       $ 37,215       
               

 

 

    

 

 

     
              Total     55,321       $ 2,824,137       
                      
 

William N. Dooley

    2007        2,499      $ 1,140.99        12/13/2017          2013 LTIP          156,944      $ 8,011,991   
    2006        2,499      $ 1,420.00        12/11/2016          SICO Plans     6,957       $ 355,155       
    2005        1,999      $ 1,319.79        12/14/2015                  
    2005        1,500      $ 1,187.00        09/01/2015                  
    2004        1,499      $ 1,289.39        12/16/2014                  
 

Peter D. Hancock

                                  2013 LTIP          194,219      $ 9,914,880   
              TARP RSUs     46,501       $ 2,373,876       
 

Jay S. Wintrob

   

 

 

 

 

2007

2006

2005

2005

2004

  

  

  

  

  

   

 

 

 

 

2,999

2,999

2,999

2,500

2,499

  

  

  

  

  

  $

$

$

$

$

1,140.99

1,420.00

1,319.79

1,187.00

1,289.39

  

  

  

  

  

   

 

 

 

 

12/13/2017

12/11/2016

12/14/2015

09/01/2015

12/16/2014

  

  

  

  

  

      2013 LTIP          172,638      $ 8,813,170   
              TARP RSUs     60,658       $ 3,096,591       
              SICO Plans     5,760       $ 294,048       
               

 

 

    

 

 

     
              Total     66,418       $ 3,390,639       
                      

 

 

(1) None of the named executives has received options since 2008. All previously granted options had four-year pro rata vesting schedules. All outstanding options were exercisable and have an exercise price equal to the closing sale price of AIG Common Stock on the NYSE on the date of grant.

 

(2) All 2013 LTIP awards are shown at maximum payout, using the closing sale price of AIG Common Stock on the NYSE on December 31, 2013 of $51.05 per share. Whether these awards will be earned at maximum level, or a lower level, or at all depends on AIG performance against plan metrics over a three-year performance period. Once earned, all 2013 LTIP awards will vest one-third on the first day of January in each of 2016, 2017 and 2018.

 

(3) All TARP RSUs are expected to be paid in cash (based on the value of AIG Common Stock on the payout date). The vesting dates for TARP RSUs are as follows:

 

     Number of TARP RSUs  

Vesting date

   David L. Herzog      Peter D. Hancock      Jay S. Wintrob  

12/17/2014

     15,321         14,306         17,024   

12/19/2014

     23,949         17,889         26,610   

12/17/2015

     15,322         14,306         17,024   

 

(4)

Prior to 2005, key employees participated in the SICO Plans. The original SICO plan came into being in 1975. Participation in the SICO Plans by any person, and the extent of such participation, was at the sole discretion of SICO’s Board of Directors. SICO is responsible for issuing cash or AIG Common Stock under the SICO Plans when required; AIG has made no payments under these plans, although AIG records the expense

 

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  attributable to these plans in its financial statements. In 2005, AIG took steps to protect the interests of AIG’s current employees with respect to these benefits. AIG agreed, subject to certain conditions, to make any payment or delivery of AIG Common Stock that is not promptly made with respect to the benefits accrued by current employees of AIG and its subsidiaries under the SICO Plans.

Shares that have been contingently allocated to named executives under the SICO Plans will not be paid until age 65 and generally are subject to forfeiture on earlier termination of employment. SICO’s Board of Directors has the authority to reinstate a payout right and may permit early payout of shares. Before earning the right to payout, a participant is not entitled to any equity interest with respect to the contingently allocated shares.

Under certain of the SICO Plans, if a participating named executive continues to be employed by AIG at the end of the eighth year after units were granted and had not yet reached age 65, he was contingently allocated additional shares equal to 20 percent of the shares initially allocated. The contingent allocations are included in this table.

 

(5) Based on the closing sale price of AIG Common Stock on the NYSE on December 31, 2013 of $51.05 per share.

Vesting of Stock-Based Awards During 2013

The following table sets forth the amounts realized in accordance with SEC rules by each named executive as a result of the vesting of stock-based awards in 2013. There were no options exercised in 2013 by any of the named executives.

2013 Vesting of Stock-Based Awards

 

     Stock-Based Awards
Vested in 2013
 

Name                                           

   Number of
Shares
Acquired on
Vesting
     Value
Realized on
Vesting
 

Robert H. Benmosche(1)

     95,160       $ 3,708,385   

David L. Herzog(2)

     43,087       $ 2,182,029   

William N. Dooley(3)

     28,079       $ 1,432,871   

Peter D. Hancock(4)

     17,889       $ 900,890   

Jay S. Wintrob(5)

     48,249       $ 2,444,318   

 

 

(1) Represents 95,160 shares underlying vested TARP RSUs granted on March 15, 2011 that were settled in cash (based on the value of the underlying shares of AIG Common Stock on the vesting date).

 

(2) Represents (i) 19,093 shares underlying vested TARP RSUs granted on December 20, 2010 and 23,949 shares underlying vested TARP RSUs granted on December 19, 2011 that were settled in cash (in each case, based on the value of the underlying shares of AIG Common Stock on the vesting date), and (ii) a distribution of 45 shares from a SICO Plan.

 

(3) Represents 28,079 shares underlying vested TARP RSUs granted on December 20, 2010 that were settled in cash (based on the value of the underlying shares of AIG Common Stock on the vesting date).

 

(4) Represents 17,889 shares underlying vested TARP RSUs granted on December 19, 2011 that were settled in cash (based on the value of the underlying shares of AIG Common Stock on the vesting date).

 

(5) Represents 21,639 shares underlying vested TARP RSUs granted on December 20, 2010 and 26,610 shares underlying vested TARP RSUs granted on December 19, 2011 that were settled in cash (in each case, based on the value of the underlying shares of AIG Common Stock on the vesting date).

POST-EMPLOYMENT COMPENSATION

Pension Benefits

AIG maintains tax-qualified and nonqualified defined benefit (pension) plans that provide retirement benefits for employees whose length of service allows them to vest in and receive these benefits. Employees of AIG and its subsidiaries who are citizens of the United States and are paid on a U.S. dollar payroll, or non-citizens working in the United States, are covered under the Qualified Retirement Plan. Participants whose formula benefit is restricted from being fully paid from the Qualified Retirement Plan due to Internal Revenue Service (IRS) limits on

 

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compensation and benefits, including the named executives, are eligible to participate in the Non-Qualified Retirement Plan. Of the named executives, only Messrs. Dooley and Wintrob also participate in the SERP. In addition, Mr. Herzog has a benefit under the American General Corporation Supplemental Executive Retirement Plan for service accrued to December 31, 2002. This benefit vested, and his age 65 accrued benefit was frozen, following the acquisition of the American General Corporation on August 29, 2001.

While AIG was subject to the TARP restrictions on executive compensation, benefit accruals in the Non-Qualified Retirement Plan ceased on October 22, 2009 for Messrs. Herzog and Wintrob and on December 11, 2009 for Mr. Dooley, and benefit accruals in the SERP ceased on October 22, 2009 for Mr. Wintrob and on December 11, 2009 for Mr. Dooley. Messrs. Benmosche, Herzog and Hancock do not participate in the SERP. Because the TARP restrictions ceased to apply as of December 14, 2012, the freeze on benefit accruals in the Non-Qualified Retirement Plan and SERP ended and benefit accruals commenced again under these plans after this date. In addition, benefit accruals commenced for Messrs. Benmosche and Hancock under the Non-Qualified Retirement Plan, as they had not accrued any benefits under this plan prior to the TARP restrictions. We are not permitted to restore service for benefit accruals for the length of time during which these executives were subject to the freeze.

The benefit formula under the Qualified Retirement Plan and the Non-Qualified Retirement Plan was converted effective April 1, 2012 from a final average pay formula to a cash balance formula comprised of pay credits, calculated based on 6 percent of a plan participant’s annual pensionable compensation (subject to IRS limitations, on qualified plans ($255,000 in 2013) and annual interest credits (2.90% in 2013)).

The definition of pensionable compensation under the cash balance formula is different from the definition used in the final average pay formula. Effective April 1, 2012, pensionable compensation under the cash balance formula includes base salary, commissions, overtime and annual short-term incentive awards. The Qualified Retirement Plan continues to be subject to IRS compensation limits and the Non-Qualified Retirement Plan was subject to an annual compensation limit of $1.015 million in 2013.

The current final average pay formula and definition of pensionable compensation did not change under the Qualified Retirement Plan or the Non-Qualified Retirement Plan for employees whose age and credited service as of March 31, 2012 equaled 65 or greater and who had at least five years of credited service in the Qualified Retirement Plan as of that date. Messrs. Dooley and Wintrob meet these requirements. For purposes of all of the domestic pension plans, the final average pay formula is based on the average pensionable compensation of a participant during those three consecutive years in the last 10 years of credited service that afford the highest such average, not including amounts attributable to overtime pay, quarterly bonuses, annual cash bonuses or long-term incentive awards. These participants will receive a benefit under the Qualified Retirement Plan and the Non-Qualified Retirement Plan calculated using either the final average pay formula or the cash balance formula, whichever produces the greater benefit. The Non-Qualified Retirement Plan provides a benefit equal to the portion of the benefit that is not permitted to be paid from the Qualified Retirement Plan due to IRS limits on compensation and benefits. The Qualified Retirement Plan and Non-Qualified Retirement Plan final average pay formula ranges from 0.925 percent to 1.425 percent times average final salary for each year of credited service accrued since April 1, 1985 up to 44 years and 1.25 percent to 1.75 percent times average final salary for each year of credited service accrued prior to April 1, 1985 up to 40 years. For participants who retire after the normal retirement age of 65, the retirement benefit is actuarially increased to reflect the later benefit commencement date.

Participants in the Qualified Retirement Plan are vested after three years of service and participants in the Non-Qualified Retirement Plan are vested once they attain age 60 with five or more years of service or age 55 with 10 or more years of service.

Participants in the Qualified Retirement Plan can elect to receive their benefit in the form of an annuity or as a lump sum distribution. For Non-Qualified Retirement Plan participants, the benefit they accrued through March 31, 2012 can be paid only in the form of an annuity, and the benefit accrued on and after April 1, 2012 can be paid only in a lump sum.

The SERP continues to provide participants annuity options under the final average pay formula. The SERP provides a benefit equal to 2.4 percent times average final salary for each year of credited service up to 25 years, reduced by the monthly benefits payable from the Non-Qualified Retirement Plan, the Qualified Retirement Plan, Social Security and any predecessor plan or foreign deferred compensation plan sponsored by AIG.

Early retirement benefits. Each of the domestic pension plans provides for reduced early retirement benefits. These benefits are available to all vested participants in the Qualified Retirement Plan. The

 

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Non-Qualified Retirement Plan provides reduced early retirement benefits to participants who have reached age 55 with 10 or more years of service or to participants who have reached age 60 with five or more years of service. The early retirement reduction factors in the Non-Qualified Retirement Plan are based upon age as of the retirement date and years of credited service excluding the freeze period. The SERP provides reduced early retirement benefits to participants beginning at age 60 with five or more years of service, or to participants who have reached age 55 with 10 or more years of credited service, except that the Committee must approve payment for eligible participants retiring before age 60.

In the case of early retirement, participants in the SERP will receive the SERP formula benefit reduced by 3, 4 or 5 percent (depending on age and years of credited service at retirement excluding the freeze period) for each year that retirement precedes age 65. Participants in the Qualified Retirement Plan and the Non-Qualified Retirement Plan under the final average pay formula will receive the plan formula benefit projected to normal retirement at age 65 (using average final salary as of the date of early retirement), but prorated based on years of actual service, then reduced by a further amount in the same manner described with respect to the SERP except that there is no exclusion of service for the freeze period under the Qualified Retirement Plan. Participants in the Qualified Retirement Plan with at least 3 years of service to AIG have a vested reduced retirement benefit pursuant to which, in the case of termination of employment prior to reaching age 65, such participants may elect to receive a reduced early retirement benefit commencing at any date between their date of termination and age 65. Participants in the Qualified Retirement Plan may choose to receive a lump sum payment or an annuity option upon normal or early retirement. Participants in the Non-Qualified Plan must receive the benefit accrued through March 31, 2012 in the form of an annuity and the benefit accrued on and after April 1, 2012 in a lump sum. The SERP participants can elect an annuity option only and may not choose to receive the benefit in a lump sum.

Death and disability benefits. Each of the domestic pension plans also provides for death and disability benefits. The death benefit payable to a participant’s designated beneficiary under the Qualified Retirement Plan and the Non-Qualified Retirement Plan will generally equal the participant’s lump sum benefit or cash balance account. In the case of death, the SERP provides a participant who has at least five years of service to AIG with a survivor annuity equal to 40 percent of the participant’s accumulated benefit, which may be reduced based on the age of the surviving spouse.

Under the Qualified Retirement Plan and the Non-Qualified Retirement Plan, participants who become disabled and whose benefit is determined under the final average pay formula continue to accrue credited service, and participants whose benefit is determined under the cash balance formula continue to receive pay credits and interest credits to their cash balance account, during the period that they are receiving payments under AIG’s long-term disability plan or during periods of unpaid medical leave before reaching age 65 (or such later date as provided under AIG’s long-term disability plan if disability commences after age 60) for a maximum of three additional years. Under the SERP, participants do not accrue credited service during that time.

As with other retirement benefits, in the case of death and disability benefits, the formula benefit under the Non-Qualified Retirement Plan and the SERP is reduced by amounts payable under the Qualified Retirement Plan, and participants in both the Non-Qualified Retirement Plan and the SERP may receive the formula benefit from the SERP only to the extent that it exceeds the benefit payable from the Non-Qualified Retirement Plan and the Qualified Retirement Plan.

2013 pension benefits. The following table details the accumulated benefits under the pension plans in which each named executive participates. In accordance with SEC rules, these accumulated benefits are presented as if they were payable upon the named executive’s normal retirement at age 65. However, it is important to note that the benefits shown for the named executives are at least partially unvested and could be received at lower levels due to reduced benefits or forfeited entirely if the named executive does not continue to work at AIG for the next several years. As of year-end 2013, Messrs. Dooley and Wintrob were eligible for early retirement benefits under the Non-Qualified Retirement Plan, but Messrs. Benmosche, Herzog and Hancock were not yet eligible for early retirement benefits under that plan. Mr. Dooley was eligible for early retirement benefits under the SERP, but Mr. Wintrob, the only other participating named executive, was not eligible for such benefits.

AIG has not granted extra years of credited service under the defined benefit plans described above to any named executive, other than credit for prior service by Mr. Herzog to American General Corporation (as required by Code regulations applicable to plans assumed in acquisitions). In order to vest in AIG’s nonqualified pension plans, participants must meet the eligibility requirements for early retirement benefits. Vesting in the Qualified Retirement Plan requires three years of service.

 

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2013 Pension Benefits

 

Name                                                         

  

Plan Name

  Years of
Credited
Service(1)
    Present
Value of
Accumulated
Benefit(2)
    Payments
During 2013
 

Robert H. Benmosche

  

Qualified Retirement Plan

    3.833      $ 90,934      $ 0   
  

Non-Qualified Retirement Plan

    1.000      $ 49,644      $ 0   
  

Total

    $ 140,578      $ 0   

David L. Herzog

  

Qualified Retirement Plan

    13.917      $ 289,280      $ 0   
  

Non-Qualified Retirement Plan

    10.750      $ 463,466      $ 0   
  

American General Corporation Supplemental Executive Retirement Plan

    2.917      $ 165,328      $ 0   
  

Total

    $ 918,074      $ 0   

William N. Dooley

  

Qualified Retirement Plan

    28.750      $ 872,824      $ 0   
  

Non-Qualified Retirement Plan

    25.750      $ 2,184,248      $ 0   
  

SERP

    25.000      $ 1,367,821      $ 0   
  

Total

    $ 4,424,893      $ 0   

Peter D. Hancock

  

Qualified Retirement Plan

    3.333      $ 61,984      $ 0   
  

Non-Qualified Retirement Plan

    1.000      $ 44,107      $ 0   
  

Total

    $ 106,091      $ 0   

Jay S. Wintrob

  

Qualified Retirement Plan

    13.500      $ 340,140      $ 0   
  

Non-Qualified Retirement Plan

    10.333      $ 941,917      $ 0   
  

SERP

    10.333      $ 657,511      $ 0   
   Total     $ 1,939,568      $ 0   

 

(1) The named executives had the following years of service with AIG as of December 31, 2013: Mr. Benmosche—4.416; Mr. Herzog—12.417; Mr. Dooley—35.5; Mr. Hancock—3.916; and Mr. Wintrob—14.083.

Mr. Benmosche. Mr. Benmosche had fewer years of credited service than actual service under the Qualified Retirement Plan because employees must wait a year after commencing employment with AIG before becoming participants in this plan and receiving credit for service retroactive to six months of employment. Mr. Benmosche became a participant in the Qualified Retirement Plan effective September 1, 2010, after he completed one year of service with AIG with service credited retroactive to March 1, 2010. Mr. Benmosche began accruing credited service under the Non-Qualified Retirement Plan on January 1, 2013, the first of the month following December 14, 2012, the end of AIG’s TARP restrictions period. He participates in the Qualified Retirement and Non-Qualified Retirement Plans under the cash balance formula. He began to accrue pay credits under the Non-Qualified Retirement Plan cash balance formula following December 14, 2012.

Mr. Herzog. Mr. Herzog participates in the Qualified Retirement and Non-Qualified Retirement Plans under the cash balance formula. Under both of these plans, Mr. Herzog received credit for his service retroactive to his date of hire at American General Corporation, which was acquired by AIG in August 2001. Under the Qualified Retirement Plan, Mr. Herzog had more years of credited service than actual service because that plan provided credit for years of employment with American General Corporation before its acquisition by AIG.

Under the Non-Qualified Retirement Plan, Mr. Herzog’s credited service is less than his credited service under the Qualified Retirement Plan due to the freeze on service accrual in the Non-Qualified Retirement Plan. Mr. Herzog began to accrue pay credits under the Non-Qualified Retirement Plan cash balance formula following December 14, 2012, the end of AIG’s TARP restrictions period and resumed accruing credited service under the Non-Qualified Retirement Plan on January 1, 2013.

Mr. Herzog’s benefit under the American General Corporation Supplemental Executive Retirement Plan was frozen at December 31, 2002.

Mr. Dooley. Mr. Dooley had fewer years of credited service than actual service under the Qualified Retirement Plan and Non-Qualified Retirement Plan, because he did not enter the plans immediately upon eligibility. Mr. Dooley had fewer years of credited service than actual service under the SERP because credited service is capped at 25 years under this plan. Mr. Dooley’s credited service under the Non-Qualified Retirement Plan is less than his credited service under the Qualified Retirement Plan due to the freeze on service accrual in

 

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the Non-Qualified Retirement Plan. He participates in the Qualified Retirement Plan and the Non-Qualified Retirement Plan calculated using either the final average pay formula or the cash balance formula, whichever produces the greater benefit. He resumed accruing credited service under the final average pay formula for both the Non-Qualified Retirement Plan and SERP on January 1, 2013.

Mr. Hancock. Mr. Hancock had fewer years of credited service than actual service under the Qualified Retirement Plan because employees must wait a year after commencing employment with AIG before becoming participants in this plan and receiving credit for service retroactive to six months of employment. Mr. Hancock became a participant in the Qualified Retirement Plan effective March 1, 2011 after he completed one year of service with AIG with service credited retroactive to September 1, 2010. Mr. Hancock began accruing credited service under the Non-Qualified Retirement Plan on January 1, 2013. He participates in the Qualified Retirement and Non-Qualified Retirement Plans under the cash balance formula. He began to accrue pay credits under the Non-Qualified Retirement Plan cash balance formula following December 14, 2012, the end of AIG’s TARP restrictions period.

Mr. Wintrob. Mr. Wintrob had fewer years of credited service than actual service under the Qualified Retirement Plan and the Non-Qualified Retirement Plan because employees must wait a year after commencing employment with AIG before becoming participants in those plans and receiving credit for service retroactive to six months of employment. Mr. Wintrob became a participant in the Qualified Retirement Plan effective January 1, 2001, after he completed one year of service with AIG with service credited retroactive to July 1, 2000. Mr. Wintrob’s credited service under the Non-Qualified Retirement Plan and the SERP is less than his credited service under the Qualified Retirement Plan due to the freeze on service accrual. He participates in the Qualified Retirement Plan and the Non-Qualified Retirement Plan calculated using either the final average pay formula or the cash balance formula, whichever produces the greater benefit. He resumed accruing credited service under the final average pay formula for both the Non-Qualified Retirement Plan and SERP on January 1, 2013.

 

(2) The actuarial present values of the accumulated benefits are based on service and earnings as of December 31, 2013 (the pension plan measurement date for purposes of AIG’s financial statement reporting). The actuarial present values of the accumulated benefits under the Qualified Retirement Plan, the Non-Qualified Retirement Plan and the SERP are calculated based on payment of a life annuity beginning at age 65, or current age if older, consistent with the assumptions described in Note 21 to the Consolidated Financial Statements included in AIG’s 2013 Annual Report on Form 10-K. As described in that Note, the discount rate assumption is 4.84 percent for the Qualified Retirement Plan. The discount rate assumption for the Non-Qualified Retirement Plan is 4.72 percent, 4.81 percent for the SERP, and 4.50 percent for the American General Corporation Supplemental Executive Retirement Plan. The mortality assumptions are based on the RP-2000 combined white collar mortality table projected using scale BB through 2013 and the AIG improvement scale thereafter, if applicable.

As a result of the TARP restrictions on executive compensation, benefit accruals in the Non-Qualified Retirement Plan ceased on October 22, 2009 for Messrs. Benmosche, Herzog and Wintrob and on December 11, 2009 for Mr. Dooley; and benefit accruals in the SERP ceased on October 22, 2009 for Mr. Wintrob and on December 11, 2009 for Mr. Dooley. Messrs. Benmosche, Herzog and Hancock do not participate in the SERP. The freeze on benefit accruals in the Non-Qualified Retirement Plan and SERP ended on December 14, 2012. We are not permitted to restore service for benefit accruals for the length of time during which these executives were subject to the freeze.

The Non-Qualified Retirement Plan and SERP benefits for these participants, if eligible, are equal to the lesser of the frozen Non-Qualified Retirement Plan and SERP benefit (excluding service and earnings during the period in which benefit accruals were frozen due to the TARP restrictions) or the Non-Qualified Retirement Plan and SERP benefit without taking into account the plan freeze on service accrual. Vesting is determined in the Non-Qualified Retirement Plan and the SERP based on age and years of service as of the executive’s actual retirement date. Early retirement reduction factors are based on age at the executive’s actual retirement date and years of credited service excluding credited service during the period in which benefit accruals were frozen due to the TARP restrictions.

Mr. Herzog. Mr. Herzog’s American General Corporation Supplemental Executive Retirement Plan benefit was frozen as of December 31, 2002 following AIG’s acquisition of American General Corporation.

 

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Nonqualified Deferred Compensation

In 2008, AIG paid out the entire account balances of most participants and terminated future participation in a number of its nonqualified deferred compensation plans, including the Supplemental Incentive Savings Plan (SISP), which allowed employees to contribute to deferred compensation accounts above the 401(k) annual limit, and the Executive Deferred Compensation Plan (EDCP), in which designated key employees were eligible to participate. However, for certain current and former employees, including participating named executives, payments of account balances were not accelerated. Mr. Dooley participated in the SISP and Messrs. Herzog and Wintrob participated in the EDCP. In addition, Mr. Herzog participated in the American General Supplemental Thrift Plan (AG Supplemental Thrift Plan) as a result of his employment by American General Corporation prior to its acquisition by AIG.

Supplemental Incentive Savings Plan. Participants in the SISP were able to defer cash compensation up to a maximum of $11,500 per year. Amounts deferred under the SISP were credited with earnings based on the returns of a number of mutual funds. In 2013, based on the performance of these funds, Mr. Dooley experienced a return of approximately 10.7 percent. All funds available for selection under the SISP were also available for selection under AIG’s 401(k) plan. Amounts deferred during each year, and earnings thereon, will be distributed in accordance with each participant’s prior decision to receive installments over a period of five or ten years or in a lump sum payment following termination of employment after reaching age 60. Participants whose employment terminates before reaching age 60 must receive their account balances in a lump sum payment.

Executive Deferred Compensation Plan. Participants in the EDCP were able to defer cash compensation up to a maximum of $300,000 per year. Amounts deferred under the EDCP were credited with earnings based on the returns of a small number of mutual funds. In 2013, based on the performance of these funds, Mr. Wintrob experienced a return of less than 1 percent and Mr. Herzog experienced a return of approximately 37 percent. Amounts deferred during each year, and earnings thereon, will be distributed in accordance with participants’ prior decision to receive installments over a period of five or ten years or in a lump sum payment following termination of employment after reaching age 60. Participants whose employment terminates before reaching age 60 must receive their account balances in a lump sum payment.

Senior Partners Plan. In 2009, AIG terminated its Senior Partners Plan for future performance cycles. The Senior Partners Plan was operated for successive overlapping three-year performance periods. The first performance period was January 1, 2004 through December 31, 2006, and the last performance period was January 1, 2006 through December 31, 2008. Participants were granted Senior Partner Units that entitled them to receive deferred cash awards based on a weighted average of the annual growth in AIG’s adjusted book value per share during the performance period. No Senior Partner Units were earned for the performance period ending in 2008. Earned awards under the Senior Partners Plan vested and were paid in two equal installments promptly after the fourth and sixth anniversaries of the first day of the final year of the performance period. Each of Messrs. Herzog, Dooley and Wintrob had awards that had previously been earned under the Senior Partners Plan with a performance period ending in 2007. These awards vested on January 1, 2013 and Messrs. Herzog, Dooley and Wintrob received $339,625, $1,018,875 and $1,358,500, respectively, in January 2013 in payment of these awards. No Senior Partners Plan awards remain outstanding.

Stock Salary. Stock Salary took the form of regular, bi-weekly or semi-monthly grants of immediately vested stock or units. The amount of stock or units awarded on each grant date was based on the dollar value of the Stock Salary earned over the period since the preceding grant date. Each grant of Stock Salary is subject to transfer or payment restrictions for a multi-year period. For more details on Stock Salary, please see “Compensation Discussion and Analysis—Historic Compensation Components—Stock Salary.”

 

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Senior Partners Plan and Stock Salary awards, as well as balances under the EDCP and the other plans in which the named executives participated, are detailed in the following table.

2013 Nonqualified Deferred Compensation

 

Name

   Executive
Contributions
     AIG
Contributions
     Aggregate
Earnings
(Loss)(1)(3)
     Distributions           Balance  

Robert H. Benmosche

                 

Stock Salary(1)

   $ 0       $ 0       $ 0       $ 0            $ 0   

David L. Herzog

                 

EDCP

   $ 0       $ 0       $ 146,169       $ 0            $ 541,373   

AG Supplemental Thrift Plan

   $ 0       $ 0       $ 853       $ 0            $ 20,610 (4) 

Senior Partners Plan(2)

   $ 0       $ 0       $ 0       $ 339,625            $ 0   

2009 Stock Salary(1)

   $ 0       $ 0       $ 323       $ 0            $ 0   

2010 Stock Salary(1)

   $ 0       $ 0       $ 510,109       $ 0            $ 0   

2011 Stock Salary(1)

   $ 0       $ 0       $ 1,454,308       $ 0            $ 2,849,978   

2012 Stock Salary(1)

   $ 0       $ 0       $ 1,942,311       $ 0            $ 4,812,600   
                   

 

 

 

Total

                    $ 8,224,561   

William N. Dooley

                 

SISP

   $ 0       $ 0       $ 2,914       $ 0            $ 30,036   

Senior Partners Plan(2)

   $ 0       $ 0       $ 0       $ 1,018,875            $ 0   

2009 Stock Salary(1)

   $ 0       $ 0       $ 628       $ 0            $ 0   

2010 Stock Salary(1)

   $ 0       $ 0       $ 460,639       $ 0            $ 0   

2011 Stock Salary(1)

   $ 0       $ 0       $ 1,704,937       $ 0            $ 3,341,143   

2012 Stock Salary(1)

   $ 0       $ 0       $ 2,275,662       $ 0            $ 5,638,809   
                   

 

 

 

Total

                    $ 9,009,988   

Peter D. Hancock

                 

2010 Stock Salary(1)

   $ 0       $ 0       $ 270,369       $ 0            $ 0   

2011 Stock Salary(1)

   $ 0       $ 0       $ 1,356,538       $ 0            $ 2,658,367   

2012 Stock Salary(1)

   $ 0       $ 0       $ 2,136,214       $ 0            $ 5,294,346   
                   

 

 

 

Total

                    $ 7,952,713   

Jay S. Wintrob

                 

EDCP

   $ 0       $ 0       $ 249       $ 0            $ 1,276,855   

Senior Partners Plan(2)

   $ 0       $ 0       $ 0       $ 1,358,500            $ 0   

2009 Stock Salary(1)

   $ 0       $ 0       $ 218       $ 0            $ 0   

2010 Stock Salary(1)

   $ 0       $ 0       $ 585,505       $ 0            $ 0   

2011 Stock Salary(1)

   $ 0       $ 0       $ 1,632,377       $ 0            $ 3,198,947   

2012 Stock Salary(1)

   $ 0       $ 0       $ 2,173,958       $ 0            $ 5,388,394   
                   

 

 

 

Total

                    $ 9,864,196   

 

(1) From 2009 to 2012, AIG maintained a program of regular bi-weekly or semi-monthly grants of vested stock or units generally referred to as “Stock Salary” that remained subject to transfer or payment restrictions over a multi-year period. Amounts in the Balance column above represent the fair market value of outstanding unit-based Stock Salary on December 31, 2013 based on the closing sale price of AIG Common Stock on the NYSE of $51.05 per share. Because Mr. Benmosche’s Stock Salary took the form of restricted stock and not units, his earned Stock Salary does not appear in the table. Mr. Benmosche’s Stock Salary is restricted from transfer until August 10, 2014. Stock Salary for Messrs. Herzog, Dooley, Hancock and Wintrob is subject to transfer restrictions from one to three years from the date of grant.

2009 Stock Salary was granted in units based on AIG Common Stock.

2010 Stock Salary was granted in restricted shares of AIG Common Stock or LTPUs based on a basket of AIG Common Stock and debt securities. Under the terms of the AIG Long-Term Performance Units Plan, the debt securities portion of any outstanding LTPUs was converted into AIG Common Stock on April 14, 2011. 2011 and 2012 Stock Salary was granted in restricted shares of AIG Common Stock or units based on AIG Common Stock. Holders of unit-based Stock Salary are entitled to certain dividend equivalents under the terms of their awards. For 2010 Stock Salary, RSUs outstanding on a dividend payment date entitle the holder to a dividend-equivalent grant of additional RSUs equal to the dividend per share multiplied by the number of RSUs outstanding on the dividend payment date, divided by the closing sale price per share of AIG Common Stock on the dividend payment date. For 2011 and 2012 Stock Salary, RSUs outstanding on a dividend record date entitle the holder to a cash dividend equivalent equal to the dividend per share, multiplied by the

 

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number of RSUs outstanding on the dividend record date. Dividend equivalent amounts resulting from 2013 dividend payments are included in the Aggregate Earnings (Loss) column for 2010, 2011 and 2012 Stock Salary amounts.

Stock Salary becomes immediately transferable upon an executive’s termination due to death or permanent disability. The Stock Salary amounts in the Balance column for certain of the named executives were included in amounts reported in Summary Compensation Tables in previous years. The amounts in the Balance column represent the portion of such previously reported awards that was undelivered at December 31, 2013. All of the 2011 Stock Salary for Messrs. Herzog, Dooley, Hancock and Wintrob was previously reported in the 2011 Summary Compensation Table. All of the 2012 Stock Salary for Messrs. Herzog, Dooley, Hancock and Wintrob was previously reported in the 2012 Summary Compensation Table. Amounts in previous Summary Compensation Tables represent the fair market value at the grant date.

 

(2) Represents the second half of the 2007 Senior Partners Plan award that was paid in January 2013.

 

(3) For 2009 Stock Salary, represents the earnings or loss accrued from December 31, 2012 through the applicable delivery date. For the third tranche of 2010 Stock Salary, represents the earnings or loss accrued from December 31, 2012 through the applicable delivery date. For the second tranche of 2011 Stock Salary, represents the earnings or loss accrued from December 31, 2012 through the applicable delivery date; for the third tranche of 2011 Stock Salary, represents the earnings or loss accrued from December 31, 2012 through December 31, 2013. For the first tranche of 2012 Stock Salary, represents the earnings or loss accrued from December 31, 2012 through the applicable delivery date; for the second and third tranches of 2012 Stock Salary, represents the earnings or loss accrued from December 31, 2012 through December 31, 2013. For 2010, 2011 and 2012 Stock Salary, amounts in this column also include dividend equivalents with respect to 2013 dividend payments.

 

(4) Represents Mr. Herzog’s balances under the AG Supplemental Thrift Plan and contributions made to this plan prior to AIG’s acquisition of American General Corporation. Mr. Herzog may receive a lump sum distribution from this plan when he terminates employment with AIG and elects a distribution from AIG’s 401(k) plan. This plan provides a return based on Prime plus 1 percent which resulted in a rate of return of approximately 4.3 percent in 2013.

POTENTIAL PAYMENTS ON TERMINATION

Executive Severance Plan. As previously discussed, AIG maintains the 2012 ESP for AIG executives in grade level 27 or above and other executives who participated in AIG’s prior executive severance plan (Prior Participants). Mr. Benmosche is not eligible for the 2012 ESP or any other severance under the terms of his employment agreement. Each of Messrs. Herzog, Dooley, Hancock and Wintrob participates in the 2012 ESP based on his grade level and as a Prior Participant.

Severance benefits. The 2012 ESP provides for severance payments and benefits upon a termination by AIG without “Cause” or by a qualifying executive (including Messrs. Herzog, Dooley, Hancock and Wintrob) for “Good Reason,” including, for qualifying executives, after a “Change in Control.” In the event of a qualifying termination, subject to the participant’s execution of a release of claims and agreement to abide by certain restrictive covenants, a participant is generally eligible to receive:

 

   

For terminations on and after April 1 of the termination year, a pro-rata annual short-term incentive for the year of termination based on the participant’s target amount and actual company (and/or, if applicable, business unit or function) performance, paid at the same time as such short-term incentives are regularly paid to similarly-situated active employees; and

 

   

Severance in an amount equal to the product of a multiplier times the sum of salary and average short-term incentive paid for the preceding three completed calendar years. The multiplier is either 1 or 1.5 depending on the executive’s grade level and increases to 1.5 or 2 for qualifying terminations within two years following a Change in Control. Each of Messrs. Herzog, Dooley, Hancock and Wintrob is eligible for the higher multipliers.

However, in any event, Prior Participants in grade level 27 or above, which includes Messrs. Herzog, Dooley, Hancock and Wintrob, may not receive less than the severance they would have received under the prior plan. Severance generally will be paid in a lump sum. For a qualifying termination of a Prior Participant prior to January 1, 2014, only the amount in excess of the severance he or she would have received under the prior plan would have been paid in a lump sum, and the remainder would have been paid in installments over a number of

 

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months equal to the participant’s severance period under the prior plan (that is, a number of months equal to the participant’s full years of service with AIG or its subsidiaries, but not less than six months nor more than 24 months).

For qualifying terminations prior to January 1, 2014, a Prior Participant was entitled to continued health and life insurance benefits, as well as additional age and service credit under AIG’s qualified and non-qualified pension plans, for the length of his or her severance period under the prior plan. All other participants, and Prior Participants for qualifying terminations on or after January 1, 2014, are entitled to continued health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), a $40,000 payment that may be applied towards such coverage and one year of additional age and service under AIG’s non-qualified pension plans solely for purposes of determining vesting and eligibility, not benefit accruals.

Restrictive covenants. Pursuant to the release of claims that each participant must execute to receive benefits under the 2012 ESP, each participant is generally prohibited from:

 

   

Engaging in, being employed by, rendering services to or acquiring financial interests in businesses that are competitive with AIG for a period of six months after termination;

 

   

Interfering with AIG’s business relationships with customers, suppliers or consultants for a period of six months after termination;

 

   

Soliciting or hiring AIG employees for a period of one year after termination; and

 

   

Disclosing AIG’s confidential information at any time following termination.

Definitions. Under the 2012 ESP:

 

   

“Cause” generally means

 

   

the participant’s conviction, whether following trial or by plea of guilty or nolo contendere (or similar plea), in a criminal proceeding (A) on a misdemeanor charge involving fraud, false statements or misleading omissions, wrongful taking, embezzlement, bribery, forgery, counterfeiting or extortion, (B) on a felony charge or (C) on an equivalent charge to those in clauses (A) and (B) in jurisdictions which do not use those designations;

 

   

the participant’s engagement in any conduct which constitutes an employment disqualification under applicable law (including statutory disqualification as defined under the Exchange Act);

 

   

the participant’s violation of any securities or commodities laws, any rules or regulations issued pursuant to such laws, or the rules and regulations of any securities or commodities exchange or association of which AIG or any of its subsidiaries or affiliates is a member; or

 

   

the participant’s material violation of AIG’s codes of conduct or any other AIG policy as in effect from time to time.

 

   

“Change in Control” generally means

 

   

individuals who, on the effective date of the 2012 ESP, constitute the Board of Directors of AIG (or subsequent directors whose election or nomination was approved by a vote of at least two-thirds of such directors, including by approval of the proxy statement in which such person is named as a nominee for director) cease for any reason to constitute at least a majority of the Board;

 

   

any person is or becomes a beneficial owner of 50% or more of AIG’s voting securities (for this purpose, person is as defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act);

 

   

consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving AIG that results in any person becoming the beneficial owner of 50% or more of the total voting power of the outstanding voting securities eligible to elect directors of the entity resulting from such transaction;

 

   

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

 

   

AIG’s stockholders approve a plan of complete liquidation or dissolution of AIG.

 

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“Good Reason” generally means a reduction of more than 20% in the participant’s annual target direct compensation; provided that, prior to the Transition Date, for Prior Participants, “Good Reason” generally means

 

   

a diminution in duties or responsibilities such that they are inconsistent in any material and adverse respect with the participant’s then title or offices;

 

   

a diminution in title or offices that is material and adverse to the participant’s authority;

 

   

a material reduction in base salary; or

 

   

a material reduction in annual target bonus opportunity.

Treatment of 2013 LTIP Awards. The 2013 LTIP provides for accelerated vesting of outstanding PSUs in certain termination scenarios. In the case of a participant’s involuntary termination without Cause (as defined in accordance with the 2012 ESP), retirement or disability, or if the participant experiences a qualifying resignation after the first year of a performance period (i.e., on or after January 1, 2014 for the 2013-2015 performance period), the participant’s earned PSUs will vest based on actual performance for the whole performance period and be delivered on the normal settlement schedule. Retirement requires attainment of age 60 with five years of service or attainment of age 55 with ten years of service, and a qualifying resignation requires attainment of both (1) age 50 with at least five years of service and (2) age plus years of service equal to at least 60. In the case of a participant’s death during or prior to adjudication for a performance period or involuntary termination without Cause within 24 months following a Change in Control (as defined in accordance with the 2012 ESP) during a performance period, an amount equal to the participant’s target amount of PSUs (unless the Committee determines to use actual performance through the date of the Change in Control) will vest and be delivered to the participant by the later of the end of the calendar year or two and a half months following death or termination.

 

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Quantification of Termination Payments and Benefits. The following table sets forth the compensation and benefits that would have been provided to each of the named executives if he had been terminated on December 31, 2013 under the circumstances indicated (including following a change in control).

Termination Payments and Benefits for the Named Executive Officers as of December 31, 2013

 

Name

  Annual
Short-Term
Incentive(1)
    Severance(2)     Medical and
Life Insurance(3)
    Pension
Plan
Credit(4)
    Unvested
Options(5)
    Unvested
Stock
Awards(6)
    Total  

Robert H. Benmosche

             

By AIG for “Cause”

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0   

By AIG w/o “Cause”

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 9,347,357      $ 9,347,357   

By Executive w/o Good Reason

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0   

By Executive with Good Reason

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0   

Qualifying Termination following a change in control(7)

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 9,347,357      $ 9,347,357   

Death

  $ 4,000,000      $ 0      $ 0      $ 0      $ 0      $ 9,347,357      $ 13,347,357   

Disability(8)

  $ 6,000,000      $ 0      $ 0      $ 177,603      $ 0      $ 9,347,357      $ 15,524,960   

Retirement

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0   

David L. Herzog

             

By AIG for “Cause”

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0   

By AIG w/o “Cause”

  $ 2,260,000      $ 4,500,000      $ 23,814      $ 188,249      $ 0      $ 5,378,526      $ 12,350,589   

By Executive w/o Good Reason

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0   

By Executive with Good Reason

  $ 2,260,000      $ 4,500,000      $ 23,814      $ 188,249      $ 0      $ 0      $ 6,972,063   

Qualifying Termination following a change in control(7)

  $ 2,260,000      $ 6,000,000      $ 23,814      $ 188,249      $ 0      $ 5,378,526      $ 13,850,589   

Death

  $ 2,000,000      $ 0      $ 0      $ 0      $ 0      $ 8,165,448      $ 10,165,448   

Disability(8)

  $ 2,260,000      $ 0      $ 0      $ 148,663      $ 0      $ 8,165,448      $ 10,574,111   

Retirement

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0   

William N. Dooley

             

By AIG for “Cause”

  $ 0      $ 0      $ 0      $ 770,346      $ 0      $ 0      $ 770,346   

By AIG w/o “Cause”

  $ 2,280,000      $ 4,500,000      $ 33,746      $ 1,078,465      $ 0      $ 5,696,465      $ 13,588,676   

By Executive w/o Good Reason

  $ 0      $ 0      $ 0      $ 770,346      $ 0      $ 0      $ 770,346   

By Executive with Good Reason

  $ 2,280,000      $ 4,500,000      $ 33,746      $ 1,078,465      $ 0      $ 0      $ 7,892,211   

Qualifying Termination following a change in control(7)

  $ 2,280,000      $ 6,000,000      $ 33,746      $ 1,078,465      $ 0      $ 5,696,465      $ 15,088,676   

Death

  $ 2,000,000      $ 0      $ 0      $ 0      $ 0      $ 5,696,465      $ 7,696,465   

Disability(8)

  $ 2,400,000      $ 0      $ 0      $ 1,471,239      $ 0      $ 5,696,465      $ 9,567,704   

Retirement

  $ 2,280,000      $ 0      $ 0      $ 770,346      $ 0      $ 5,696,465      $ 8,746,811   

Peter D. Hancock

             

By AIG for “Cause”

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0   

By AIG w/o “Cause”

  $ 2,754,000      $ 5,805,000      $ 33,746      $ 0      $ 0      $ 6,609,903      $ 15,202,649   

By Executive w/o Good Reason

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0   

By Executive with Good Reason

  $ 2,754,000      $ 5,805,000      $ 33,746      $ 0      $ 0      $ 0      $ 8,592,746   

Qualifying Termination following a change in control(7)

  $ 2,754,000      $ 7,740,000      $ 33,746      $ 0      $ 0      $ 6,609,903      $ 17,137,649   

Death

  $ 2,700,000      $ 0      $ 0      $ 1,932      $ 0      $ 8,983,779      $ 11,685,711   

Disability(8)

  $ 3,500,000      $ 0      $ 0      $ 159,068      $ 0      $ 8,983,779      $ 12,642,847   

Retirement

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0   

Jay S. Wintrob

             

By AIG for “Cause”

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0   

By AIG w/o “Cause”

  $ 2,904,000      $ 5,400,000      $ 34,456      $ 0      $ 0      $ 6,169,495      $ 14,507,951   

By Executive w/o Good Reason

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0   

By Executive with Good Reason

  $ 2,904,000      $ 5,400,000      $ 34,456      $ 0      $ 0      $ 0      $ 8,338,456   

Qualifying Termination following a change in control(7)

  $ 2,904,000      $ 7,200,000      $ 34,456      $ 0      $ 0      $ 6,169,495      $ 16,307,951   

Death

  $ 2,400,000      $ 0      $ 0      $ 0      $ 0      $ 9,266,086      $ 11,666,086   

Disability(8)

  $ 3,800,000      $ 0      $ 0      $ 1,470,390      $ 0      $ 9,266,086      $ 14,536,476   

Retirement

  $ 2,904,000      $ 0      $ 0      $ 0      $ 0      $ 7,527,935      $ 10,431,935   

 

 

(1) These amounts represent pro-rata annual short-term incentive payments for which the named executives would have been eligible pursuant to the 2012 ESP or 2013 Short-Term Incentive Plan had they been terminated on December 31, 2013. Except in the case of death or disability, these pro-rata short-term incentive payments are based on the named executive’s target amount and actual company, business unit and/or function performance and paid at the same time such short-term incentives are regularly paid to similarly-situated active employees. In the case of death, a named executive’s pro-rata short-term incentive payment is based on his or her target amount and paid as soon as administratively possible after the date of death (but in no event later than March 15th of the following year). In the case of disability, these pro-rata short-term incentive payments are based on the named executive’s actual individual performance and actual company, business unit and/or function performance and paid at the same time such short-term incentives are regularly paid to similarly-situated active employees. These amounts would have been solely in lieu of, and not in addition to, the annual short-term incentives for 2013 actually paid to the named executives as reported in the 2013 Summary Compensation Table.

 

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(2) Mr. Benmosche is not eligible for severance under the terms of his employment agreement. Severance payable to the other named executives would have been paid in equal installments over a 24-month period in accordance with the executive’s normal payroll schedule.

 

(3) Mr. Benmosche is not eligible for severance benefits under the terms of his employment agreement. For the other named executives, the amount reflects the company-paid cost of continued medical, dental and life insurance coverage during a 24-month severance period following a qualifying termination based on 2014 premium rates. Messrs. Dooley and Wintrob are also eligible for retiree medical coverage and there is no increase to the incremental present value of the retiree medical plan subsidy for Mr. Dooley. For Mr. Wintrob, this amount also includes $710, which reflects the incremental present value of a retiree medical plan subsidy attributed to the 24-month severance period. Messrs. Benmosche, Herzog and Hancock are not eligible for company-subsidized retiree medical benefits. The amounts do not include medical and life insurance benefits upon permanent disability or death to the extent that they are generally available to all salaried employees. All of the named executives are eligible participants under the AIG medical and life insurance plans.

 

(4) Mr. Benmosche is not eligible for severance benefits under the terms of his employment agreement. For the other named executives, the amount shown for all of the termination events is the increase, if any, above the accumulated value of pension benefits shown in the 2013 Pension Benefits table, calculated using the same assumptions. Where there is no increase in value, the amount shown in this column is zero. The amounts in this column for termination by AIG without cause, by the executive with good reason and a qualifying termination after a change in control, represent the increase in the present value, if any, of the named executive’s accumulated pension benefits as a result of additional years of age and credited service that would have accrued during the 24-month severance period.

In the event of termination as a result of death, the beneficiary of the named executives or their estates would have received benefits under AIG’s pension plans. The death benefit payable to a vested participant’s designated beneficiary under the Qualified Retirement Plan and the Non-Qualified Retirement Plan generally equals the participant’s lump sum benefit or cash balance account pursuant to the plan provisions applicable to all salaried employees. The SERP provides a participant with at least five years of service to AIG with a survivor annuity equal to 40 percent of the participant’s accumulated benefit, which may be reduced based on the age of the surviving spouse. The death benefits for the named executives are calculated using the actual dates of birth for these individuals’ spouses, and are generally less than the amounts shown in the 2013 Pension Benefits table on a present value basis. In the event of termination as a result of disability, the named executives would have received benefits under AIG’s pension plans. The amounts in this column for termination due to permanent disability represent the increase in the present value, if any, of the named executive’s accumulated pension benefits, representing additional years of credited service or additional pay credits, as applicable, that would accrue during a period of disability pursuant to the plan provisions applicable to all salaried employees.

All termination benefits, except disability benefits, are assumed to commence at the earliest permissible retirement date. Disability benefits are assumed to commence at age 65.

For information on pension benefits generally, see “Post-Employment Compensation—Pension Benefits.”

 

(5) No options that become exercisable on retirement, death or permanent disability are in the money.

 

(6) The amounts in this column represent the total market value (based on the closing sale price on the NYSE of $51.05 on December 31, 2013) of shares of AIG Common Stock underlying unvested equity-based awards. Includes for all of the named executives the outstanding PSUs granted under the 2013 LTIP assuming target performance; however, the actual number of PSUs (if any) vesting upon a qualifying termination by AIG without Cause, disability, or retirement, and, in certain circumstances, following a change in control, would be based on actual performance; for Messrs. Dooley, Herzog, and Wintrob includes previously earned awards under the SICO Plans; and for Messrs. Hancock, Herzog, and Wintrob includes outstanding TARP RSUs, all of which would have become vested on termination due to permanent disability or death. The final tranche of Mr. Wintrob’s 2011 TARP RSUs may be accelerated in the event of his retirement at the discretion of the Committee, as he is retirement eligible. The amount in this column for retirement reflects such acceleration for Mr. Wintrob.

Stock-based award holdings at the end of 2013 are detailed in the Outstanding Equity Awards at December 31, 2013 table.

 

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(7) Under the 2012 ESP, includes a termination by AIG without Cause or by the executive for Good Reason within 24 months following a Change in Control. Under the 2013 LTIP, includes only termination by AIG without Cause within 24 months following a Change in Control, with the amount of PSUs vesting shown at target. However, for a Change in Control that occurs following a performance period, the actual PSUs vesting, if any, would be based on actual performance, and for a Change in Control that occurs during a performance period, the Committee may determine to use actual performance through the date of the Change in Control rather than target performance to determine the actual PSUs vesting, if any.

 

(8) Amounts shown in this row represent the amounts the executive would be entitled to receive upon qualifying for benefits under AIG’s long-term disability plan.

 

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PROPOSAL 2—NON-BINDING ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

Pursuant to the rules of the SEC, AIG must submit to shareholders at least once every three years a non-binding shareholder advisory vote to approve the compensation of AIG’s executives, as disclosed in the annual Proxy Statement. Last year, our Board unanimously recommended, and our shareholders agreed, that the say-on-pay advisory vote occur annually as a corporate governance best practice.

Accordingly, this Proposal 2 gives holders of AIG Common Stock the opportunity to vote for or against the following resolution:

RESOLVED: that the holders of the Common Stock of American International Group, Inc. (the Company) approve the compensation of the Company’s named executives, as disclosed in the Company’s Proxy Statement for the 2014 Annual Meeting of Shareholders, including the Compensation Discussion and Analysis, the 2013 Summary Compensation Table and the other related tables and disclosure contained in the Proxy Statement.

Because this resolution relates to the information about executive compensation contained in this Proxy Statement, beginning with “Executive Compensation—Compensation Discussion and Analysis,” shareholders should review that information in considering their vote on the resolution.

Holders of AIG Common Stock are entitled to vote on this resolution. Adoption of the resolution requires a vote for the resolution by a majority of votes cast by the shareholders of AIG Common Stock, which votes cast are either “for” or “against” the resolution.

The results of the vote on this resolution will not be binding on AIG’s Board of Directors, will not overrule any decisions the Board has made and will not create any duty for the Board to take any action in response to the outcome of the vote. However, AIG’s Compensation and Management Resources Committee may, in its sole discretion, take into account the outcome of the vote in analyzing and evaluating future compensation opportunities. We will include an advisory vote on executive compensation on an annual basis at least until the next shareholder advisory vote on the frequency of such votes (no later than our 2019 Annual Meeting of Shareholders).

AIG STATEMENT IN SUPPORT

The Board and Compensation and Management Resources Committee support this resolution because they believe that our compensation program provides an appropriate balance of fixed and variable pay, drives achievement of AIG’s short- and long-term business strategies and aligns the economic interests of our executives with the long-term interests of AIG and our shareholders. At our 2013 Annual Meeting, more than 98% of the votes cast by shareholders were in favor of the 2012 compensation of our named executives. Our 2013 program builds on the 2012 program, with a greater emphasis on performance-based pay, long-term incentives and alignment with sound risk management. At least 70% of each named executive’s total target compensation is “at risk” and based on performance, and the majority of incentive pay opportunity is based on performance over a 3-year period and paid over a 5-year period.

2013 pay decisions reflect AIG’s accomplishments in another strong year of strategic transformation and execution with a focus on our core businesses. AIG continued to improve its profitability, as demonstrated by growth in 2013 over 2012 of pre-tax operating income in each of our core insurance operations; to execute strategic objectives, such as our focus on growth of higher value lines of business and the agreement to sell ILFC to a wholly owned subsidiary of AerCap Holdings N.V.; and to engage in effective capital management coupled with enhanced risk management. These accomplishments, and our 2013 compensation program and pay decisions, are described in more detail under the heading “Executive Compensation—Compensation Discussion and Analysis.”

Recommendation

Your Board of Directors unanimously recommends a vote FOR this resolution.

 

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BACKGROUND TO PROPOSALS 3 AND 4

AIG has significant deferred tax assets, which AIG may be able to use to offset future taxable income. At December 31, 2013, AIG had a U.S. federal net operating loss carryforward of approximately $34.2 billion, $1.1 billion in capital loss carryforwards and $5.8 billion in foreign tax credits carryforward (collectively, Tax Attributes). The Tax Attributes are part of net deferred tax assets of AIG’s U.S. consolidated income tax group.

AIG’s ability to utilize such Tax Attributes to offset future taxable income may be significantly limited if AIG experiences an “ownership change” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the Code). In general, an ownership change will occur when the percentage of AIG’s ownership (by value) by one or more “5-percent shareholders” (as defined in the Code) has increased by more than 50 percent over the lowest percentage owned by such shareholders at any time during the prior three years (calculated on a rolling basis). An entity that experiences an ownership change generally will be subject to an annual limitation on its pre-ownership change tax losses and credit carryforwards equal to the equity value of the corporation immediately before the ownership change, multiplied by the long-term, tax-exempt rate posted monthly by the Internal Revenue Service (IRS) (subject to certain adjustments). The annual limitation would be increased each year to the extent that there is an unused limitation in a prior year. The limitation on AIG’s ability to utilize its Tax Attributes arising from an ownership change under Section 382 would depend on the value of AIG’s equity at the time of any ownership change.

For the purpose of determining whether there has been an “ownership change”, the change in ownership as a result of purchases by “5-percent shareholders” will be aggregated with certain changes in ownership that occurred over the three-year period ending on the date of such purchases (with certain relief provided with respect to the sale of AIG Common Stock held by the Department of the Treasury). If AIG were to experience an “ownership change”, it is possible that a significant portion of the Tax Attributes would expire before AIG would be able to use them to offset future taxable income.

After careful consideration, the Board of Directors believes the most effective way to continue to preserve the benefits of the Tax Attributes for long-term shareholder value is to (i) amend AIG’s Restated Certificate of Incorporation to adopt a successor to Article Thirteen thereto (such successor, the Protective Amendment) that contains substantially the same terms as the current Article Thirteen but expires on the third anniversary of the date of the Annual Meeting (current Article Thirteen will expire by its terms on May 11, 2014) and (ii) amend AIG’s Tax Asset Protection Plan (the Plan) to extend the expiration date by approximately three years to January 8, 2017, and make other minor technical changes to the Plan. The Protective Amendment, which is designed to prevent certain transfers of AIG securities that could result in an ownership change, is described below under Proposal 3, and its full terms can be found in the accompanying Appendix C, which also shows the changes compared to current Article Thirteen, with deletions indicated by strikeouts and additions indicated by double underlining.

AIG’s Board of Directors adopted the Plan on March 9, 2011, pursuant to which AIG previously issued a dividend of one right per each outstanding share of AIG Common Stock payable to AIG’s shareholders of record as of the close of business on March 18, 2011 and to holders of AIG Common Stock issued after that date, with terms designed to deter transfers of AIG Common Stock that could result in an ownership change. On January 8, 2014, the Board unanimously adopted Amendment No. 1 to the Plan (Amendment No. 1), which extends the expiration date of the Plan to January 8, 2017 (subject to other earlier termination events as described in the Plan identical to the events that were included in the Plan prior to Amendment No. 1) and also makes minor technical changes to the Plan. The Plan, as amended by Amendment No. 1, is described below under Proposal 4, and its full terms, and those of the Plan, can be found in the accompanying Appendices D and E. Unless the context otherwise requires, all references herein to the Plan refer to the Plan as amended by Amendment No. 1 thereto.

In accordance with the terms of the Plan, the Board of Directors is asking AIG’s shareholders to ratify Amendment No. 1 at the Annual Meeting. AIG’s By-laws and other governing documents and applicable law do not require shareholder ratification of Amendment No. 1. However, AIG considers this proposal for shareholders to ratify Amendment No. 1 to be an important opportunity for AIG’s shareholders to provide direct feedback on an important issue of corporate governance. If AIG’s shareholders do not ratify Amendment No. 1, the Board will consider whether or not to terminate the Plan. But, because the Board owes fiduciary duties to all shareholders, it must make an independent decision in the exercise of its fiduciary duties whether it is in the best interests of AIG and all of its shareholders to terminate the Plan, and may not rely solely on the shareholder vote in making this decision. Accordingly, the Board may decide that its fiduciary duties require it to leave the Plan in place

 

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notwithstanding the failure of shareholders to ratify Amendment No. 1. Likewise, even if Amendment No. 1 is ratified by shareholders, the Board may at any time during the term of the Plan determine, in the exercise of its fiduciary duties, that the Plan should be terminated.

The Board of Directors urges shareholders to carefully read each proposal, the items discussed below under the heading “Certain Considerations Related to the Protective Amendment and the Plan” and the full terms of the Protective Amendment and the Plan.

It is important to note that neither measure offers a complete solution and an ownership change may occur even if the Protective Amendment is adopted and Amendment No. 1 is ratified. There are limitations on the enforceability of the Protective Amendment against shareholders who do not vote to adopt it that may allow an ownership change to occur, and the Plan may deter, but ultimately cannot block, transfers of AIG Common Stock that might result in an ownership change. The limitations of these measures are described in more detail below. Because of their individual limitations, the Board of Directors believes that both measures are needed and that they will serve as important tools to help prevent an ownership change that could substantially reduce or eliminate the significant long-term potential benefits of the Tax Attributes. Accordingly, the Board of Directors recommends that shareholders amend AIG’s Restated Certificate of Incorporation to adopt the Protective Amendment and ratify Amendment No. 1.

 

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PROPOSAL 3—APPROVAL OF AMENDMENT AND RESTATEMENT OF AIG’S RESTATED CERTIFICATE OF INCORPORATION

For the reasons discussed above under “Background to Proposals 3 and 4,” the Board of Directors recommends that shareholders amend AIG’s Restated Certificate of Incorporation to adopt the Protective Amendment. The Protective Amendment is a successor to, and is substantively the same as, current Article Thirteen of AIG’s Restated Certificate of Incorporation, except that the Protective Amendment would expire on the third anniversary of the date of this Annual Meeting. The current Article Thirteen is set to expire on May 11, 2014, one day prior to the Annual Meeting. Similar to the current Article Thirteen, the Protective Amendment is designed to prevent certain transfers of AIG securities that could result in an ownership change under Section 382 of the Code and, therefore, materially inhibit AIG’s ability to use its Tax Attributes to reduce future income taxes. The Board believes it is in AIG’s and AIG shareholders’ best interests to adopt the Protective Amendment to help avoid this result.

The purpose of the Protective Amendment is to protect the long-term value to AIG of its accumulated Tax Attributes by limiting direct or indirect transfers of AIG Common Stock that could affect the percentage of stock that is treated as being owned by a holder of 4.99 percent or more of AIG stock. In addition, the Protective Amendment includes a mechanism to block the impact of such transfers while generally allowing purchasers to receive their money back from prohibited purchases. In order to continue to implement these transfer restrictions, the Protective Amendment must be adopted. The Board of Directors has adopted resolutions approving and declaring the advisability of amending AIG’s Restated Certificate of Incorporation as described below and as provided in the accompanying Appendix C, subject to shareholder adoption.

Description of Protective Amendment

The following description of the Protective Amendment is qualified in its entirety by reference to the full text of the Protective Amendment, which can be found in the accompanying Appendix C, which also shows the changes compared to current Article Thirteen, with deletions indicated by strikeouts and additions indicated by double underlining. Please read the Protective Amendment in its entirety as the discussion below is only a summary.

Prohibited Transfers. The Protective Amendment generally will restrict any direct or indirect transfer of AIG Common Stock (such as transfers of AIG securities that result from the transfer of interests in other entities that own AIG Common Stock) if the effect would be to:

 

   

increase the Beneficial Ownership (as defined below) of any Person (as defined below) to 4.99 percent or more of AIG Common Stock then outstanding or certain other classes of stock then outstanding (a Five Percent Stockholder); or

 

   

increase the percentage of AIG stock Beneficially Owned by a Five Percent Stockholder.

“Person” means any individual, firm, partnership, limited liability company, trust, association, limited liability partnership, corporation or other “entity” within the meaning of Treasury Regulation § 1.382-3(a)(1)(i), and includes any successor (by merger or otherwise) of such entity.

A Person shall be deemed the “Beneficial Owner”, and to have “Beneficial Ownership” of, and to “Beneficially Own”, any securities (i) which such Person is considered to own under general federal income tax principles, (ii) which such Person would be deemed to indirectly or constructively own for purposes of Section 382 of the Code and the Treasury Regulations promulgated thereunder or (iii) which any other Person Beneficially Owns, but only if such Person and such other Person are part of the same group of Persons that, with respect to such security, are treated as one “entity” as defined under Treasury Regulation § 1.382-3(a)(1).

Restricted transfers include sales to Persons whose resulting Beneficial Ownership of AIG Common Stock would equal or exceed the 4.99 percent threshold discussed above, or to Persons whose Beneficial Ownership of AIG Common Stock would by attribution cause another Person to equal or exceed such threshold. Complicated stock ownership rules prescribed by the Code (and Treasury regulations promulgated thereunder) will apply in determining whether a Person is a 4.99 percent shareholder under the Protective Amendment. A transfer from one member of a “public group” (as that term is defined under Section 382) to another member of the same public group that does not result in such transferee being treated as a “5-percent shareholder” does not increase the percentage interests taken into account for purposes of determining an ownership change and, therefore, such transfers are not restricted. For purposes of determining the existence and identity of, and the amount of AIG Common Stock owned by, any shareholder, AIG will be entitled to rely on the existence or absence of certain public securities filings as of any date, subject to AIG’s actual knowledge of the ownership of AIG Common Stock.

 

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The Protective Amendment includes the right to require a proposed transferee, as a condition to registration of a transfer of AIG securities, to provide all information reasonably requested regarding such person’s Beneficial Ownership of AIG securities.

These transfer restrictions may result in the delay or refusal of certain requested transfers of AIG Common Stock, or prohibit ownership (thus requiring dispositions) of AIG Common Stock due to a change in the relationship between two or more persons or entities or to a transfer of an interest in an entity that, directly or indirectly, owns AIG Common Stock. The transfer restrictions will also apply to proscribe the creation or transfer of certain “options” (which are broadly defined by Section 382) with respect to AIG securities to the extent that, in certain circumstances, the creation, transfer or exercise of the option would result in a proscribed level of ownership. These restrictions also apply to the exercise of the warrants to purchase AIG Common Stock that were distributed to AIG shareholders on January 19, 2011.

Consequences of Prohibited Transfers. Under the Protective Amendment, any direct or indirect transfer attempted in violation of the Protective Amendment would be void as of the date of the prohibited transfer as to the purported transferee (or, in the case of an indirect transfer, the direct owner of AIG securities would be deemed to have disposed of, and would be required to dispose of, the excess stock (as defined below), with such disposition being deemed to occur simultaneously with the transfer), and the purported transferee (or in the case of any indirect transfer, the direct owner) would not be recognized as the owner of the securities owned in violation of the Protective Amendment for any purpose, including for purposes of voting and receiving dividends or other distributions in respect of such AIG Common Stock, or in the case of options, receiving AIG Common Stock in respect of their exercise. In this Proxy Statement, AIG Common Stock purportedly acquired in violation of the Protective Amendment is referred to as “excess stock.”

In addition to a prohibited transfer being void as of the date it is attempted, upon demand, the purported transferee must transfer the excess stock to an agent designated by the Board of Directors (the Agent) along with any dividends or other distributions paid with respect to such excess stock. The Agent is required to sell such excess stock in an arm’s-length transaction (or series of transactions) that would not constitute a violation under the Protective Amendment. The net proceeds of the sale, together with any other distributions with respect to such excess stock received by the Agent, after deduction of all costs incurred by the Agent, will be distributed first to the purported transferee in an amount, if any, up to the cost (or, in the case of gift, inheritance or similar transfer, the fair market value of the excess stock on the date of the prohibited transfer) incurred by the purported transferee to acquire such excess stock, and the balance of the proceeds, if any, will be distributed to a charitable beneficiary. If the excess stock is sold by the purported transferee, such person will be treated as having sold the excess stock on behalf of the Agent, and will be required to remit all proceeds to the Agent (except to the extent AIG grants written permission to the purported transferee to retain an amount, not to exceed the amount such person otherwise would have been entitled to retain had the Agent sold such shares for an amount equal to the proceeds of such sale (taking into account the actual costs incurred by the Agent)).

With respect to any transfer that does not involve a transfer of AIG’s “securities” within the meaning of Delaware law but that would cause any shareholder of 4.99 percent or more of AIG Common Stock to violate the Protective Amendment, the following procedures will apply in lieu of those described above: In such case, such shareholder and/or any person whose ownership of AIG securities is attributed to such shareholder will be deemed to have disposed of (and will be required to dispose of) sufficient securities, simultaneously with the transfer, to cause such holder not to be in violation of the Protective Amendment, and such securities will be treated as excess stock to be disposed of through the Agent under the provisions summarized above, with the maximum amount payable to such shareholder or such other person that was the direct holder of such excess stock from the proceeds of sale by the Agent being the fair market value of such excess stock at the time of the prohibited transfer.

Public Groups; Modification and Waiver of Transfer Restrictions. A transfer from one member of a “public group” to another member of the same public group that does not result in such transferee being treated as a “5-percent shareholder” does not increase the percentage interests taken into account for purposes of determining an ownership change and, therefore, such transfers are generally not restricted. In addition, the Board of Directors will have the discretion to approve a transfer of AIG securities that would otherwise violate the transfer restrictions if it determines that the transfer is in AIG’s best interests or if the Board receives a report, at the Board’s request, from AIG’s advisors that the proposed transfer does not create a significant risk of material adverse tax consequences to AIG. In connection with any request to waive the transfer restrictions, the Board of Directors may request relevant information from the requesting person. If the Board of Directors decides to grant a waiver, it may impose conditions on the acquirer or selling party.

 

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In the event of a change in law, the Board of Directors will be authorized to modify the applicable allowable percentage ownership interest (currently less than 4.99 percent) or modify any of the definitions, terms and conditions of the transfer restrictions or to eliminate the transfer restrictions, provided that the Board of Directors receives a report, at the Board’s request, from AIG’s advisors that such action is reasonably necessary or advisable to preserve the Tax Attributes or that the continuation of these restrictions is no longer reasonably necessary for such purpose, as applicable. Shareholders will be notified of any such determination through the method of notice that the Board of Directors deems appropriate under the circumstances.

The Board of Directors may, to the extent permitted by law, establish, modify, amend or rescind by-laws, regulations and procedures for purposes of determining whether any transfer of AIG Common Stock would jeopardize AIG’s ability to preserve and use Tax Attributes.

Implementation and Expiration of the Protective Amendment

If AIG’s shareholders adopt the Protective Amendment, AIG intends to promptly file an Amended and Restated Certificate of Incorporation of AIG with the Secretary of State of the State of Delaware, whereupon the Protective Amendment will become effective. AIG intends to immediately thereafter enforce the restrictions in the Protective Amendment to preserve the future use of Tax Attributes. AIG also intends to disclose such restrictions to persons holding AIG Common Stock in uncertificated form, disclose such restrictions to the public generally and include a legend reflecting the transfer restrictions included in the Protective Amendment on any certificates representing newly issued or transferred shares.

The Protective Amendment would expire on the earliest of (i) the close of business on the third anniversary of the 2014 Annual Meeting of Shareholders, (ii) the date on which the Board receives, at the Board’s request, a report from AIG’s advisors that the Protective Amendment is no longer necessary for the preservation of our Tax Attributes because of the amendment or repeal of Section 382 or any other change in law, (iii) the first day of a taxable year to which the Board of Directors receives a report, at the Board’s request, from AIG’s advisors that no Tax Attributes may be carried forward, and (iv) such date as the Board of Directors determines for the restrictions in the Protective Amendment to terminate.

In taking or omitting to take any action under the Protective Amendment, the Board of Directors will be fully protected in relying on the advice of tax advisors. Further, to the maximum extent permitted by law, no director will be liable for any breach of any duty to any shareholder for any action taken or omitted to be taken under the Protective Amendment.

Effectiveness and Enforceability

Although the Protective Amendment is intended to reduce the likelihood of an ownership change, AIG cannot eliminate the possibility that an ownership change will occur even if the Protective Amendment is adopted given that:

 

   

The Board of Directors can permit a transfer to an acquirer that results or contributes to an ownership change if it determines that such transfer is in AIG’s best interests.

 

   

A court could find that part or all of the Protective Amendment is not enforceable, either in general or as to a particular fact situation. Under the laws of the State of Delaware, AIG’s jurisdiction of incorporation, a corporation is conclusively presumed to have acted for a reasonable purpose when restricting the transfer of its securities in its certificate of incorporation for the purpose of maintaining or preserving any tax attribute (including Tax Attributes). Delaware law provides that transfer restrictions with respect to shares of AIG Common Stock issued prior to the effectiveness of the restrictions will be effective against (i) shareholders with respect to shares that were voted in favor of this proposal and (ii) purported transferees of shares that were voted in favor of this proposal if (A) the transfer restriction is conspicuously noted on the certificate(s) representing such shares or (B) the transferee had actual knowledge of the transfer restrictions (even absent such conspicuous notation). AIG intends to disclose such restrictions to persons holding AIG Common Stock in uncertificated form, and to cause any shares of AIG Common Stock issued in certificated form to be issued with the relevant transfer restriction conspicuously noted on the certificate(s) representing such shares. Therefore, under Delaware law, such newly issued shares will be subject to the transfer restriction. For the purpose of determining whether a shareholder is subject to the Protective Amendment, AIG intends to take the position that all shares issued prior to the effectiveness of the Protective Amendment that are proposed to be transferred were voted in favor of the Protective Amendment, unless the contrary is established. AIG may also assert that shareholders have waived the

 

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right to challenge or otherwise cannot challenge the enforceability of the Protective Amendment, unless a shareholder establishes that it did not vote in favor of the Protective Amendment. Nonetheless, a court could find that the Protective Amendment is unenforceable, either in general or as applied to a particular shareholder or fact situation.

 

   

Despite the adoption of the Protective Amendment, there is still a risk that certain changes in relationships among shareholders or other events could cause an ownership change under Section 382. Accordingly, AIG cannot assure that an ownership change will not occur even if the Protective Amendment is made effective. However, the Board of Directors has adopted, and is seeking shareholder ratification of, the extension of the Plan by Amendment No. 1, which is intended to act as a deterrent to any person acquiring 4.99 percent or more of AIG Common Stock and endangering AIG’s ability to use its Tax Attributes.

As a result of these and other factors, the Protective Amendment serves to reduce, but does not eliminate, the risk that AIG will undergo an ownership change.

Section 382 Ownership Change Determinations

The rules of Section 382 are very complex. Some of the factors that must be considered in determining whether a Section 382 ownership change has occurred include the following:

 

   

The share ownership of each shareholder who owns less than 5 percent of AIG Common Stock by value is generally (but not always) aggregated and therefore such group of persons are generally treated as a “5-percent shareholder” that is a “public group” for purposes of Section 382. Thus, transactions within a “public group” among shareholders who are not “5-percent shareholders” are generally (but not always) excluded from the Section 382 calculation.

 

   

There are several rules regarding the aggregation and segregation of shareholders who otherwise do not qualify as Section 382 “5-percent shareholders”. Ownership of stock is generally attributed to its ultimate beneficial owner without regard to ownership by nominees, trusts, corporations, partnerships or other entities. Certain constructive ownership rules, which generally attribute ownership of stock owned by estates, trusts, corporations, partnerships or other entities to the ultimate indirect individual owner thereof, or to related individuals, are applied in determining the level of stock ownership of a particular shareholder. Special rules can result in the treatment of options (including warrants) or other similar interests as having been exercised.

 

   

Acquisitions by a person that cause the person to become a “5-percent shareholder” may result in a 5 percent (or more) change in ownership, regardless of the size of the final purchase(s) that caused the threshold to be exceeded.

 

   

A buyback of AIG Common Stock by AIG may increase the ownership of any “5-percent shareholder” (including groups of shareholders who are not themselves 5-percent shareholders) and can contribute to an ownership change. In addition, it is possible that a buyback of shares could cause a holder of less than 5 percent to become a “5-percent shareholder,” which may result in a 5 percent (or more) change in ownership.

Required Vote

Approval of an amendment to AIG’s Restated Certificate of Incorporation to adopt the Protective Amendment requires a “for” vote by a majority of the outstanding shares of AIG Common Stock. The Protective Amendment, if adopted, would become effective upon the filing of an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, which AIG expects to do as soon as practicable after the Protective Amendment is adopted.

Recommendation

Your Board of Directors unanimously recommends a vote FOR the proposal to adopt the Protective Amendment.

 

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PROPOSAL 4—RATIFICATION OF AMENDMENT NO. 1 TO THE TAX ASSET PROTECTION PLAN

The Plan

On March 9, 2011, the Board of Directors adopted the Plan, which was ratified by AIG’s shareholders at the 2011 Annual Meeting of Shareholders. On January 8, 2014, the Board of Directors adopted Amendment No. 1 to the Plan, which extends the expiration date of the Plan to January 8, 2017 (subject to other earlier termination events identical to the events that were included in the Plan prior to Amendment No. 1) and also makes minor technical changes to the Plan. Unless the context otherwise requires, references to the Plan in this “Proposal 4” refer to the Plan as amended by Amendment No. 1 thereto. Subject to certain limited exceptions, the Plan is designed to deter any person from buying AIG Common Stock (or any interest in AIG Common Stock) if the acquisition would result in a shareholder owning 4.99 percent or more of the then-outstanding AIG Common Stock.

The Plan is intended to protect shareholder value by attempting to preserve AIG’s ability to use its Tax Attributes to reduce its future income tax liability. Because of the limitations of the Protective Amendment in preventing transfers of AIG Common Stock that may result in an ownership change, as further described above under Proposal 3, the Board of Directors believes Amendment No. 1 is in AIG’s and its shareholders’ best interests.

The following description of the Plan is qualified in its entirety by reference to the full terms of the Plan, as amended by Amendment No. 1, which can be found in the accompanying Appendices D and E, respectively. Please read the Plan and Amendment No. 1 in their entirety, as the discussion below is only a summary.

Description of the Plan

The Plan is intended to act as a deterrent to any person or group acquiring 4.99 percent or more of the outstanding AIG Common Stock (an Acquiring Person) without the approval of the Board of Directors. Shareholders who owned 4.99 percent or more of AIG Common Stock as of the close of business on March 9, 2011 generally will not trigger the Plan so long as they do not acquire any additional shares of AIG Common Stock. The Board of Directors may, in its sole discretion, exempt any person or group from being deemed an Acquiring Person for purposes of the Plan with respect to which it receives, at its request, a report from AIG’s advisors to the effect that such exemption would not create a significant risk of material adverse tax consequences to AIG, or the Board otherwise determines such exemption is in the best interests of AIG.

The Rights. In connection with the initial adoption of the Plan, the Board of Directors previously issued a dividend of one right per each outstanding share of AIG Common Stock payable to AIG’s shareholders of record as of the close of business on March 18, 2011 and to holders of AIG Common Stock issued after that date. Subject to the terms, provisions and conditions of the Plan, if these rights become exercisable, each right would initially represent the right to purchase from AIG one ten-thousandth of a share of AIG Participating Preferred Stock, par value $5.00 per share (Participating Preferred Stock), for a purchase price of $185.00 per right (the Exercise Price). If issued, each one ten-thousandth of a share of Participating Preferred Stock would generally give a shareholder approximately the same dividend, voting and liquidation rights as does one share of AIG Common Stock. However, prior to exercise, a right does not give its holder any rights as a shareholder, including without limitation any dividend, voting or liquidation rights.

Exercisability. The rights will not be exercisable until the earlier of (i) a public announcement by AIG that a person or group has become an Acquiring Person (the date of such public announcement is referred to herein as the Stock Acquisition Date) and (ii) 10 business days after the commencement of a tender or exchange offer by a person or group if upon consummation of the offer the person or group would Beneficially Own 4.99 percent or more of the outstanding AIG Common Stock. In this Proxy Statement, AIG refers to the date on which the rights become exercisable as the Separation Time.

Until the Separation Time, AIG Common Stock certificates (or the registration of uncertificated shares on AIG’s stock transfer books) will evidence the rights and may contain a notation to that effect. Any transfer of shares of AIG Common Stock prior to the Separation Time will constitute a transfer of the associated rights. After the Separation Time, the rights may be transferred other than in connection with the transfer of the underlying shares of AIG Common Stock.

If there is an Acquiring Person on the Separation Time or a person or group becomes an Acquiring Person after the Separation Time, each holder of a right, other than rights that are or were Beneficially Owned by an Acquiring Person (which will be void), will thereafter have the right to receive upon exercise of a right and

 

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payment of the Exercise Price that number of shares of AIG Common Stock (or, at AIG’s election, Participating Preferred Stock) having a market value of two times the exercise price of the right.

Exchange. At any time after the Stock Acquisition Date, provided the Acquiring Person does not hold 50 percent or more of the outstanding AIG Common Stock, the Board of Directors may exchange the rights, other than rights that are or were Beneficially Owned by an Acquiring Person, which will be void, in whole or in part, at an exchange ratio equal to one share of AIG Common Stock (or one ten-thousandth of a share of Participating Preferred Stock) per right.

Redemption. At any time until the Stock Acquisition Date, the Board of Directors may redeem all of the then-outstanding rights in whole, but not in part, at a price of $0.001 per right, subject to adjustment (the Redemption Price). Immediately upon action of the Board of Directors ordering redemption of the rights, the right to exercise the rights will terminate, and the only right of the holders of rights will be to receive the Redemption Price.

Anti-Dilution Provisions. The Exercise Price and the number of outstanding rights are subject to adjustment to prevent dilution that may occur as a result of certain events, including, among others, a stock dividend, a stock split or a reclassification of AIG Common Stock.

Amendments. Any of the provisions of the Plan may be amended by the Board of Directors at any time and in any manner.