SHARE-BASED COMPENSATION PLANS (Tables)

12 Months Ended

Dec. 31, 2018

SHARE-BASED COMPENSATION PLANS

Schedule of share-based compensation expense recognized in Consolidated Statements of Income

Years Ended December 31,
(in millions)		2018		2017		2016
Share-based compensation expense - pre-tax(a)	$	337	$	353	$	237
Share-based compensation expense - after tax(b)		266		229		154

(a)We recognized $48 million, $141 million and $105 million for immediately vested stock-settled awards issued to retirement eligible employees in 2018, 2017and 2016, on their respective grant dates. It is our policy to reverse compensation expense for forfeited awards when they occur.

(b)We also recognized $9 million of excess tax benefits due to share settlements occurring in 2018.

Schedule of assumptions used to estimate the fair value of PSUs based on AIG's TSR

	2017		2016
Expected dividend yield(a)	2.37	%	2.17	%
Expected volatility(b)	17.58	%	24.55	%
Risk-free interest rate(c)	2.00	%	1.30	%

(a) The dividend yield is the projected annualized AIG dividend yield estimated by Bloomberg Professional service as of the valuation date.

(b)The expected volatility is based on the historical volatility of the stock price for the 360 most recent trading days prior to the valuation date estimated by Bloomberg Professional service.

(c) The risk-free interest rate is the continuously compounded interest rate for the term between the valuation date and the end of the performance period that is assumed to be constant and equal to the interpolated value between the closest data points on the U.S. dollar LIBOR-swap curve as of the valuation date

Summary of outstanding share-settled LTI awards

						Weighted Average
As of or for the Year	Number of Units					Grant-Date Fair Value
Ended December 31, 2018(b)	2018 LTI	2017 LTI	2016 LTI	2015 LTI	2014 LTI	2018 LTI		2017 LTI		2016 LTI		2015 LTI		2014 LTI
Unvested, beginning of year	-	2,173,115	1,467,745	1,291,788	823,311	$	-	$	62.78	$	60.90	$	60.02	$	48.81
Granted	4,640,722	43,792	-	-	-		55.47		58.52		-		-		-
Vested(c)	(1,205,653)	(530,388)	(728,576)	(266,184)	(793,955)		55.85		63.67		60.28		57.87		48.81
Forfeited	(113,041)	(106,524)	(98,509)	(753,272)	(29,356)		55.92		63.13		62.13		54.46		48.84
Unvested, end of year(d)	3,322,028	1,579,995	640,660	272,332	-	$	55.32	$	62.32	$	61.55	$	60.51	$	-

(a) Excludes stock options and DSUs, which are discussed under Stock Options and Non-Employee Plan, respectively.

(b) Except for the 2014 LTI and 2015 LTI awards, PSUs represent target amount granted, and does not reflect potential increases or decreases that could result from the final outcome of the performance goals for the respective awards, which is determined in the quarter after the applicable performance period ends.

(c) Also reflects units that vest as a result of an accelerated vesting event that occurred prior to the specified vesting date.

(d)At December 31, 2018, the total unrecognized compensation costfor outstanding RSUs and PSUs was $215 million and the weighted-average and expected period of years over which that cost is expected to be recognized are 0.96 year and 2 years.

Schedule of weighted-average assumptions

The following weighted-average assumptions were used for stock options granted:

	2018		2017
Expected annual dividend yield(a)	2.32	%	2.03	%
Expected volatility(b)	23.29	%	20.96	%
Risk-free interest rate(c)	2.83	%	1.94	%
Expected term(d)	4.50 - 6.47	years	4.5	years

(a)The dividend yield is the projected annualized AIG dividend yield estimated by Bloomberg Professional service as of the valuation date.

(b)The expected volatility is based on the implied volatility of 24 months stock option estimated by the Bloomberg Professional service as of the valuation date.

(c)The risk-free interest rate is the continuously compounded interest rate for the term between the valuation date and the expiration date that is assumed to be constant and equal to the interpolated value between the closet data points on the U.S. dollar LIBOR-swap curve as of the valuation date.

(d)The contractual termsare 7 and 10 years.

Schedule of stock option activity

The following table provides a rollforward of stock option activity:

				Weighted Average			Aggregate
As of or for the Year			Weighted Average		Remaining		Intrinsic Values
Ended December 31, 2018	Units		Exercise Price	Contractual Life		(in millions)
Outstanding, beginning of year	2,500,000	$	62.90		6.48
Granted	2,752,098		55.38
Exercised	-		-
Forfeited or expired	(46,299)		55.94
Outstanding, end of year	5,205,799	$	58.99		7.38	$	-
Exercisable, end of year	486,229	$	59.90		4.07	$	-