DEF 14A 1 c57286_def14a.htm 3B2 EDGAR HTML -- c57286_def14a.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT


SCHEDULE 14A INFORMATION

 

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

Exchange Act of 1934 (Amendment No.      )

 

Filed by the Registrant  x

Filed by a Party other than the Registrant  o

Check the appropriate box:

o

Preliminary Proxy Statement

x

Definitive Proxy Statement

o

Definitive Additional Materials

o 

Soliciting Material Pursuant to §240.14a-12

o

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

 

 

American International Group, Inc.

(Name of Registrant as Specified in its Charter)


 

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

 

Payment of filing fee (Check the appropriate box):

 

x

No fee required.

o

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

  

 

(1)

Title of each class of securities to which transaction applies:

     
     

 

(2)

Aggregate number of securities to which transaction applies:

     
     

 

(3)

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

     
     

 

(4)

Proposed maximum aggregate value of transaction:

     
     

 

(5)

Total fee paid:

     

       

o

Fee paid previously with preliminary materials:

 

 

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

 

 

(1)

Amount Previously Paid:

     
     

 

(2)

Form, Schedule or Registration Statement No.:

     
     

 

(3)

Filing Party:

     
     

 

(4)

Date Filed:

     

 


AMERICAN INTERNATIONAL GROUP, INC.
70 Pine Street, New York, N.Y. 10270

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 30, 2009

June 5, 2009

To the Shareholders of
 AMERICAN INTERNATIONAL GROUP, INC.:

The Annual Meeting of Shareholders of AMERICAN INTERNATIONAL GROUP, INC. (AIG) will be held at the offices of AIG at 72 Wall Street, Eighth Floor, New York, New York, on June 30, 2009, at 10:00 a.m., for the following purposes:

 

1.

 

 

 

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

 

2.

 

 

 

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

 

3.

 

 

 

To act upon a proposal to amend AIG’s Restated Certificate of Incorporation to increase the authorized shares of common stock from 5,000,000,000 shares to 9,225,000,000 shares;

 

4.

 

 

 

To act upon a proposal to amend AIG’s Restated Certificate of Incorporation to effect a reverse stock split of AIG’s outstanding common stock at a ratio of one-for-twenty;

 

5.

 

 

 

To act upon a proposal to amend AIG’s Restated Certificate of Incorporation to increase the authorized shares of preferred stock from 6,000,000 shares to 100,000,000 shares;

 

6.

 

 

 

To act upon a proposal to amend AIG’s Restated Certificate of Incorporation to (i) permit AIG’s Board of Directors to issue series of preferred stock that are not of equal rank and (ii) cause the Series E Fixed Rate Non-Cumulative Perpetual Preferred Stock, the Series F Fixed Rate Non-Cumulative Perpetual Preferred Stock and any other series of preferred stock subsequently issued to the United States Department of the Treasury to rank senior to all other series of preferred stock;

 

7.

 

 

 

To act upon a proposal to amend AIG’s Restated Certificate of Incorporation to eliminate any restriction on the pledging of all or substantially all of the property or assets of AIG;

 

8.

 

 

 

To act upon a proposal to ratify the selection of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2009;

 

9.

 

 

 

To act upon a shareholder proposal relating to executive compensation retention upon termination of employment;

 

10.

 

 

 

To act upon a shareholder proposal relating to special meetings of shareholders;

 

11.

 

 

 

To act upon a shareholder proposal relating to reincorporation of AIG in North Dakota; and

 

12.

 

 

 

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

Shareholders of record at the close of business on May 22, 2009 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 June 30, 2009. The Proxy Statement, Annual Report to Shareholders and other Soliciting Material are available in the Investor Information section of AIG’s corporate website at www.aigcorporate.com.

By Order of the Board of Directors
KATHLEEN E. SHANNON  
Secretary


If you plan on attending the meeting, please remember to bring photo identification with you. In addition, if you hold shares in “street name” and would like to attend the meeting, you should bring an account statement or other acceptable evidence of ownership of AIG common stock as of the close of business on May 22, 2009. If you cannot be present at the meeting, please sign the enclosed proxy card or voting instruction card and return it at once in the accompanying postage prepaid envelope or vote your shares by telephone or through the Internet.


AMERICAN INTERNATIONAL GROUP, INC.
70 Pine Street, New York, N.Y. 10270

PROXY STATEMENT

June 5, 2009

 

 

 

 

 

TIME AND DATE

 

10:00 a.m. on Wednesday, June 30, 2009.

 

PLACE

 

72 Wall Street, Eighth Floor, New York, New York 10270.

 

MAILING DATE

 

These materials are being mailed to shareholders of AIG commencing on or about June 5, 2009.

 

ITEMS OF BUSINESS

 

 

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

 

 

 

 

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

 

 

 

 

To act upon a proposal to amend AIG’s Restated Certificate of Incorporation to increase the authorized shares of common stock from 5,000,000,000 shares to 9,225,000,000 shares;

 

 

 

 

To act upon a proposal to amend AIG’s Restated Certificate of Incorporation to effect a reverse stock split of AIG’s outstanding common stock at a ratio of one-for-twenty;

 

 

 

 

To act upon a proposal to amend AIG’s Restated Certificate of Incorporation to increase the authorized shares of preferred stock from 6,000,000 shares to 100,000,000 shares;

 

 

 

 

To act upon a proposal to amend AIG’s Restated Certificate of Incorporation to (i) permit AIG’s Board of Directors to issue series of preferred stock that are not of equal rank and (ii) cause the Series E Fixed Rate Non-Cumulative Perpetual Preferred Stock, the Series F Fixed Rate Non-Cumulative Perpetual Preferred Stock and any other series of preferred stock subsequently issued to the United States Department of the Treasury to rank senior to all other series of preferred stock;

 

 

 

 

To act upon a proposal to amend AIG’s Restated Certificate of Incorporation to eliminate any restriction on the pledging of all or substantially all of the property or assets of AIG;

 

 

 

 

To act upon a proposal to ratify the selection of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2009;

 

 

 

 

To act upon a shareholder proposal relating to executive compensation retention upon termination of employment;

 

 

 

 

To act upon a shareholder proposal relating to special meetings of shareholders;



 

 

 

 

 

 

 

 

To act upon a shareholder proposal relating to reincorporation of AIG in North Dakota; 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 May 22, 2009.

 

INSPECTION OF LIST OF SHAREHOLDERS OF RECORD

 

A list of the shareholders of record as of May 22, 2009 will be available for inspection during ordinary business hours during the ten days prior to the meeting at AIG’s offices, 70 Pine Street, New York, New York 10270.

 

ADDITIONAL INFORMATION

 

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

 

PROXY VOTING

 

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


2


TABLE OF CONTENTS

 

 

 

 

 

Page

VOTING INSTRUCTIONS AND INFORMATION

 

 

 

4

 

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

 

 

 

10

 

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

 

 

 

11

 

ELECTION OF DIRECTORS

 

 

 

13

 

CORPORATE GOVERNANCE

 

 

 

16

 

Governance

 

 

 

16

 

Report of the Nominating and Corporate Governance Committee

 

 

 

18

 

Committees

 

 

 

20

 

Compensation of Directors

 

 

 

23

 

Compensation and Management Resources Committee Interlocks and Insider Participation

 

 

 

26

 

OWNERSHIP OF CERTAIN SECURITIES

 

 

 

27

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

 

 

29

 

RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

 

 

 

29

 

EXECUTIVE COMPENSATION

 

 

 

31

 

Report of the Compensation and Management Resources Committee

 

 

 

31

 

Compensation Discussion and Analysis

 

 

 

32

 

2008 Compensation

 

 

 

42

 

Exercises and Holdings of Previously Awarded Equity

 

 

 

50

 

Post-Employment Compensation

 

 

 

53

 

Potential Payments on Termination and Arrangements with Former Officers

 

 

 

60

 

NON-BINDING SHAREHOLDER
RESOLUTION TO APPROVE EXECUTIVE COMPENSATION

 

 

 

64

 

AMENDMENT OF AIG’S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF AIG COMMON STOCK

 

 

 

64

 

AMENDMENT OF AIG’S RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT OF OUTSTANDING AIG COMMON STOCK

 

 

66

 

AMENDMENT OF AIG’S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF AIG PREFERRED STOCK

 

 

 

70

 

AMENDMENT OF AIG’S RESTATED CERTIFICATE OF INCORPORATION TO PERMIT ISSUANCE OF SERIES OF AIG PREFERRED STOCK THAT ARE NOT OF EQUAL RANK AND TO RANK THE AIG SERIES E PREFERRED STOCK, THE AIG SERIES F PREFERRED STOCK AND ANY OTHER SERIES OF AIG PREFERRED STOCK SUBSEQUENTLY ISSUED TO THE DEPARTMENT OF THE TREASURY SENIOR TO ALL OTHER AIG PREFERRED STOCK

 

 

 

71

 

AMENDMENT OF AIG’S RESTATED CERTIFICATE OF INCORPORATION TO ELIMINATE RESTRICTIONS ON PLEDGE OF ALL OR SUBSTANTIALLY ALL OF AIG’S ASSETS

 

 

73

 

REPORT OF AUDIT COMMITTEE AND RATIFICATION OF SELECTION OF ACCOUNTANTS

 

 

 

73

 

Report of the Audit Committee

 

 

 

73

 

RATIFICATION OF SELECTION OF PRICEWATERHOUSECOOPERS LLP

 

 

 

75

 

Fees Paid to PricewaterhouseCoopers LLP

 

 

76

 

EQUITY COMPENSATION PLAN INFORMATION

 

 

 

77

 

SHAREHOLDER PROPOSALS

 

 

 

78

 

SHAREHOLDER PROPOSAL—Executive Compensation Retention upon Termination of Employment

 

 

 

78

 

AIG Statement in Opposition

 

 

 

78

 

SHAREHOLDER PROPOSAL—Special Meetings of Shareholders

 

 

 

79

 

AIG Statement in Opposition

 

 

 

80

 

SHAREHOLDER PROPOSAL—Reincorporation of AIG in North Dakota

 

 

 

81

 

AIG Statement in Opposition

 

 

 

82

 

OTHER MATTERS

 

 

 

83

 

Other Matters to be Presented at the 2009 Annual Meeting

 

 

 

83

 

Shareholder Proposals for 2010 Annual Meeting

 

 

 

83

 

Communications with the Board of Directors

 

 

 

83

 

Important Notice Regarding Delivery of Shareholder Documents

 

 

 

83

 

Proxy Solicitation

 

 

 

83

 

Incorporation by Reference

 

 

 

83

 

CORPORATE GOVERNANCE GUIDELINES

 

 

 

A-1

 

PROPOSED AMENDMENT TO ARTICLE FOUR OF AMERICAN INTERNATIONAL GROUP, INC.’S RESTATED CERTIFICATE OF INCORPORATION RELATING TO PROPOSALS 3, 4, 5 and 6

 

 

 

B-1

 

PROPOSED AMENDMENTS TO ARTICLE EIGHT OF AMERICAN INTERNATIONAL GROUP, INC.’S RESTATED CERTIFICATE OF INCORPORATION RELATING TO PROPOSAL 7

 

 

 

C-1

 

3


VOTING INSTRUCTIONS AND INFORMATION

The enclosed proxy is solicited on behalf of the Board of Directors (Board of Directors or Board) of American International Group, Inc., a Delaware corporation (AIG), for use at the AIG Annual Meeting of Shareholders to be held on June 30, 2009, or at any adjournment thereof (Annual Meeting or 2009 Annual Meeting of Shareholders). These proxy materials are being mailed to shareholders of AIG commencing on or about June 5, 2009.

Who can vote at the Annual Meeting?

You are entitled to vote or direct the voting of your shares of AIG 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 May 22, 2009. On that date, 2,691,865,452 shares of AIG Common Stock (exclusive of shares held by AIG and certain subsidiaries) were outstanding, held by 57,741 shareholders of record. You may cast one vote for each share of AIG Common Stock held by you on the record date.

Holders of Series C Perpetual, Convertible, Participating Preferred Stock (AIG Series C Preferred Stock) are also entitled to vote or direct the voting of their shares of AIG Series C Preferred Stock, if they were shareholders of record at the close of business on May 22, 2009. On that date, 100,000 shares of AIG Series C Preferred Stock were outstanding, held by one shareholder of record. Holders of AIG Series C Preferred Stock may cast approximately 106,422.58 votes for each share of AIG Series C Preferred Stock held by them on the record date (10,642,258,800 in the aggregate).

With respect to Proposal 5 and only with respect to Proposal 5, holders of the Series E Fixed Rate Non-Cumulative Perpetual Preferred Stock (AIG Series E Preferred Stock) and Series F Fixed Rate Non-Cumulative Perpetual Preferred Stock (AIG Series F Preferred Stock) are also entitled to vote or direct the voting of their shares of AIG Series E Preferred Stock or AIG Series F Preferred Stock, as applicable, if they were shareholders of record at the close of business on May 22, 2009. On that date, 400,000 shares of AIG Series E Preferred Stock were outstanding, held by one shareholder of record and 300,000 shares of AIG Series F Preferred Stock were outstanding, held by one shareholder of record. Holders of AIG Series E Preferred Stock may cast one vote for each share of AIG Series E Preferred Stock held by them on the record date. Holders of AIG Series F Preferred Stock may cast one vote for each share of AIG Series F Preferred Stock held by them on the record date.

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 70 Pine Street, New York, New York 10270.

 

 

 

 

If you hold AIG Common Stock, AIG Series C Preferred Stock, AIG Series E Preferred Stock or AIG Series F Preferred 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 in “street name.”

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

What proposals will be voted on at the Annual Meeting?

There are eight proposals from AIG to be considered and voted on at the Annual Meeting:

 

1.

 

 

 

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

 

2.

 

 

 

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

 

3.

 

 

 

To act upon a proposal to amend AIG’s Restated Certificate of Incorporation to increase the authorized shares of AIG Common Stock from 5,000,000,000 shares to 9,225,000,000 shares;

 

4.

 

 

 

To act upon a proposal to amend AIG’s Restated Certificate of Incorporation to effect a reverse stock split of the outstanding AIG Common Stock at a ratio of one-for-twenty;

4


 

5.

 

 

 

To act upon a proposal to amend AIG’s Restated Certificate of Incorporation to increase the authorized shares of preferred stock of AIG (AIG Preferred Stock) from 6,000,000 shares to 100,000,000 shares.

 

6.

 

 

 

To act upon a proposal to amend AIG’s Restated Certificate of Incorporation to (i) permit the Board to issue series of AIG Preferred Stock that are not of equal rank and (ii) cause the AIG Series E Preferred Stock, the AIG Series F Preferred Stock and any other series of AIG Preferred Stock subsequently issued to the United States Department of the Treasury to rank senior to all other series of AIG Preferred Stock;

 

7.

 

 

 

To act upon a proposal to amend AIG’s Restated Certificate of Incorporation to eliminate any restriction on the pledging of all or substantially all of the property or assets of AIG; and

 

8.

 

 

 

To act upon a proposal to ratify the selection of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2009.

In addition, there are three proposals from shareholders to be considered and voted on at the Annual Meeting:

 

9.

 

 

 

To act upon a shareholder proposal relating to executive compensation retention upon termination of employment;

 

10.

 

 

 

To act upon a shareholder proposal relating to special meetings of shareholders; and

 

11.

 

 

 

To act upon a shareholder proposal relating to reincorporation of AIG in North Dakota.

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 to the Board of Directors.

 

2.

 

 

 

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

 

3.

 

 

 

“FOR” the proposal to amend AIG’s Restated Certificate of Incorporation to increase the authorized shares of AIG Common Stock from 5,000,000,000 shares to 9,225,000,000 shares.

 

4.

 

 

 

“FOR” the proposal to amend AIG’s Restated Certificate of Incorporation to effect a reverse stock split of the outstanding AIG Common Stock at a ratio of one-for-twenty.

 

5.

 

 

 

“FOR” the proposal to amend AIG’s Restated Certificate of Incorporation to increase the authorized shares of AIG Preferred Stock from 6,000,000 shares to 100,000,000 shares.

 

6.

 

 

 

“FOR” the proposal to amend AIG’s Restated Certificate of Incorporation to (i) permit the Board to issue series of AIG Preferred Stock that are not of equal rank and (ii) cause the AIG Series E Preferred Stock, the AIG Series F Preferred Stock and any other series of AIG Preferred Stock subsequently issued to the United States Department of the Treasury to rank senior to all other series of AIG Preferred Stock.

 

7.

 

 

 

“FOR” the proposal to amend AIG’s Restated Certificate of Incorporation to eliminate any restriction on the pledging of all or substantially all of the property or assets of AIG.

 

8.

 

 

 

“FOR” the proposal to ratify the selection of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2009.

 

9.

 

 

 

“AGAINST” the shareholder proposal relating to executive compensation retention upon termination of employment.

 

10.

 

 

 

“AGAINST” the shareholder proposal relating to special meetings of shareholders.

 

11.

 

 

 

“AGAINST” the shareholder proposal relating to reincorporation of AIG in North Dakota.

The Board of Directors is required by the terms of the Series C Perpetual, Convertible, Participating Preferred Stock Purchase Agreement, dated as of March 1, 2009 (the Series C Stock Purchase Agreement), entered into by AIG with the AIG Credit Facility Trust, to recommend that shareholders vote for proposals 6 and 7 and to solicit proxies in favor of those proposals. See “Relationships with the Federal Reserve Bank of New York, the AIG Credit Facility Trust and the United States Department of the Treasury” for more information on AIG’s relationship with the U.S. government.

5


What do I need to attend the Annual Meeting?

If you plan on attending the Annual Meeting, please remember to bring photo identification with you, such as a driver’s license. In addition, if you hold shares in “street name” and would like to attend the Annual Meeting, you should bring an account statement or other acceptable evidence of ownership of AIG Common Stock as of the close of business on May 22, 2009, the record date for voting. In order to vote at the Annual Meeting, 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.

How do I vote?

You may cast your vote in one of four ways:

 

 

 

 

By Submitting a Proxy by Internet. Go to the following website: www.eproxy.com/aig. You may submit a proxy by Internet 24 hours a day. Enter the information requested on your computer screen and follow the simple instructions. If you choose to submit a proxy by Internet, then you do not need to return the proxy card. To be valid, your proxy by Internet must be received by 11:59 a.m., Eastern Daylight Saving Time, on June 29, 2009. Please have your proxy card and the last four digits of your Social Security number or tax identification number available.

 

 

 

 

By Submitting a Proxy by Telephone. To submit a proxy using the telephone (within the United States and Canada), call toll free 1-800-560-1965 in the United States or Canada any time on a touch tone telephone. You may submit a proxy by telephone 24 hours a day, 7 days a week. There is NO CHARGE to you for the call. Follow the simple instructions provided by the recorded message. If you choose to submit a proxy by telephone, then you do not need to return the proxy card. To be valid, your proxy by telephone must be received by 11:59 a.m., Eastern Daylight Saving Time, on June 29, 2009.

 

 

 

 

By Submitting a Proxy by Mail. Mark the enclosed proxy card, sign and date it, and return it in the pre-paid envelope that has been provided. To be valid, your proxy by mail must be received by 9:00 a.m., Eastern Daylight Saving Time, on June 30, 2009.

 

 

 

 

At the Annual Meeting. You can vote your shares in person at the Annual Meeting (see “What do I need to attend 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 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 the Annual Meeting?”, and bring that proxy to the Annual Meeting.

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

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

For a Proxy Submitted by Internet or Telephone

 

 

 

 

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

 

 

 

 

Executing and mailing a later-dated proxy card that is received by AIG prior to 9:00 a.m., Eastern Daylight Saving Time, on June 30, 2009; or

 

 

 

 

Voting in person at the Annual Meeting.

For a Proxy Submitted by Mail

 

 

 

 

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

 

 

 

 

Giving written notice of revocation to AIG’s Secretary at 70 Pine Street, New York, New York 10270 that is received by AIG prior to 9:00 a.m., Eastern Daylight Saving Time, on June 30, 2009; 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; FOR the approval of the non-binding shareholder resolution on executive compensation; FOR the amendment of AIG’s Restated Certificate of Incorporation to increase the

6


authorized shares of AIG Common Stock from 5,000,000,000 shares to 9,225,000,000 shares; FOR the amendment of AIG’s Restated Certificate of Incorporation to effect a reverse stock split of the outstanding AIG Common Stock at a ratio of one-for-twenty; FOR the amendment of AIG’s Restated Certificate of Incorporation to increase the authorized shares of AIG Preferred Stock from 6,000,000 shares to 100,000,000 shares; FOR the amendment of AIG’s Restated Certificate of Incorporation to (i) permit the Board to issue series of AIG Preferred Stock that are not of equal rank and (ii) cause the AIG Series E Preferred Stock, the AIG Series F Preferred Stock and any other series of AIG Preferred Stock subsequently issued to the United States Department of the Treasury to rank senior to all other series of AIG Preferred Stock; FOR the amendment of AIG’s Restated Certificate of Incorporation to eliminate any restriction on the pledging of all or substantially all of the property or assets of AIG; FOR the ratification of the appointment of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2009; AGAINST each of the shareholder proposals; 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 election of directors, the non-binding shareholder vote on executive compensation and the ratification of the appointment of independent auditors because these are considered “discretionary” under NYSE rules. If your broker is an affiliate of AIG, NYSE policy specifies that, in the absence of your specific voting instructions, your shares may only be voted in the same proportion as all other shares are voted with respect to each proposal.

Under NYSE rules, each other proposal 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 shareholders of AIG Common Stock and AIG Series C Preferred Stock, voting together as a single class. In other words, directors in an uncontested election must receive more votes “for” their election than “against” their election. Pursuant to AIG’s 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, the Nominating and Corporate Governance Committee will then make a recommendation to the Board on the action to be taken with respect to the resignation. The Board will accept such resignation unless the Committee recommends and the Board determines that the best interests of AIG and its shareholders would not be served by doing so.

Proposal 2—Non-binding Shareholder Vote to Approve Executive Compensation. Adoption of the resolution of the non-binding shareholder vote to approve executive compensation requires a “for” vote of a majority of the voting power represented by the votes cast by the shareholders of AIG Common Stock and AIG Series C Preferred Stock, voting together as a single class, which votes cast are either “for” or “against” the resolution.

Proposal 3—Amendment of AIG’s Restated Certificate of Incorporation to Increase the Authorized Shares of AIG Common Stock. This amendment of the Restated Certificate of Incorporation requires a “for” vote of a majority of the voting power of the outstanding shares of AIG Common Stock and AIG Series C Preferred Stock, voting together as a single class, plus a “for” vote of a majority of the outstanding shares of AIG Common Stock, voting as a separate class.

Proposal 4—Amendment of AIG’s Restated Certificate of Incorporation to Effect a Reverse Stock Split of AIG’s Outstanding Common Stock at a Ratio of One-for-Twenty. This amendment of the Restated Certificate of Incorporation requires a “for” vote of a majority of the voting power of the outstanding shares of AIG Common Stock and AIG Series C Preferred Stock, voting together as a single class.

7


Proposal 5—Amendment of AIG’s Restated Certificate of Incorporation to increase the authorized shares of AIG Preferred Stock. This amendment of the Restated Certificate of Incorporation requires:

 

 

 

 

A “for” vote of a majority of the voting power of the outstanding shares of AIG Common Stock and AIG Series C Preferred Stock, voting together as a single class; plus

 

 

 

 

A “for” vote of a majority of the voting power of AIG Series C Preferred Stock, voting as a separate class; plus

 

 

 

 

A “for” vote of at least 662/3 percent of the outstanding shares of each of the AIG Series E Preferred Stock and the AIG Series F Preferred Stock, voting as separate classes.

Proposal 6—Amendment of AIG’s Restated Certificate of Incorporation to (i) Permit AIG’s Board of Directors to Issue Series of AIG Preferred Stock that Are Not of Equal Rank and (ii) Cause the AIG Series E Preferred Stock, the AIG Series F Preferred Stock and Any Other Series of AIG Preferred Stock Subsequently Issued to the United States Department of the Treasury to Rank Senior to All Other Series of AIG Preferred Stock. This amendment of the Restated Certificate of Incorporation requires:

 

 

 

 

A “for” vote of a majority of the voting power of the outstanding shares of AIG Common Stock and AIG Series C Preferred Stock, voting together as a single class; plus

 

 

 

 

A “for” vote of at least 662/3 percent of the outstanding shares of AIG Series C Preferred Stock, voting as a separate class.

Proposal 7—Amendment of AIG’s Restated Certificate of Incorporation to Eliminate Any Restriction on the Pledging of All or Substantially All of the Property or Assets of AIG. This amendment of the Restated Certificate of Incorporation requires a “for” vote of a majority of the voting power of the outstanding shares of AIG Common Stock and AIG Series C Preferred Stock, voting together as a single class.

Proposal 8—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 voting power represented by the votes cast by the shareholders of AIG Common Stock and AIG Series C Preferred Stock, voting together as a single class, which votes are cast “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.

Shareholder Proposals 9-11. Approval of each shareholder proposal requires a “for” vote by a majority of the voting power of the outstanding shares of AIG Common Stock and AIG Series C Preferred Stock, voting together as a single class.

Broker Non-Votes and Abstentions. Because directors are elected by a majority of the votes cast, an abstention or broker non-vote 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 adoption of the non-binding resolution on executive compensation and ratification of the appointment of PricewaterhouseCoopers LLP, only votes cast “for” or “against” the ratification will be considered; abstentions, broker non-votes and withheld votes will not be treated as a vote “for” or “against” these proposals and therefore will have no effect on the vote. With respect to each other proposal, an abstention, broker non-vote or withheld vote will have the effect of a vote “against” such proposals.

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 combined voting power of AIG Common Stock and AIG Series C Preferred Stock, treated as a single class, 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.

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How do I obtain more information about AIG?

A copy of AIG’s 2008 Annual Report to Shareholders, which includes AIG’s Annual Report on Form 10-K for the year ended December 31, 2008 (AIG’s 2008 Annual Report on Form 10-K) filed with the U.S. Securities and Exchange Commission (SEC), has been previously delivered to shareholders. You also may obtain, free of charge, a copy of the 2008 Annual Report to Shareholders and AIG’s 2008 Annual Report on Form 10-K by writing to American International Group, Inc., 70 Pine Street, New York, New York 10270, Attention: Investor Relations. These documents also are available in the Investor Information section of AIG’s corporate website at www.aigcorporate.com.

Why was approval of the issuance of the AIG Series C Preferred Stock, which is convertible into more than 20 percent of AIG Common Stock, not sought?

Section 312.03 of the NYSE Listed Company Manual generally requires shareholder approval (the Shareholder Approval Policy) prior to the issuance by NYSE-listed companies of common stock, or securities convertible into or exercisable for common stock, in any transaction or series of transactions if:

 

 

 

 

The common stock to be issued has, or will have upon issuance, voting power equal to or in excess of 20 percent of the voting power outstanding before the issuance of such common stock or of securities convertible into or exercisable for common stock, or

 

 

 

 

The number of shares of common stock to be issued is, or will be upon issuance, equal to or in excess of 20 percent of the number of shares of common stock outstanding before the issuance of the common stock or of securities convertible into or exercisable for common stock.

There is an exception under Section 312.05 to the Shareholder Approval Policy when (1) the delay in securing shareholder approval would seriously jeopardize the financial viability of the listed company’s enterprise and (2) reliance by the listed company on such exception is expressly approved by the Audit Committee of the Board of Directors.

The Audit Committee of AIG’s Board of Directors determined that the issuance of the AIG Series C Preferred Stock was necessary to procure funds the delay of which would have seriously jeopardized the financial viability of AIG. Notice of such determination was sent to shareholders on September 26, 2008 in accordance with NYSE rules.

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 approximately eight 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 $17,000 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.

9


CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

This Proxy Statement and other publicly available documents may include, and AIG’s officers and representatives may from time to time make, projections and statements which may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These projections and statements are not historical facts but instead represent only AIG’s belief regarding future events, many of which, by their nature, are inherently uncertain and outside AIG’s control. These projections and statements may address, among other things, the outcome of the proposed and completed transactions with the NY Fed and the Department of the Treasury, the number, size, terms, cost and timing of dispositions and their potential effect on AIG’s businesses, financial condition, results of operations, cash flows and liquidity (and AIG at any time and from time to time may change its plans with respect to the sale of one or more businesses), AIG’s exposures to subprime mortgages, monoline insurers and the residential and commercial real estate markets and AIG’s strategy for growth, product development, market position, financial results and reserves. It is possible that AIG’s actual results and financial condition will differ, possibly materially, from the anticipated results and financial condition indicated in these projections and statements. Factors that could cause AIG’s actual results to differ, possibly materially, from those in the specific projections and statements include a failure of the completed transactions with the Department of the Treasury to achieve their desired objectives or a failure to complete the proposed transactions with the NY Fed, developments in global credit markets and such other factors as discussed throughout part II, Item 7. in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Item 1A. Risk Factors, of AIG’s 2008 Annual Report on Form 10-K and in part II, Item 1A. Risk Factors, of AIG’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009. AIG is not under any obligation (and expressly disclaims any obligations) to update or alter any projection or other statement, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise.

10


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

AIG has entered into several important transactions and relationships, as well as certain agreements in principle, with the Federal Reserve Bank of New York (NY Fed), the AIG Credit Facility Trust (the Trust) and the United States Department of the Treasury (the Department of the Treasury). These are summarized below and discussed in more detail in AIG’s 2008 Annual Report on Form 10-K, and two Current Reports on Form 8-K, dated April 17, 2009.

Credit Facility with the NY Fed

AIG and the NY Fed entered into a revolving credit facility (as amended, the Fed Credit Agreement) and a Guarantee and Pledge Agreement on September 22, 2008.

AIG Series C Preferred Stock

As of March 4, 2009, the Trust, established for the sole benefit of the United States Treasury in connection with the Fed Credit Agreement and issuance of AIG Series C Preferred Stock, holds all of the outstanding 100,000 shares of AIG Series C Preferred Stock, which are, to the extent permitted by law, entitled to vote on all matters with the AIG Common Stock. As of the record date, the holders of the AIG Series C Preferred Stock are entitled to (i) approximately 79.81 percent of the voting power of AIG’s shareholders entitled to vote on any particular matter and (ii) approximately 79.81 percent of the aggregate dividend rights of the outstanding AIG Common Stock and the AIG Series C Preferred Stock, in each case, on an as converted basis. As of the record date, the AIG Series C Preferred Stock was entitled to 10,696,060,566 votes, less

 

 

 

 

The shares of AIG Common Stock subject to the Warrants (as defined below);

 

 

 

 

Any shares of AIG Common Stock underlying any other instrument convertible into, exchangeable for or representing the right to receive AIG Common Stock owned by the Department of the Treasury; and

 

 

 

 

Any shares of AIG Common Stock otherwise directly owned by the Department of the Treasury.

This calculation is made as if the AIG Series C Preferred Stock had been converted into AIG Common Stock. Thus, as of the record date, the total AIG Series C Preferred Stock voting power of 10,696,060,566 shares was reduced by the 53,801,766 shares of AIG Common Stock subject to the Warrants (AIG understands that, as of the record date, the Department of the Treasury did not otherwise own any shares of AIG Common Stock or any other instrument convertible into, exchangeable for or representing the right to receive shares of AIG Common Stock.

The Series C Stock Purchase Agreement requires the Board of Directors to recommend to shareholders, and solicit proxies for, Proposals 6 and 7.

AIG Series E Preferred Stock, AIG Series F Preferred Stock and Warrants

The Department of the Treasury holds all the outstanding 400,000 shares of AIG Series E Preferred Stock, the 300,000 shares of AIG Series F Preferred Stock and two 10-year warrants (the Warrants) to purchase 53,801,766 shares of AIG Common Stock (the TARP Investment), as part of the Troubled Asset Relief Program (TARP) and the Systemically Significant Failing Institutions Program.

The terms of the TARP Investment, among other things:

 

 

 

 

Contain limitations on the payment of dividends on AIG Common Stock and on AIG’s ability to repurchase AIG Common Stock; and

 

 

 

 

Subject AIG to the executive compensation limitations included in the Emergency Economic Stabilization Act of 2008 (the EESA), including the provisions for Systemically Significant Failing Institutions. Each of AIG’s “senior executive officers” (as defined under the EESA) and certain other senior employees executed waivers and entered into letter agreements relating to modifications to compensation or benefits necessary to comply with the executive compensation limitations included in the EESA and the terms of the TARP Investment during the period in which any obligation of AIG arising from financial assistance provided under the Troubled Asset Relief Program remains outstanding.

On April 17, 2009, AIG entered into an agreement with the Department of the Treasury to exchange all of the outstanding shares of Series D Fixed Rate Cumulative Perpetual Preferred Stock (AIG Series D Preferred Stock) for 400,000 shares of AIG Series E Preferred Stock, with a liquidation preference of $104,011.44 per share. The terms of the AIG Series E Preferred Stock are substantially the same as for the AIG Series D Preferred Stock, except that the dividends are not cumulative. In connection with the agreement, AIG agreed that, while any AIG obligations under TARP remain outstanding, other than under any warrant held by the Department of the Treasury, AIG would comply with Section 111 of the EESA, as amended, as implemented by

11


any guidance or regulations issued and/or to be issued thereunder, including any amendments to the guidelines implementing the Systemically Significant Failing Institutions Program.

Resolution of Securities Lending Program

AIG and various U.S. life insurance company subsidiaries of AIG and AIG Securities Lending Corp. (the AIG Agent) entered into an Asset Purchase Agreement, dated as of December 12, 2008 (the Purchase Agreement), with Maiden Lane II LLC, whose sole member is the NY Fed. Pursuant to the Purchase Agreement, the life insurance subsidiaries sold to Maiden Lane II LLC all of their undivided interests in a pool of $39.3 billion face amount of residential mortgage-backed securities held by the AIG Agent as agent of the life insurance subsidiaries in connection with AIG’s U.S. securities lending program.

Termination of Certain CDS

On November 25, 2008, AIG entered into a Master Investment and Credit Agreement (the ML III Agreement) with the NY Fed, Maiden Lane III LLC (ML III), and The Bank of New York Mellon, which established arrangements, through ML III, to fund the purchase of the multi-sector super senior collateralized debt obligations underlying or related to certain credit default swaps and other similar derivative instruments (CDS) written by AIG Financial Products Corp. in connection with the termination of such CDS transactions.

Equity Capital Commitment Facility

On April 17, 2009, the Department of the Treasury and AIG entered into a 5-year equity capital commitment facility of $29.835 billion. AIG has issued 300,000 shares of AIG Series F Preferred Stock to the Department of the Treasury, each share with a zero initial liquidation preference. The liquidation preference of the AIG Series F Preferred Stock will automatically increase, on a pro rata basis, by the amount of any drawdown on the commitment. The Department of the Treasury also received a warrant exercisable for 3,000 shares of AIG Common Stock, and, as described under “AIG Series C Preferred Stock” above, the voting power of the AIG Series C Preferred Stock was reduced by the number of shares of AIG Common Stock underlying the warrant.

Repayment of Borrowings under Fed Credit Agreement with Subsidiary Preferred Equity

On March 2, 2009, AIG announced its intent to enter into a transaction pursuant to which AIG will transfer to the NY Fed preferred equity interests in newly formed special purpose vehicles (SPVs). Each SPV will have (directly or indirectly) as its only asset 100 percent of the common stock of an AIG operating subsidiary (American International Assurance Company, Limited, together with American International Assurance Company (Bermuda) Limited, in one case and American Life Insurance Company in the other). AIG expects to own the common interests of each SPV and will initially have the right to appoint the entire board of directors of each SPV. In exchange for the preferred equity interests received by the NY Fed, there would be a concurrent substantial reduction in the outstanding balance and maximum available amount to be borrowed under the Fed Credit Agreement.

Securitization

On March 2, 2009, AIG announced its intent to enter into a transaction pursuant to which AIG will issue to the NY Fed senior certificates in one or more newly-formed SPVs backed by in-force blocks of life insurance policies in settlement of a portion of the outstanding balance under the Fed Credit Agreement.

Effect of Transactions with the NY Fed, the Trust and the Department of the Treasury

As a result of the arrangements described above, AIG is controlled by the Trust, which is established for the sole benefit of the United States Treasury. The interests of the Trust and the United States Treasury may not be the same as the interests of AIG’s other shareholders. As a result of its ownership, the Trust is able, subject to the terms of the AIG Credit Facility Trust Agreement, dated as of January 16, 2009 (as it may be amended from time to time, the Trust Agreement), and AIG Series C Preferred Stock, to elect all of AIG’s directors and can, to the extent permitted by law, control the vote on substantially all matters, including:

 

 

 

 

Approval of mergers or other business combinations;

 

 

 

 

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

 

 

 

 

Issuance of any additional shares of AIG Common Stock or other equity securities; and

 

 

 

 

Other matters that might be favorable to the United States Treasury.

Moreover, the Trust may, subject to the terms of the Trust Agreement and applicable securities laws, transfer all, or a portion of, AIG Series C Preferred Stock to another person or entity and, in the event of such a transfer, that person or entity could become AIG’s controlling shareholder.

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ELECTION OF DIRECTORS

Eleven directors are to be elected at the Annual Meeting to hold office until the next annual election and until their successors are duly elected and qualified. It is the intention of the persons named in the accompanying form of proxy to vote for the election of the nominees listed below. Five of the nominees, other than Harvey Golub, Laurette T. Koellner, Christopher S. Lynch, Arthur C. Martinez, Robert S. Miller and Douglas M. Steenland, 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 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 and AIG Series C Preferred Stock, voting together as a single class, 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, the 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.

Ellen V. Futter, Richard C. Holbrooke, Fred H. Langhammer, Martin J. Sullivan and Robert B. Willumstad resigned from the Board of Directors during 2008 after the 2008 Annual Meeting of Shareholders. Virginia M. Rometty and Michael H. Sutton resigned from the Board of Directors on May 7, 2009. Stephen F. Bollenbach, Martin S. Feldstein and James F. Orr III informed AIG that they would not be standing for reelection at the 2009 Annual Meeting of Shareholders and Edmund Tse, after over 40 years of service, will retire from AIG and the Board of Directors at the 2009 Annual Meeting of Shareholders.

The nominees for director and certain information supplied by them to AIG are as follows:

 

 

 

 

 

 

 

 

 


 

 

DENNIS D. DAMMERMAN
Elected November 12, 2008

 

Former Vice Chairman of the Board, General Electric Company; Former Chairman of GE Capital Services
Age 63
Director, BlackRock, Inc.
 Capmark Financial Group Inc.

         
         


 

 

HARVEY GOLUB

 

Former Chairman and Chief Executive Officer of American Express Company
Age 70
Director, Campbell Soup Company
 The Reader’s Digest Association, Inc.

         


 

 

LAURETTE T. KOELLNER

 

Former Senior Vice President of The Boeing Company; Former President, Boeing International
Age 54
Director, Celestica Inc.
 Sara Lee Corporation


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EDWARD M. LIDDY
Elected September 18, 2008

 

Chairman and Chief Executive Officer, AIG
Age 63
Director, 3M Company

         


 

 

CHRISTOPHER S. LYNCH

 

Former Partner, KPMG LLP
Age 51
Director, Federal Home Loan Mortgage Corporation

         


 

 

ARTHUR C. MARTINEZ

 

Former Chairman of the Board, President and Chief Executive Officer, Sears, Roebuck and Co.
Age 69
Director,* ABN AMRO Holding, N.V.
 HSN, Inc.
 IAC/InterActiveCorp
 International Flavors & Fragrances, Inc.
 Liz Claiborne, Inc.
 PepsiCo, Inc.

* Mr. Martinez has made a commitment to AIG that, in accordance with AIG’s Corporate Governance Guidelines, he will reduce the number of public company boards on which he serves as director (other than AIG) to no more than four within the next 12 months.

         


 

 

GEORGE L. MILES, JR.
Director since 2005

 

President and Chief Executive Officer, WQED Multimedia
Age 67
Director, EQT Corporation
 Harley-Davidson, Inc.
 HFF, Inc.
 WESCO International, Inc.

         


 

 

ROBERT S. MILLER

 

Executive Chairman, Delphi Corporation
Age 67
Director, Symantec Corporation
 UAL Corporation


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SUZANNE NORA JOHNSON
Elected July 16, 2008

 

Former Vice Chairman, The Goldman Sachs Group, Inc.
Age 51
Director, Intuit Inc.
 Pfizer Inc.
 Visa Inc.

         


 

 

MORRIS W. OFFIT
Director since 2005

 

Chairman, Offit Capital Advisors LLC (a wealth management advisory firm); Founder and Former Chief Executive Officer, OFFITBANK (a private bank)
Age 72

         


 

 

DOUGLAS M. STEENLAND

 

Former President and Chief Executive Officer, Northwest Airlines Corporation
Age 57
Director, Delta Air Lines, Inc.
 Digital River, Inc.

         

The principal occupation or affiliation of the nominees is shown above. Except as noted below, each director has occupied an executive position with the company or organization listed above for at least five years. Mr. Dammerman retired in 2005 as Vice Chairman of the Board and Executive Officer and a member of the Corporate Executive Office of GE. Prior to his retirement, he had served on the GE Board of Directors and as Chairman and Chief Executive Officer and a director of GE Capital Services, Inc. Ms. Koellner retired as President of Boeing International, a position she held from 2006 to 2008. Prior to that, she was President of Connexion by Boeing from 2004 to 2006, and Executive Vice President, Member of the Office of the Chairman and Chief Human Resources Officer and Chief Administrative Officer. Mr. Liddy joined the private equity firm of Clayton, Dubilier & Rice, Inc. in 2008 after serving as Chairman of The Allstate Corporation, the parent of the Allstate Insurance Company, since January 2007. Prior to that, he was Allstate Chairman and Chief Executive Officer from 1999 until 2006. Mr. Lynch is an independent consultant providing a variety of services to financial intermediaries, including risk management, strategy, governance, financial and regulatory reporting and troubled-asset management. Prior to retiring from KPMG LLP in May 2007, Mr. Lynch held a variety of leadership positions at KPMG, including National Partner in Charge—Financial Services. Mr. Martinez retired as Chairman of the Board, President and Chief Executive Officer of Sears, Roebuck and Co. in 2000. Mr. Miller was Chairman of Federal-Mogul Corporation from 2004 to 2005, prior to becoming Chairman and Chief Executive Officer of Delphi Corporation in 2005. Mr. Miller was Chairman and Chief Executive Officer of Delphi Corporation when it filed for Chapter 11 bankruptcy in October 2005. Ms. Nora Johnson retired as Vice Chairman of The Goldman Sachs Group, Inc. in 2007. Since 2003, she had held numerous roles at Goldman Sachs including Head of the Global Investment Research Division and Chairman of the Global Markets Institute. Mr. Offit served as Co-Chief Executive Officer of Offit Hall Capital Management LLC from 2002 until 2007. Mr. Steenland was President of Northwest Airlines from 2001 until 2004 and was President and Chief Executive Officer of Northwest Airlines from 2004 until 2008. Mr. Steenland was Chief Executive Officer of Northwest Airlines when it filed for Chapter 11 bankruptcy in September 2005.

Working with the Board, Edward M. Liddy, AIG’s Chairman and Chief Executive Officer, has determined that coincident with the reconfiguration of the Board, the company should also initiate the necessary actions to install a more permanent leadership team and structure. Accordingly, he has informed the Board of his intention to resign from his positions with AIG, including his service as a director, once appropriate permanent replacements are appointed. The Board concurs with Mr. Liddy’s recommendation that the roles of Chairman and Chief Executive Officer be separated going forward and intends to conduct a search to fill both positions. The search will include participation by both the reconstituted Board and the trustees of the Trust.


15


CORPORATE GOVERNANCE

GOVERNANCE

AIG’s Board regularly reviews corporate governance developments and modifies its Corporate Governance Guidelines, charters and practices from time to time. AIG’s Corporate Governance Guidelines are included as Appendix A. AIG’s Corporate Governance Guidelines and the charters of the Nominating and Corporate Governance Committee, the Compensation and Management Resources Committee, the Finance and Risk Management Committee, the Audit Committee, and the Regulatory, Compliance and Public Policy Committee are available in the Corporate Governance section of AIG’s corporate website at www.aigcorporate.com or in print by writing to American International Group, Inc., 70 Pine Street, New York, New York 10270, Attention: Investor Relations.

AIG’s Director, Executive Officer and Senior Financial Officer Code of Business Conduct and Ethics and a Code of Conduct for employees are available, without charge, in the Corporate Governance section of AIG’s corporate website at www.aigcorporate.com or in print by writing to American International Group, Inc., 70 Pine Street, New York, New York 10270, Attention: Investor Relations. Any amendment to AIG’s Director, Executive Officer and Senior Financial Officer Code of Business Conduct and Ethics and any waiver applicable to AIG’s directors, executive officers or senior financial officers will be posted on AIG’s website within the time period required by the SEC and the NYSE.

Using the current AIG Director Independence Standards that are included with the Corporate Governance Guidelines as Annex A thereto, the Board, on the recommendation of the Nominating and Corporate Governance Committee, determined that Ms. Nora Johnson, Ms. Koellner and Messrs. Bollenbach, Dammerman, Feldstein, Golub, Lynch, Martinez, Miles, Miller, Offit, Orr, and Steenland are independent under NYSE listing standards and AIG’s Director Independence Standards. In addition, Ms. Futter and Ms. Rometty and Messrs. Holbrooke, Langhammer and Sutton, who also served on the Board during 2008, Mr. Willumstad, until he was appointed AIG’s Chief Executive Officer in June 2008, and Marshall A. Cohen, Stephen L. Hammerman and Frank G. Zarb, who also served on the Board in 2008 before the 2008 Annual Meeting of Shareholders, were independent under NYSE listing standards and AIG’s Director Independence Standards.

In making the independence determinations, the Nominating and Corporate Governance Committee considered relationships arising from: (1) contributions by AIG to charitable organizations with which Messrs. Bollenbach, Feldstein, Hammerman, Holbrooke, Langhammer, Offit and Willumstad and Ms. Futter and Ms. Nora Johnson or members of their immediate families are affiliated; (2) in the case of Ms. Rometty, transactions between AIG and IBM Corporation; and (3) 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. Except as described in the following paragraph, none of these relationships exceeded the thresholds set forth in the AIG Director Independence Standards.

In 2008, AIG made payments totaling $410,000 to the Asia Society, of which Mr. Holbrooke was chairman of the board of directors, for membership fees, sponsorship costs and general contributions. Under AIG’s Director Independence Standards that are used to assist the Board in making independence determinations, the Board must consider the materiality of any contributions for a calendar year made to a charitable organization with which a director is affiliated if the contributions exceed $200,000. The Board, on the recommendation of the Nominating and Corporate Governance Committee, considered the payments to the Asia Society and determined that they did not impair Mr. Holbrooke’s independence. In making this determination, the Nominating and Corporate Governance Committee and the Board evaluated all facts they considered relevant, including that Mr. Holbrooke did not serve as an executive officer and did not receive compensation from the Asia Society, that he did not solicit the payments and that, given the significance of AIG’s operations in Asia, the Board and AIG management believed that the payments to the Asia Society would enhance AIG’s reputation and standing in Asia.

In 2007 and 2008, AIG made donations of $615,000 and $550,000, respectively, to Lincoln Center in New York City, of which Mr. Golub is a director. As described above, AIG’s Board is required to consider the materiality of these contributions to Mr. Golub’s independence. These contributions to Lincoln Center were made prior to Mr. Golub being considered as a candidate for election to the Board and were not solicited by Mr. Golub, and the Board, on the recommendation of the Nominating and Corporate Governance Committee, determined that these contributions did not impair Mr. Golub’s independence.

There were 19 meetings of the Board during 2008. The non-management directors meet in executive session, without any management directors present, in conjunction with each regularly scheduled Board

16


meeting. Mr. Willumstad presided at the executive sessions before he was appointed the Chief Executive Officer of AIG and Mr. Bollenbach, as Lead Independent Director, presided at the executive sessions thereafter. For 2008 and 2007, all of the directors attended at least 75 percent of the aggregate of all meetings of the Board and of the committees of the Board on which they served. Under AIG’s Corporate Governance Guidelines, any director who, for two consecutive calendar years, attends fewer than 75 percent of the regular meetings of the Board and the meetings of all committees of which such director is a voting member will not be nominated for reelection at the annual meeting in the next succeeding calendar year, absent special circumstances that may be taken into account by the Board and the Nominating and Corporate Governance Committee in making its recommendations to the Board.

Directors are expected to attend the annual meetings of shareholders. All directors serving at the time of the 2008 Annual Meeting of Shareholders, except for former director Mr. Cohen, attended that meeting.

AIG has adopted policies on reporting of concerns regarding accounting and other matters and on communicating with non-management directors. These policies are available in the Corporate Governance section of AIG’s corporate website at www.aigcorporate.com. Interested parties may make their concerns known to the non-management members of AIG’s Board of Directors as a group or the other members of the Board of Directors by writing in care of Special Counsel and Secretary to the Board, American International Group, Inc., 70 Pine Street, New York, New York 10270 or by email to: boardofdirectors@aig.com.

17


REPORT OF THE NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

Overview

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

Committee Organization

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

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

Conduct of meetings and governance process. During 2008, the Committee held five meetings. In discussing governance initiatives and in preparation for meetings, the Committee Chairman, the Chairman of the Board, the Lead Independent Director and the Special Counsel and Secretary to the Board of Directors met and consulted frequently with the other Committee and Board members.

Board Membership and Composition

Nomination and Election of Directors. Thirteen directors were elected at AIG’s Annual Meeting of Shareholders in May 2008. During 2008, after the Annual Meeting of Shareholders, five directors resigned from the Board of Directors (Ms. Futter and Messrs. Holbrooke, Langhammer, Sullivan and Willumstad). In addition, Ms. Rometty and Mr. Sutton resigned on May 7, 2009, and Messrs. Bollenbach, Feldstein and Orr informed AIG in May 2009 that they would not be standing for reelection. Mr. Tse submitted his resignation in March 2009 to become effective at the 2009 Annual Meeting of Shareholders. On September 18, 2008, in connection with the transactions entered into between AIG and the NY Fed and the Department of the Treasury described above, the Board elected Edward M. Liddy as Chief Executive Officer and a director of AIG and appointed him as Chairman of the Board, succeeding Mr. Robert B. Willumstad, who had served as Chairman since November 1, 2006. In addition, the Committee nominated, and the Board elected, two new directors after the 2008 Annual Meeting of Shareholders, Dennis D. Dammerman and Suzanne Nora Johnson. Ms. Nora Johnson was brought to the Committee’s attention by Heidrick & Struggles, an executive search firm that the Committee engaged to assist it in identifying potential director nominees. Mr. Liddy and Mr. Dammerman were identified for the Committee by members of the U.S. government in connection with the transactions entered into between AIG and the NY Fed and the Department of the Treasury. Ms. Koellner and Messrs. Golub, Lynch, Martinez and Miller were identified to the Committee by the trustees of the Trust. Their candidacies were considered in the same manner as any other director candidate brought by a shareholder to the attention of the Committee. In addition, the Committee, acting upon a referral provided by Paula Rosput Reynolds, Vice Chairman and Chief Restructuring Officer, identified Mr. Steenland to stand for election at the 2009 Annual Meeting of Shareholders. The Committee believes the depth of experience and breadth of expertise of these nominees complement the composition of the Board and provide the Board with a broader view of AIG’s businesses.

On the recommendation of the Committee, the Board appointed Mr. Stephen F. Bollenbach as Lead Independent Director in connection with creation of that position in June 2008 at the time of Mr. Willumstad’s appointment as Chief Executive Officer. As Lead Independent Director, Mr. Bollenbach became an ex-officio member of each committee of the Board of Directors of which he was not a member.

The Committee evaluated and recommended to the Board of Directors the eleven nominees standing for election at the 2009 Annual Meeting, based on the criteria set forth in AIG’s Corporate Governance Guidelines. A description of the nominees recommended by the Committee is set forth above in “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 Committee, determined that each of AIG’s seven non-management directors, and Messrs. Golub, Lynch, Martinez, Miller and Steenland and Ms. Koellner, is independent within the meaning of the NYSE listing standards. Mr. Liddy, who serves as Chief Executive Officer, and Mr. Tse (who has submitted his resignation to become effective at the 2009 Annual

18


Meeting of Shareholders), who serves as Senior Vice Chairman—Life Insurance, are the only directors who held AIG management positions and, therefore, are not independent directors.

Corporate Governance Initiatives in 2008

Amendment of By-laws and Corporate Governance Guidelines. On the recommendation of the Committee, the Board amended the By-laws of AIG to provide for a Chairman of the Board of Directors, who may also serve as Chief Executive Officer, and to create the position of Lead Independent Director.

Conclusion

During 2008, the Committee performed its duties and responsibilities under the Nominating and Corporate Governance Committee charter.

 

 

 

 

 

Nominating and Corporate Governance Committee
American International Group, Inc.*
     
George L. Miles, Jr., Chairman
James F. Orr III
Stephen F. Bollenbach, ex-officio

 

*

 

 

 

Ms. Rometty was a member of the Nominating and Corporate Governance Committee until she resigned from the Board on May 7, 2009.

19


COMMITTEES

The following table sets forth the current membership on each standing committee of the Board and the number of committee meetings held in 2008. Mr. Bollenbach became a member of the Board and the Audit Committee on January 16, 2008, a member of the Regulatory, Compliance and Legal Committee on May 14, 2008, and a member of the Compensation and Management Resources Committee on November 12, 2008. He has been an ex-officio member of the Nominating and Corporate Governance, the Finance and Risk Management and the Public Policy and Social Responsibility Committees since June 15, 2008. Mr. Liddy became a member of the Board and Chairman on September 18, 2008. Mr. Dammerman became a member of the Board and the Finance and Risk Management and the Compensation and Management Resources Committees on November 12, 2008. Ms. Nora Johnson became a member of the Board on July 16, 2008 and a member of the Compensation and Management Resources and the Finance and Risk Management Committees on January 14, 2009.

 

 

 

 

 

 

 

 

 

 

 

 

 

Director

 

Audit
Committee

 

Nominating
and
Corporate
Governance
Committee

 

Compensation
and
Management
Resources
Committee

 

Finance
and Risk
Management
Committee(1)

 

Public
Policy and
Social
Responsibility
Committee(2)

 

Regulatory,
Compliance
and Legal
Committee(2)

 

Stephen F. Bollenbach

 

 

P

   

 

 

*

   

 

P

   

 

 

*

   

 

 

*

   

 

P

(C)

 

 

Dennis D. Dammerman

 

 

 

 

 

 

P

   

 

P

 

 

 

 

 

 

Martin S. Feldstein

 

 

 

 

 

 

 

 

P

 

 

 

 

 

P

 

 

Edward M. Liddy

 

 

 

 

 

 

 

 

 

 

 

 

 

George L. Miles, Jr.

 

 

P

   

 

P

(C)

 

 

 

 

 

 

 

P

 

 

 

 

Suzanne Nora Johnson

 

 

 

 

 

 

P

   

 

P

 

 

 

 

 

 

Morris W. Offit

 

 

P

 

 

 

 

 

 

 

P

(C)

 

 

 

P

 

 

 

 

James F. Orr III

 

 

 

 

P

   

 

P

(C)

 

 

 

 

 

 

 

 

Virginia M. Rometty(3)

 

 

 

 

P

   

 

P

 

 

 

 

 

 

 

 

Michael H. Sutton(3)

 

 

P

(C)

 

 

 

 

 

 

 

 

 

 

 

P

 

 

Edmund S.W. Tse

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of meetings

 

 

 

15

   

 

 

5

   

 

 

11

   

 

 

12

   

 

 

3

   

 

 

5

 

P = Member
C = Chair
* Mr. Bollenbach is an ex-officio member.


 

 

 

(1)

 

 

 

On March 25, 2009, the Finance Committee was renamed the Finance and Risk Management Committee. Please see “Other Committees” below for further details.

 

(2)

 

 

 

On March 25, 2009, the Public Policy and Social Responsibility Committee and the Regulatory, Compliance and Legal Committee were combined to form the Regulatory, Compliance and Public Policy Committee. Please see “Other Committees” below for further details.

 

(3)

 

 

 

Resigned from the Board on May 7, 2009.

Audit Committee

The Audit Committee, which held 15 meetings during 2008, assists the Board in its oversight of AIG’s financial statements and compliance with legal and regulatory requirements, the qualifications and performance of AIG’s independent registered public accounting firm and the performance of AIG’s internal audit function. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of AIG’s independent registered public accounting firm. In its oversight of AIG’s internal audit function, the Audit Committee also is involved in performance reviews and determining compensation of AIG’s chief internal auditor.

The 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, as defined by NYSE

20


listing standards, and that a majority of the members of the Committee are audit committee financial experts, as defined under SEC rules. In accordance with SEC rules, the Board of Directors designated, for purposes of AIG’s 2008 financial statements, Mr. Sutton the named audit committee financial expert and, on the recommendation of the Nominating and Corporate Governance Committee, determined that Mr. Sutton had accounting or related financial management expertise, as defined by NYSE listing standards. Although designated as an audit committee financial expert, Mr. Sutton did not act as an accountant for AIG and, under SEC rules, is not an “expert” for purposes of the liability provisions of the Securities Act of 1933, as amended (the Securities Act), or for any other purpose. Under the Federal securities laws, Mr. Sutton did not have any responsibilities or obligations in addition to those of the other Audit Committee members; for these purposes, all Audit Committee members have identical duties and responsibilities.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee held 5 meetings in 2008. The Board has determined that all members of the Nominating and Corporate Governance Committee are independent under NYSE listing standards. The primary purposes of the Nominating and Corporate Governance Committee are to review and recommend individuals to the Board of Directors for nomination, election or appointment as members of the Board and its committees, to advise the Board on corporate governance and to oversee the evaluation of the Board and its committees.

The AIG Corporate Governance Guidelines include characteristics that the Nominating and Corporate Governance Committee considers important for nominees for director and information for shareholders with respect to director nominations. The Nominating and Corporate Governance Committee will consider director nominees recommended by shareholders and will evaluate shareholder nominees on the same basis as all other nominees. Shareholders who wish to submit nominees for director for consideration by the Nominating and Corporate Governance Committee for election at the 2010 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 2010 Annual Meeting” in this Proxy Statement.

Compensation and Management Resources Committee

The Compensation and Management Resources Committee, which held 11 meetings during 2008, is responsible for reviewing and approving the compensation awarded to AIG’s Chief Executive Officer (subject to ratification or approval by the Board) and to the other key employees under its purview, including the performance measures and goals relevant to that compensation. The Committee is also responsible for making recommendations to the Board with respect to AIG’s compensation programs for key and other employees, for evaluating whether AIG’s compensation programs encourage AIG’s senior executives to take unnecessary and excessive risks that threaten the value of the firm and for oversight of AIG’s management development and succession planning programs. These responsibilities, which may not be delegated to persons who are not members of the Compensation and Management Resources Committee, are set forth in the Committee’s charter, which is available in the Corporate Governance section of AIG’s corporate website at www.aigcorporate.com.

Twenty-two key employees are currently under the purview of the Compensation and Management Resources Committee, including all of the executive officers named in the 2008 Summary Compensation Table. Mr. Liddy 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 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. 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 review and comment on AIG’s executive compensation framework in relation to the objectives of the framework and market practices. A senior member of the Cook firm regularly participates in Committee meetings and provides information on compensation trends along with specific views on AIG’s compensation programs.

21


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 and does not provide any services to AIG’s management.

In June 2008, the Compensation and Management Resources Committee also considered materials presented by Watson Wyatt Worldwide, Inc., related to retention planning and possible changes to AIG’s long-term incentive compensation programs. For more information on this engagement, see the Compensation Discussion and Analysis. Watson Wyatt has not otherwise presented materials to the Committee.

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

Other Committees

On March 25, 2009, the Board approved amendments to the charter of the Finance Committee of AIG and the Committee was renamed the Finance and Risk Management Committee. The Finance and Risk Management Committee assists the Board in its oversight responsibilities by reviewing and making recommendations to the Board with respect to AIG’s financial and investment policies, provides strategic guidance to management as to AIG’s capital structure, the allocation of capital as to its businesses, methods of financing its businesses and other related strategic initiatives. The Committee also reports to and assists the Board in overseeing and reviewing information regarding AIG’s enterprise risk management, including the significant policies, procedures, and practices employed to manage liquidity risk, credit risk, market risk, operational risk and insurance risk. Before the amendments to the charter, the Finance Committee had functions similar to those of the Finance and Risk Management Committee, but the amendments clarified the Committee’s authority with respect to risk management. The Finance Committee held 12 meetings in 2008. The Finance and Risk Management Committee’s charter is available in the Corporate Governance section of AIG’s corporate website at www.aigcorporate.com.

The Public Policy and Social Responsibility Committee was responsible for reviewing the position and policies of AIG relating to current and emerging corporate social responsibility and political and public policy issues. The Public Policy and Social Responsibility Committee held 3 meetings in 2008.

The Regulatory, Compliance and Legal Committee held 5 meetings during 2008. The principal purpose of the Regulatory, Compliance and Legal Committee was to assist the Board in its oversight of AIG’s legal, regulatory and compliance matters.

On March 25, 2009, the Public Policy and Social Responsibility Committee and the Regulatory, Compliance and Legal Committee were combined to form the Regulatory, Compliance and Public Policy Committee. The Regulatory, Compliance and Public Policy Committee combines the roles of the two former Committees and eliminates the prior overlapping responsibilities between the Committees. The Regulatory, Compliance and Public Policy Committee assists the Board in its oversight of AIG’s 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 Committee’s charter is available in the Corporate Governance section of AIG’s corporate website at www.aigcorporate.com.

22


COMPENSATION OF DIRECTORS

In 2008, each non-management director of AIG received a retainer of $75,000 per year. In lieu of committee annual retainers and meeting fees, Mr. Bollenbach, as Lead Independent Director and an ex-officio member of all standing committees of the Board of which he is not a member, received an additional annual retainer of $40,000. Mr. Willumstad, as non-executive Chairman of the Board in the first two quarters of 2008, had an additional annual retainer of $200,000 in lieu of committee annual retainers and meeting fees, and received $137,500 in total retainers before payments ceased when he became Chief Executive Officer. Other non-management directors received committee meeting attendance fees of $1,500 per meeting, which included attendance, upon request, at meetings of committees of which they are not members and attendance at meetings of AIG’s International Advisory Board. The chairman of each committee received an annual committee retainer of $15,000, except the chairman of the Audit Committee, who received $25,000. For each other member of each committee, the annual committee retainer was $5,000. Retainers were paid in equal installments each quarter in advance of service, and meeting fees were paid each quarter for service in the prior quarter. See “Committees” for information on current committee memberships and committee memberships during 2008.

In 2008, non-management directors received an annual award of Deferred Stock Units (DSUs) with a grant date value of $125,000, with the number of units determined based on the closing price of AIG Common Stock on the date of grant (which was the date of the Annual Meeting of Shareholders). However, as described below, these DSUs lost most of their value in 2008.

In 2008, DSUs were granted under the Amended and Restated 2007 Stock Incentive Plan (2007 Stock Incentive Plan). Each DSU provides that one share of AIG Common Stock will be delivered when a director ceases to be a member of the Board. The annual retainer amounts, the committee retainer amounts and the meeting fee amounts for service may be deferred, at the election of the directors, into DSUs. DSUs include 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 that underlie the DSUs had been outstanding.

In March 2009, the Nominating and Corporate Governance Committee completed a review of non-management director compensation. Based on this review, the Nominating and Corporate Governance Committee recommended to the Board, and the Board approved, the retention of the following components of AIG’s non-management director compensation:

 

 

 

 

Annual retainer of $75,000;

 

 

 

 

Lead Independent Director retainer of $40,000;

 

 

 

 

Annual committee chairman retainers of $15,000, except $25,000 for the chairman of the Audit Committee; and

 

 

 

 

Annual committee member retainers of $5,000.

The following components of non-management director compensation were eliminated:

 

 

 

 

Annual awards of DSUs;

 

 

 

 

Committee meeting fees; and

 

 

 

 

The right to defer annual retainers, the Lead Independent Director retainer, committee chair retainers and committee membership retainers into DSUs (with any such retainers for the remainder of 2009 that are required to be deferred being paid without interest upon termination of Board service).

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

To provide independent advice and guidance, certain of AIG’s non-management directors also serve on the boards of directors of subsidiaries of AIG. These directorships do not pay retainer fees but instead pay a fee of $1,500 per meeting attended.

In response to a derivative action filed against AIG, which is described in AIG’s 2008 Annual Report on Form 10-K, AIG’s Board of Directors appointed a special litigation committee of independent directors to review the matters asserted in the complaint. The special litigation committee was established in 2005, and Messrs. Hammerman and Miles were the members until Mr. Hammerman’s resignation from the special litigation committee effective on May 14, 2008, the date of the 2008 Annual Meeting of Shareholders. Mr. Miles is currently the only member of the special litigation committee. Fees for the special litigation committee are set by

23


the Board and may be reviewed and adjusted by the Board if the amount of work is greater than originally anticipated.

Mr. Zarb, who retired from the Board on May 14, 2008, received fees of $40,000 (and reimbursement for out-of-pocket expenses) for his consulting services to the Nominating and Corporate Governance Committee of the Board from May to September 2008. At the time he retired from the Board, Mr. Zarb was leading several initiatives relating to AIG’s corporate governance. The Nominating and Corporate Governance Committee of the Board asked Mr. Zarb to serve as a consultant with respect to those matters as the Committee and the Board brought them to conclusion.

Messrs. Liddy and Tse did not receive any compensation for their services as directors. Mr. Sullivan served on the Board until July 1, 2008 but did not receive any compensation for his service as a director. Mr. Willumstad served on the Board until September 18, 2008. From the time he was named Chief Executive Officer in June 2008 until he resigned in September, he did not receive any compensation for his services as a director. For information on Mr. Willumstad’s compensation as non-executive Chairman of the Board in the first two quarters of 2008, see the 2008 Summary Compensation Table.

The following table contains information with respect to the compensation of the individuals other than Mr. Willumstad who served as non-management directors of AIG for all or part of 2008.

2008 Non-Management Director Compensation

 

 

 

 

 

 

 

 

 

Non-Management Members of the Board in 2008(1)

 

Fees
Earned or
Paid in
Cash(2)

 

Stock Awards(3)

 

All Other
Compensation(4)

 

Total

Stephen F. Bollenbach

 

 

$

 

0

   

 

$

 

381,086

   

 

$

 

3,449

   

 

$

 

384,535

 

Marshall A. Cohen

 

 

$

 

16,500

   

 

$

 

51,134

   

 

$

 

761

   

 

$

 

68,395

 

Dennis D. Dammerman

 

 

$

 

0

   

 

$

 

73,941

   

 

$

 

0

   

 

$

 

73,941

 

Martin S. Feldstein

 

 

$

 

119,500

   

 

$

 

124,985

   

 

$

 

2,715

   

 

$

 

247,200

 

Ellen V. Futter

 

 

$

 

75,750

   

 

$

 

124,985

   

 

$

 

1,629

   

 

$

 

202,364

 

Stephen L. Hammerman

 

 

$

 

195,212

   

 

$

 

0

   

 

$

 

667

   

 

$

 

195,879

 

Richard C. Holbrooke

 

 

$

 

10,000

   

 

$

 

198,390

   

 

$

 

1,910

   

 

$

 

210,300

 

Fred H. Langhammer

 

 

$

 

0

   

 

$

 

244,413

   

 

$

 

3,505

   

 

$

 

247,918

 

George L. Miles, Jr.

 

 

$

 

284,500

   

 

$

 

124,985

   

 

$

 

2,715

   

 

$

 

412,200

 

Suzanne Nora Johnson

 

 

$

 

0

   

 

$

 

163,978

   

 

$

 

1,355

   

 

$

 

165,333

 

Morris W. Offit

 

 

$

 

146,500

   

 

$

 

124,985

   

 

$

 

2,715

   

 

$

 

274,200

 

James F. Orr III

 

 

$

 

0

   

 

$

 

240,942

   

 

$

 

3,552

   

 

$

 

244,494

 

Virginia M. Rometty

 

 

$

 

110,173

   

 

$

 

124,985

   

 

$

 

2,715

   

 

$

 

237,873

 

Michael H. Sutton

 

 

$

 

139,500

   

 

$

 

124,985

   

 

$

 

2,715

   

 

$

 

267,200

 

Frank G. Zarb

 

 

$

 

82,212

   

 

$

 

0

   

 

$

 

40,667

   

 

$

 

122,879

 


 

 

(1)

 

 

 

For information on Mr. Willumstad’s compensation as non-executive Chairman of the Board in 2008, see the 2008 Summary Compensation Table.

 

(2)

 

 

 

This column represents annual retainer fees, committee and committee chairman retainer fees and committee meeting attendance fees. The amounts also include the following amounts in meeting attendance fees for meetings of the boards of directors of subsidiaries of AIG, and retainer fees with respect to Mr. Holbrooke’s membership on the Board of Directors of AIG Global Trade & Political Risk Insurance Company: Cohen—$16,500; Feldstein—$6,000; and Holbrooke—$10,000 (including $2,500 earned in 2007 but paid in 2008). For Messrs. Hammerman and Miles, the amount also includes a fee of $150,000 paid in April 2008 for services rendered in 2005, 2006 and 2007 in connection with the special litigation committee established in 2005. Messrs. Hammerman and Miles each received fees in connection with such services of $50,000 and $25,000 in 2005 and 2006, respectively. No fees were paid in 2007 in connection with their service on the special litigation committee.

 

(3)

 

 

 

This column represents the expense in accordance with FAS 123R of DSUs (other than dividend equivalent DSUs) granted in 2008 to directors, calculated using the assumptions described in Note 17 to the Consolidated Financial Statements included in AIG’s 2008 Annual Report on Form 10-K.

24


 

 

 

 

 

Because of the decline in the value of AIG Common Stock in 2008, the amounts recognized in this column are not representative of the current value of AIG Common Stock underlying DSUs granted in 2008. If DSUs granted in 2008 had been expensed based on the market value of the underlying AIG Common Stock at year-end 2008, the amounts reported in this column would have been as follows:

Stock Awards

 

 

 

 

 

 

 

Name

 

Expense Reported in
2008 Director
Compensation Table

 

Pro Forma Based
on Market Value at
December 31, 2008

 

Difference

Stephen F. Bollenbach

 

 

$

 

381,086

   

 

$

 

29,315

   

 

$

 

(351,771

)

 

Marshall A. Cohen*

 

 

$

 

51,134

   

 

$

 

1,606

   

 

$

 

(49,528

)

 

Dennis D. Dammerman

 

 

$

 

73,941

   

 

$

 

57,186

   

 

$

 

(16,755

)

 

Martin S. Feldstein

 

 

$

 

124,985

   

 

$

 

4,975

   

 

$

 

(120,010

)

 

Ellen V. Futter*

 

 

$

 

124,985

   

 

$

 

4,975

   

 

$

 

(120,010

)

 

Stephen L. Hammerman*

 

 

$

 

0

   

 

 

N/A

   

 

 

N/A

 

Richard C. Holbrooke*

 

 

$

 

198,390

   

 

$

 

7,961

   

 

$

 

(190,429

)

 

Fred H. Langhammer*

 

 

$

 

244,413

   

 

$

 

24,881

   

 

$

 

(219,532

)

 

George L. Miles, Jr.

 

 

$

 

124,985

   

 

$

 

4,975

   

 

$

 

(120,010

)

 

Suzanne Nora Johnson

 

 

$

 

163,978

   

 

$

 

17,741

   

 

$

 

(146,237

)

 

Morris W. Offit

 

 

$

 

124,985

   

 

$

 

4,975

   

 

$

 

(120,010

)

 

James F. Orr III

 

 

$

 

240,942

   

 

$

 

20,366

   

 

$

 

(220,576

)

 

Virginia M. Rometty

 

 

$

 

124,985

   

 

$

 

4,975

   

 

$

 

(120,010

)

 

Michael H. Sutton

 

 

$

 

124,985

   

 

$

 

4,975

   

 

$

 

(120,010

)

 

Frank G. Zarb*

 

 

$

 

0

   

 

 

N/A

   

 

 

N/A

 


 

*

 

 

 

For directors who retired or resigned in 2008, shares of AIG Common Stock underlying DSUs were delivered before year-end.

 

 

   

 

On May 14, 2008, AIG made annual grants of 3,169 DSUs each to the directors. Mr. Bollenbach received 2,158 DSUs, Ms. Nora Johnson received 5,369 DSUs and Mr. Dammerman received 30,788 DSUs upon their election to the Board on January 16, July 16 and November 12 of 2008, respectively. In addition, directors received DSUs representing deferred director’s fees at other dates throughout the year. In total, DSUs (other than dividend equivalent DSUs) were granted on January 2, January 16, April 1, May 14, July 1, July 16, October 1, October 28 and November 12 of 2008. The grant date fair values for the DSUs were calculated by multiplying the number of DSUs awarded by the closing price of AIG Common Stock on the date of grant. The number of DSUs granted to each director on each date, and the grant date fair value in accordance with FAS 123R per DSU granted on each date, were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name

 

January 2
$56.30

 

January 16
$57.91

 

April 1
$47.00

 

May 14
$39.44

 

July 1
$26.73

 

July 16
$23.28

 

October 1
$3.95

 

October 28
$1.83

 

November 12
$2.03

Stephen F. Bollenbach

 

 

 

0

   

 

 

2,503

   

 

 

521

   

 

 

3,220

   

 

 

1,225

   

 

 

429

   

 

 

10,443

   

 

 

0

   

 

 

331

 

Marshall A. Cohen

 

 

 

421

   

 

 

0

   

 

 

488

   

 

 

114

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

 

Dennis D. Dammerman

 

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

36,424

 

Martin S. Feldstein

 

 

 

0

   

 

 

0

   

 

 

0

   

 

 

3,169

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

 

Ellen V. Futter

 

 

 

0

   

 

 

0

   

 

 

0

   

 

 

3,169

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

 

Stephen L. Hammerman

 

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

 

Richard C. Holbrooke

 

 

 

399

   

 

 

0

   

 

 

542

   

 

 

3,169

   

 

 

897

   

 

 

64

   

 

 

0

   

 

 

0

   

 

 

0

 

Fred H. Langhammer

 

 

 

377

   

 

 

0

   

 

 

675

   

 

 

3,169

   

 

 

1,131

   

 

 

0

   

 

 

8,037

   

 

 

2,459

   

 

 

0

 

George L. Miles

 

 

 

0

   

 

 

0

   

 

 

0

   

 

 

3,169

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

 

Suzanne Nora Johnson

 

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

6,174

   

 

 

5,126

   

 

 

0

   

 

 

0

 

Morris W. Offit

 

 

 

0

   

 

 

0

   

 

 

0

   

 

 

3,169

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

 

James F. Orr III

 

 

 

377

   

 

 

0

   

 

 

675

   

 

 

3,220

   

 

 

1,169

   

 

 

0

   

 

 

7,531

   

 

 

0

   

 

 

0

 

Virginia M. Rometty

 

 

 

0

   

 

 

0

   

 

 

0

   

 

 

3,169

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

 

Michael H. Sutton

 

 

 

0

   

 

 

0

   

 

 

0

   

 

 

3,169

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

 

Frank G. Zarb

 

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

   

 

 

0

 

 

(4)

 

 

 

This column represents DSUs awarded as dividend equivalents. As described above, the grant date fair values of the DSUs awarded as dividend equivalents were calculated by multiplying the number of DSUs awarded by the closing price of AIG Common Stock on the date of the grant. Directors received DSUs

25


 

 

 

 

representing dividend equivalents on January 2, April 1, July 1 and October 1 of 2008. The number of DSUs granted to each director on each of these respective dates was as follows: Bollenbach—0, 10, 46 and 443; Cohen—6, 9, 0 and 0; Feldstein—6, 7, 36 and 275; Futter—6, 7, 36 and 0; Hammerman—6, 7, 0 and 0; Holbrooke—6, 9, 43 and 0; Langhammer—6, 9, 44 and 397; Miles—6, 7, 36 and 275; Nora Johnson—0, 0, 0 and 343; Offit—6, 7, 36 and 275; Orr—6, 9, 45 and 402; Rometty—6, 7, 36 and 275; Sutton—6, 7, 36 and 275; and Zarb—6, 7, 0 and 0.

 

 

 

 

 

The grant date fair values in accordance with FAS 123R per DSU for the DSUs awarded as dividend equivalents on the relevant date are as indicated in the table in footnote 3.

 

 

 

 

 

For Mr. Zarb, the amount also includes $40,000 in consulting fees from May to September 2008.

The following table sets forth information with respect to the option and stock awards outstanding at December 31, 2008 for the non-management directors of AIG.

Stock and Option Awards Outstanding at December 31, 2008

 

 

 

 

 

 

 

Non-Management Members of the Board in 2008(1)

 

Option Awards(2)

 

Deferred
Stock(3)

 

Deferred
Stock Units(4)

Stephen F. Bollenbach

 

 

 

0

   

 

 

0

   

 

 

19,171

 

Marshall A. Cohen

 

 

 

20,500

   

 

 

0

   

 

 

0

 

Dennis D. Dammerman

 

 

 

0

   

 

 

0

   

 

 

36,424

 

Martin S. Feldstein

 

 

 

20,500

   

 

 

2,875

   

 

 

5,227

 

Ellen V. Futter

 

 

 

20,500

   

 

 

0

   

 

 

0

 

Stephen L. Hammerman

 

 

 

5,000

   

 

 

0

   

 

 

0

 

Richard C. Holbrooke

 

 

 

17,500

   

 

 

0

   

 

 

0

 

Fred H. Langhammer

 

 

 

5,000

   

 

 

0

   

 

 

0

 

George L. Miles, Jr.

 

 

 

5,000

   

 

 

1,875

   

 

 

5,227

 

Suzanne Nora Johnson

 

 

 

0

   

 

 

0

   

 

 

11,643

 

Morris W. Offit

 

 

 

5,000

   

 

 

1,875

   

 

 

5,227

 

James F. Orr III

 

 

 

2,500

   

 

 

1,000

   

 

 

15,168

 

Virginia M. Rometty

 

 

 

2,500

   

 

 

750

   

 

 

5,227

 

Michael H. Sutton

 

 

 

5,000

   

 

 

1,625

   

 

 

5,227

 

Frank G. Zarb

 

 

 

17,500

   

 

 

0

   

 

 

0

 


 

 

(1)

 

 

 

For information on Mr. Willumstad’s stock and option awards related to his service as a director and Chairman of the Board, see “Executive Compensation—Exercises and Holdings of Previously Awarded Equity.”

 

(2)

 

 

 

Represents outstanding option awards made by AIG in 2006 and prior years. All options are exercisable, but have exercise prices far in excess of the value of AIG Common Stock at year-end 2008 ($1.57). The exercise price of the options ranges from $47.00 to $84.71.

 

(3)

 

 

 

No deferred stock was awarded in 2008. 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.

 

(4)

 

 

 

DSUs shown include DSUs awarded in 2008 and prior years, director’s fees deferred into DSUs and DSUs awarded as dividend equivalents. Receipt of shares of AIG Common Stock underlying DSUs is deferred until the director ceases to be a member of the Board.

COMPENSATION AND MANAGEMENT RESOURCES COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION

No member of the Compensation and Management Resources Committee has served as an officer or employee of AIG at any time or has any relationship with AIG requiring disclosure as a related-party transaction. During 2008, 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.

26


OWNERSHIP OF CERTAIN SECURITIES

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.

 

 

 

 

 

Name and Address

 

Shares of Common Stock
Beneficially Owned

 

Number

 

Percent(1)

C.V. Starr & Co., Inc.; Edward E. Matthews; Maurice R. Greenberg;

 

 

 

 

The Maurice R. and Corinne P. Greenberg Family Foundation, Inc.;

 

 

 

 

Maurice R. and Corinne P. Greenberg Joint Tenancy Company, LLC;

 

 

 

 

Starr International Company, Inc. (SICO); Universal Foundation, Inc.;

 

 

 

 

C.V. Starr & Co., Inc. Trust (collectively, the Starr Group)(2)

 

 

 

 

399 Park Avenue
17th Floor
New York, NY 10022(3)

 

 

 

269,019,475

   

 

 

9.9979

%

 


 

 

(1)

 

 

 

Percentages calculated based on AIG Common Stock outstanding as set forth in the Schedule 13D described in note 2 below.

 

(2)

 

 

 

Based on an amended Schedule 13D dated May 1, 2009 by each member of the Starr Group (Starr Group Schedule 13D), the members of the Starr Group do not affirm the existence of a group and disclaim beneficial ownership of each other member of the group; provided, however, that Maurice R. Greenberg does not disclaim beneficial ownership of the shares of AIG Common Stock held by the Maurice R. and Corinne P. Greenberg Joint Tenancy Company, LLC and C.V. Starr & Co., Inc. does not disclaim beneficial ownership of the shares of AIG Common Stock held by the C.V. Starr & Co., Inc. Trust. Item 5 to the Starr Group Schedule 13D provides details as to the voting and investment power of each member of the Starr Group, as well as the right of each member of the Starr Group to acquire AIG Common Stock within 60 days. All information provided in “Ownership of Certain Securities” with respect to the Starr Group is provided based solely on the information set forth in the Starr Group Schedule 13D. This information has not been updated to reflect changes in the ownership by the members of the Starr Group of AIG Common Stock that are disclosed in filings made by one or more members of the Starr Group under Section 16 of the Securities Exchange Act of 1934, as amended (the Exchange Act). 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.

 

(3)

 

 

 

This is the principal office for all individuals and entities in the Starr Group, other than Starr International Company, Inc., which has a principal office at 101 Baarerstrasse, CH 6300 Zug, Switzerland; the Universal Foundation, which has a principal office at Mercury House, 101 Front Street, Hamilton HM 12, Bermuda; and the Maurice R. and Corinne P. Greenberg Joint Tenancy Company, LLC, which has a principal office at 35 Ocean Reef Drive, Key Largo, Florida  33037.

27


The following table summarizes the ownership of AIG Common Stock by the current and nominee directors, by the current and former executive officers named in the 2008 Summary Compensation Table in “2008 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
May 1, 2009(1)

 

Amount and Nature of
Beneficial
Ownership(2)(3)

 

Percent
of
Class

Steven J. Bensinger

 

 

 

126,767

   

(4)

Stephen F. Bollenbach

 

 

93,806

   

(4)

Dennis D. Dammerman

 

 

87,215

   

(4)

Martin S. Feldstein

 

 

 

86,931

   

(4)

Harvey Golub

 

 

 

0

   

(4)

David L. Herzog

 

 

183,909

   

.01

Laurette T. Koellner

 

 

 

0

   

(4)

Edward M. Liddy

 

 

 

0

   

(4)

Christopher S. Lynch

 

 

 

0

   

(4)

Arthur C. Martinez

 

 

 

0

   

(4)

George L. Miles, Jr.

 

 

 

12,102

   

(4)

Robert S. Miller

 

 

 

0

   

(4)

Kris P. Moor

 

 

307,660

   

.01

Win J. Neuger

 

 

365,348

   

.01

Suzanne Nora Johnson

 

 

61,850

   

(4)

Morris W. Offit

 

 

 

57,102

   

(4)

James F. Orr III

 

 

 

50,483

   

(4)

Martin J. Sullivan

 

 

 

470,337

   

.02

Douglas M. Steenland

 

 

 

0

   

(4)

Edmund S.W. Tse

 

 

1,702,560

   

.06

Robert B. Willumstad

 

 

 

5,000

   

(4)

All Directors and Executive Officers of AIG as a Group (32 individuals)

 

 

7,459,828

   
.26


 

 

(1)

 

 

 

Amounts include shares as to which the individual shares voting and investment power as follows: Tse—1,045,416 shares with a corporation and Feldstein—23,727 shares with a corporation.

 

(2)

 

 

 

Amount of equity securities shown includes shares of AIG Common Stock subject to options which may be exercised within 60 days as follows: Bensinger—124,942 shares, Feldstein—20,500 shares, Herzog—173,804 shares, Miles—5,000 shares, Moor—278,500 shares, Neuger—297,500 shares, Offit—5,000 shares, Orr—2,500 shares, Sullivan—425,282 shares, Tse—471,250 shares, Willumstad—5,000 shares and all directors and the former and current executive officers of AIG as a group—3,622,559 shares. The amount of equity securities shown also includes shares of AIG Common Stock underlying awards under AIG’s 2005-2006 Deferred Compensation Profit Participation Plan (DCPPP) that vested on May 1, 2009 and were issued as of that date except for Messrs. Bensinger and Sullivan. Options and share-based awards for Messrs. Bensinger and Sullivan (including 16,000 shares and 32,000 shares, respectively, underlying DCPPP awards that would have vested and been delivered as of May 1, 2009) are considered outstanding for purposes of this table. The status of these options and share-based awards is part of AIG’s ongoing review of arrangements for Messrs. Sullivan and Bensinger following termination of their employment in 2008. Under certain circumstances of termination of their employment, these options and share-based awards could have been forfeited as of year-end 2008. For more information, see “2008 Compensation—Exercises and Holdings of Previously Awarded Equity—Outstanding Equity Awards at December 31, 2008.” For Mr. Tse, the amount of equity securities shown includes 90,224 shares of AIG Common Stock underlying share-based awards that he is entitled to receive promptly following his retirement at AIG’s 2009 Annual Meeting of Shareholders. For non-management directors, the amount of equity securities shown also includes: (i) shares granted to each non-employee director with delivery deferred until the director ceases to be a member of the Board as follows: Feldstein—2,875 shares, Miles—1,875 shares, Offit—1,875 shares, Orr—1,000 shares; and (ii) 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: Bollenbach—93,806 shares, Dammerman—87,215 shares, Feldstein—5,227 shares, Miles—5,227 shares, Nora Johnson—61,850 shares, Offit—5,227 shares and Orr—21,493 shares.

 

(3)

 

 

 

Amount of equity securities shown also excludes the following securities owned by or held in trust for members of the named individual’s immediate family as to which securities such individual has disclaimed

28


 

 

 

 

beneficial ownership: Sullivan—424 shares and all directors and current executive officers of AIG as a group—27,678 shares. Amount of equity securities shown excludes shares with delivery deferred upon exercise of options as follows: Feldstein—38,109 shares.

 

(4)

 

 

 

Less than .01 percent.

AIG Series C Preferred Stock

The Trust, c/o Kevin F. Barnard, Arnold & Porter LLP, 399 Park Avenue, New York, New York 10022, holds all of the outstanding 100,000 shares of AIG Series C Preferred Stock.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires directors, executive officers, and greater than ten percent holders of AIG Common Stock to file reports with respect to their ownership of AIG equity securities. Based solely on the review of the Forms 3, 4 and 5 and amendments thereto furnished to AIG and certain representations made to AIG, AIG believes that the only filing deficiencies under Section 16(a) by its directors, executive officers, and greater than ten percent holders during 2008 were one late report as a result of a broker error by Ms. Rometty, a director, reporting the disposition of 240 shares in March 2007; one late report as a result of a broker error by Mr. Langhammer, a director, reporting the purchase of 10,000 shares in May 2008; one late report by then-executive officer Robert B. Sandler reporting the retirement distribution of 233,198 shares from the deferred compensation plans established by SICO; one late report by each of the following executive officers reporting the number of shares underlying Restricted Stock Units (RSUs) granted under the DCPPP upon certification of performance on March 2, 2007: Mr. William Dooley, 25,600 RSUs; Mr. Jacob Frenkel, 25,600 RSUs; Mr. David Herzog, 10,800 RSUs; Mr. Robert Lewis, 19,200 RSUs; Mr. Rodney Martin, 19,200 RSUs; Mr. Moor, 56,000 RSUs; Mr. Neuger, 54,400 RSUs; Mr. Brian Schreiber, 27,200 RSUs; Mr. Tse, 64,000 RSUs; Mr. Nicholas Walsh, 28,000 RSUs, Mr. Jay Wintrob, 48,000 RSUs, and Mr. Frank Wisner, 10,800 RSUs; one additional late report by each of Messrs. Frenkel, Tse and Wisner reporting the grant of 5,120, 12,800 and 3,780, respectively, incremental RSUs under the DCPPP on February 26, 2008; and two late reports by individuals and entities in the Starr Group reflecting the disposition of an aggregate of 33,776 shares resulting from two transactions.

RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

Co-Investments with AIG

AIG has established employee investment funds to permit selected employees to participate alongside AIG’s merchant banking, venture capital and similar funds. This fund has a fee structure that is generally more favorable than that offered by AIG to non-employees. Four of AIG’s current executive officers have invested in this fund. There were no distributions from this fund in 2008. A current executive officer invested in a similar fund, the SunAmerica Venture Fund 2000, LP, and received tax distributions related to such fund in 2008.

Other Transactions

Ada K.H. Tse, daughter of Mr. Tse, serves as President and CEO of AIG Global Investment Corp. (Asia) Ltd. For 2007 and 2006, Ms. Tse received approximately $1.4 million and $1.2 million, respectively, in total salary, bonus and equity-based compensation. For 2008, Ms. Tse received approximately $500,000 in salary and $400,000 in retention awards. In addition, Ms. Tse received $250,000 in respect of her year-end bonus for 2008 and is eligible to receive an additional amount that has not yet been approved. Ms. Tse will also be eligible for retention payments in 2009 in the amount of approximately $600,000.

Daniel Neuger, son of Mr. Neuger, serves as a Managing Director of AIG Global Investment Corp. and AIG Global Asset Management Holdings Corp. For 2008, 2007 and 2006, Mr. Daniel Neuger received approximately $365,000, $330,000 and $225,000, respectively, in total salary, bonus and equity- based compensation. For 2008, Mr. Daniel Neuger also received approximately $75,000 in retention awards. Mr. Daniel Neuger will be eligible for retention payments in 2009 in the amount of approximately $110,000.

For a discussion of Mr. Zarb’s consulting services for the Nominating and Corporate Governance Committee, see “Compensation of Directors.”

Related-Party Transactions Approval Policy

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

29


 

 

 

 

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

 

 

 

 

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

 

 

 

 

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

 

 

 

 

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

30


EXECUTIVE COMPENSATION

REPORT OF THE COMPENSATION AND MANAGEMENT RESOURCES COMMITTEE

Overview

The role of the Compensation and Management Resources Committee includes reviewing and approving the compensation awarded to AIG’s Chief Executive Officer (subject to ratification or approval by the Board) and to the other key employees under its purview, making recommendations to the Board with respect to AIG’s compensation programs for key and other employees, overseeing AIG’s management development and succession planning programs and producing this Report on annual compensation.

Risk Review

As part of AIG’s participation in the TARP, the Committee also became responsible for evaluating whether AIG’s compensation programs encourage AIG’s senior executives to take unnecessary and excessive risks that threaten the value of AIG. In 2009, we reviewed (and will continue to review at least annually) the incentive compensation arrangements of AIG’s most senior executives with AIG’s senior risk officers.

Certification

The Compensation Discussion and Analysis that follows discusses the principles the Committee has been using to guide its compensation decisions for senior executives. The Compensation and Management Resources Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Frederic W. Cook & Co. has also reviewed and discussed the Compensation Discussion and Analysis with management and outside counsel on behalf of the Compensation and Management Resources Committee. 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 2008 Annual Report on Form 10-K. In addition, the Compensation and Management Resources Committee certifies that it has reviewed the incentive compensation arrangements of the executives whose compensation is disclosed in the 2008 Summary Compensation Table (other than the executives who departed from AIG prior to November 2008) and has made reasonable efforts to ensure that such arrangements do not encourage such executives to take unnecessary and excessive risks that threaten the value of AIG.

Compensation and Management Resources Committee
American International Group, Inc.
     
James F. Orr III, Chairman
Stephen F. Bollenbach
Dennis D. Dammerman
Suzanne Nora Johnson
Virginia M. Rometty*

 

*

 

 

 

Ms. Rometty resigned from the Board on May 7, 2009.

31


COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis discusses the compensation of our Chief Executive Officer, our Chief Financial Officer and our three most highly paid other executives (as determined in accordance with SEC rules). It also discusses the compensation of three former executives who served as our Chief Executive Officer or Chief Financial Officer in 2008. We refer to these individuals as our “named executives.” However, the Compensation Discussion and Analysis does not cover the arrangements of AIG’s other employees or the many compensation plans and programs in which our 116,000 employees participate around the world.

Compensation Outcomes for 2008

Last year, we introduced a table showing the amount of year-end performance-based compensation earned by each of the executives named in our 2007 Summary Compensation Table. The following is the identical table, providing 2008 amounts for our named executives for 2008 who remain at AIG. Each of these named executives is a member of AIG’s seven-officer Leadership Group, which also includes Mr. Wintrob, our Executive Vice President—Retirement Services, and Ms. Reynolds, our Chief Restructuring Officer.

Year-End Performance-Based Compensation Earned for 2008

 

 

 

 

 

 

 

 

 

 

 

Name

 

Year-End
Variable
Performance-
Based Pay

 

Year-End
Option Award

 

Performance-
Based
RSUs Earned

 

Senior Partner
Units Earned

 

Total

Edward M. Liddy

 

 

$

 

0

   

 

$

 

0

   

 

$

 

0

   

 

$

 

0

   

 

$

 

0

 

David L. Herzog

 

 

$

 

0

   

 

$

 

0

   

 

$

 

0

   

 

$

 

0

   

 

$

 

0

 

Edmund S.W. Tse

 

 

$

 

0

   

 

$

 

0

   

 

$

 

0

   

 

$

 

0

   

 

$

 

0

 

Win J. Neuger

 

 

$

 

0

   

 

$

 

0

   

 

$

 

0

   

 

$

 

0

   

 

$

 

0

 

Kris P. Moor

 

 

$

 

0

   

 

$

 

0

   

 

$

 

0

   

 

$

 

0

   

 

$

 

0

 

Legacy Compensation Principles. Since 2005, our senior management compensation philosophy, as disclosed in prior Proxy Statements, has been based on:

 

 

 

 

Emphasizing “at risk” elements of compensation that had value only if AIG produced strong financial performance and shareholder returns during current and subsequent performance periods;

 

 

 

 

Fostering an owner/manager culture through a partnership compensation approach that ensured senior management accountability for a variety of company-wide strategic goals;

 

 

 

 

Aligning the economic interests of key employees with those of shareholders by ensuring that a substantial portion of each key employee’s compensation was represented by AIG Common Stock; and

 

 

 

 

Centralizing administration and control over compensation.

2008 performance-based outcomes have essentially been predetermined since November of that year, the time the Department of the Treasury agreed to acquire the AIG Series D Preferred Stock, and are consistent with our previously articulated compensation framework. We used overlapping, formula- driven approaches to reward stable short-term and long-term performance and to provide little or no payout if goals were not achieved. We believe our programs responded appropriately to 2008 results:

 

 

 

 

No member of our Leadership Group is receiving annual variable performance-based pay for 2008. Each volunteered not to be considered for such pay in 2008.

 

 

 

 

The options we granted at the end of 2007 are far out of the money, as are all of our outstanding options. We did not make an annual option grant in 2008.

 

 

 

 

Our previously granted long-term performance equity for 2007-2008 and 2008-2009 will pay nothing.

 

 

 

 

Our previously granted long-term performance cash awards for 2006-2008 will pay nothing. The 2007-2009 and 2008-2010 cycles were discontinued.

32


The long-term nature of our awards means that prior years’ compensation, even when earned based on performance, in large part remains at risk. At many other companies, the compensation represented by our unpaid long-term awards would already have been vested and delivered to employees. These long-term awards have historically had significant retentive effects, making it expensive for competitors to attempt to recruit AIG employees. However, the significant decline in the value of AIG shares has eliminated this retentive benefit.

The following chart shows the value of outstanding unvested share-based awards and in-the-money options at the end of each year held by the named executives for 2008 who remain at AIG.

Detail on Operation of Direct Compensation Components. For our most senior executives, direct compensation for 2008 was intended to consist of:

 

 

 

 

Base salary

 

 

 

 

Time-vested grants of equity in the form of stock options and RSUs

 

 

 

 

Long-term performance cash awards granted under the Senior Partners Plan, based on three-year growth in adjusted book value

 

 

 

 

Year-end variable performance-based pay

 

 

 

Performance RSUs granted under the Partners Plan, based on two-year growth in adjusted earnings per share

Base salary. Senior executives historically received a relatively small portion of their overall compensation as base salary. Mr. Liddy volunteered to receive a $1 salary when he joined AIG. For the other named executives, base salary has been set by our Compensation and Management Resources Committee at a reasonable range around the market median, based on demonstrated performance, responsibilities, tenure (including the individual’s historic salary levels) and individual experience.

The Committee considered salary levels at year-end 2007. As we voluntarily disclosed last year, salary levels generally remained at 2007 levels other than for changes related to phasing out our historic quarterly cash bonus program and a $50,000 increase to Mr. Bensinger, our former Chief Financial Officer.

None of our named executives received a regular increase in annual salary for 2009, although Mr. Moor received a promotional increase of $150,000 per year in late 2008 when he assumed additional responsibilities for AIG’s Domestic Personal Lines business in connection with the retirement of Mr. Sandler. Mr. Herzog, who had served as AIG’s comptroller since 2005, declined an increase in annual base salary when he became our Chief Financial Officer in October 2008.

33


Annual cash variable performance-based pay. Annual cash variable performance-based pay is intended to reward overall AIG, business unit and individual performance during the year. All members of the Leadership Group agreed not to receive an annual cash bonus for 2008.

To establish the corporate pool for variable performance-based pay for participants outside of the Leadership Group, the Committee approved discretionary funding for annual awards by business unit at levels between 60 and 90 percent of target, depending on the business unit. For our executive officers (including our Leadership Group other than Mr. Liddy and Ms. Reynolds, who had no target performance-based pay for 2008), the levels approved represented approximately 56 percent of target, and for these officers and our Senior Partners together, levels approved represented approximately 63 percent of target. After our discussions with the Department of the Treasury, AIG determined to pay only one half of the previously approved levels (other than previously guaranteed awards for two executives) for our executive officers and Senior Partners in the first quarter of 2009, resulting in payments at approximately 34 percent of target. The remainder may be paid later in 2009, but only if AIG achieves sufficient performance under our restructuring plan as determined in the discretion of the Committee.

In addition to year-end performance-based pay, AIG has made quarterly cash payments to certain employees, including some members of the Leadership Group. At the end of 2007, AIG began to phase out these amounts by converting up to $100,000 into salary and offering employees the option to convert the remainder into time-vested RSUs (with a 25 percent premium based on AIG’s share price on the date of grant). Messrs. Herzog and Tse elected this option and received RSUs, which have lost almost all of their value. For the members of the Leadership Group who were still receiving these amounts in 2008, the quarterly payments were suspended after the third quarter, when the initial financial assistance was received from the NY Fed. Amounts that appear in the “Bonus” column of the Summary Compensation Table for 2008 represent only these pre-assistance quarterly payments and not year- end performance-based pay. AIG has continued the suspension of quarterly payments and RSUs in lieu of quarterly payments for 2009 for the Leadership Group. To the extent the Committee establishes targets for annual variable performance-based pay for the Leadership Group for 2009, it intends to take the prior quarterly cash opportunity into account.

Time-vested grants of stock options. AIG historically provided long-term equity-based compensation in part through time-vested equity grants. Until 2008, at year-end, AIG generally granted time-vested option awards to employees participating in our Senior Partners Plan and time-vested RSUs to employees below the Senior Partner level. No year-end grants were made in 2008.

Performance RSUs granted under the Partners Plan. In 2006 and 2007, the Committee granted Performance RSUs each year under AIG’s Partners Plan. The number of Performance RSUs earned by a participant depended on growth in AIG’s adjusted net income (earnings) per share over a two-year performance period relative to pre-established goals and ranged from 0 to 150 percent of the “target” award, with no Performance RSUs earned for growth in AIG’s adjusted net income per share of less than four percent over the performance period, and 100 percent of the “target” award earned only for growth of 10 percent or more. The Plan provided that earned Performance RSUs would generally vest and be delivered between the third and sixth anniversaries of the first day of the relevant performance period.

Because AIG did not meet earnings thresholds under the Partners Plan, none of the previously granted Performance RSUs were earned for the 2007-2008 performance period. In addition, based on 2008 performance, no Performance RSUs will be earned for the 2008-2009 performance period. (The awards for the 2008-2009 performance period were granted in late 2007, as a compensation opportunity for 2008 and 2009.) No grants of Performance RSUs were made in 2008, and none are expected for 2009.

Long-term performance cash awards granted under the Senior Partners Plan. Until 2008, the Committee granted participants in the Senior Partners Plan units (referred to as Senior Partner Units) that determined their share of an aggregate incentive pool. As of year-end 2008, 55 of AIG’s senior executives, including the members of the Leadership Group other than Mr. Liddy and Ms. Reynolds, were participants in the Senior Partners Plan. The aggregate incentive pool for each year was based on a weighted average of the growth in AIG’s adjusted book value over a three-year period. The Plan provided that earned Senior Partner Units would generally vest and be paid between the third and sixth anniversaries of the first day of the last year of the relevant performance period.

To provide tangible affirmation of the alignment among Senior Partners and Partners, no value could be earned under the Senior Partners Plan for any performance period ending in any year in which no Performance

34


RSUs under the Partners Plan were earned for the performance period ending in the same year. Consequently, no Senior Partner Units were earned for the 2006-2008 performance period under the Senior Partners Plan. In 2008, the Committee terminated the operation of the Senior Partners Plan for future performance periods.

Principles of the New Environment and New 2008 Initiatives

As a result of the transformation of AIG’s ownership and financial situation, the senior executive compensation framework has changed. The following principles guided our actions as 2008 developed. Each is discussed in more detail in this section.

 

 

 

 

Principle 1: Embrace evolving standards of compensation governance.

 

 

 

 

Principle 2: Bring AIG’s historic guiding principles into 2009.

 

 

 

 

Principle 3: Act, if necessary, to provide appropriate incentives to preserve value.

Principle 1: Embrace evolving standards of compensation governance. Over the past six months, circumstances and perspectives have changed. The recession has deepened and spread globally. Public concern regarding compensation and executive perquisites has been focused on a variety of publicized incidents. We recognize that there are some practices we must change.

We stand ready to make these changes as standards evolve, both with respect to our legacy compensation arrangements and the special steps we have taken since September 2008. Again, we expect our Leadership Group to make the biggest changes.

As an example, in connection with AIG’s participation in the TARP in November 2008, we agreed to an additional set of compensation principles that would apply to the Leadership Group and Senior Partners and were designed to apply while financial assistance to AIG was in place. A number of these have been superseded by the adoption of the American Recovery and Reinvestment Act of 2009 (the ARRA), which occurred in February 2009, but they are important to an understanding of our 2008 compensation.

 

 

 

 

Chief Executive Officer and Chief Restructuring Officer compensation. Mr. Liddy volunteered to receive only $1 in salary. He has received no cash incentive compensation and no equity-based compensation. Ms. Reynolds, our Chief Restructuring Officer, worked for us on a voluntary basis in 2008. It was expected that Mr. Liddy ultimately would be compensated through an equity grant. However, Mr. Liddy declined to move forward on work toward that arrangement as AIG addressed the immediate challenges facing it. Ms. Reynolds’s compensation in 2009 was expected to be tied directly to the progress of restructuring efforts, although this initiative may be affected by the ARRA. (For 2009, Ms. Reynolds has a salary of $900,000, which was approved by the Committee with the input of Mr. Liddy and represents a reduction from her salary at her previous employer.)

 

 

 

 

No salary increases. AIG implemented a policy of no regular salary increases for the Leadership Group and other Senior Partners (other than in connection with promotions).

 

 

 

 

No use of government funds for executive variable performance-based pay and related limits. AIG agreed not to use government funds to pay Leadership Group or other Senior Partner performance-based pay. In addition, AIG agreed that the annual pool for performance-based pay for Senior Partners for each of 2008 and 2009 may not exceed the average of the annual pools for 2006 and 2007 (regardless of the performance achieved in those years). In connection with this agreement, each member of the Leadership Group volunteered not to receive annual variable performance-based pay for 2008.

 

 

 

 

Limits on termination payments and benefits. AIG’s named executives have agreed that they may not receive any termination payments or benefits (other than fully vested, previously earned amounts). For Senior Partners, including other members of the Leadership Group, termination payments and benefits were limited to three times the individual’s average historical annual compensation.

 

 

 

 

 

Separately, the members of the Leadership Group and other Senior Partners agreed to limit the total amount of 2009 variable performance-based pay, special retention awards and termination payments and benefits (if applicable) they may receive.

35


 

 

 

 

Clawback on incentive compensation. AIG’s named executives have agreed that any incentive award earned during the Department of the Treasury’s investment in AIG will be subject to recovery by AIG if it is determined to have been based on materially inaccurate financial results.

We believe that our senior employees, many of whom were not at AIG, were newly hired or were in different positions before September 2008, and all of our Senior Partners generally, have shown an appropriate willingness to restructure their compensation and give up entitlements for the benefit of AIG and its stakeholders.

Principle 2: Bring AIG’s historic guiding principles into 2009. As we have faced the challenge of developing a new annual compensation framework, we have continued to be mindful of our historic compensation principles. We believe that we should continue to apply them, although we necessarily will implement these principles differently than we did before.

Principle 3: Act, if necessary, to provide appropriate incentives to preserve value. In the second half of 2008, AIG received unprecedented assistance from the NY Fed and immediately announced a repayment plan centered on the prompt sale of high-quality assets. As a result of this announcement, we needed to confront the fact that many of our employees, perhaps the majority, knew that their long-term future with us was limited, and our competitors knew that our key producers could perhaps be lured away. At the same time, we believed that our repayment plan depended on maintaining the value of the underlying assets that we intended to sell. Allowing departures to erode the strength of our businesses would have damaged our ability to repay taxpayers for their assistance.

In response to results in prior quarters and the performance of AIG Common Stock, a retention program had been under review by the Committee since June 2008. Promptly following the announcement of AIG’s credit agreement with the NY Fed, the Committee acted to retain senior employees. We began identifying key employees based on work over several months, and Mr. Willumstad, AIG’s Chief Executive Officer immediately before the receipt of NY Fed assistance, made initial recommendations as to participants.

Of the named executives, Messrs. Herzog and Moor were granted retention awards in amounts of $2,500,000 and $4,000,000, respectively, based on multiples of their base salaries. The awards were initially scheduled to be paid 60 percent on December 31, 2008, and 40 percent on December 31, 2009. This schedule was determined after consideration of the payment dates of other expected awards and the expected divestiture schedule.

AIG has not paid any retention award to Messrs. Herzog or Moor. In November 2008, all of AIG’s executive officers, including Messrs. Herzog and Moor, voluntarily agreed to extend the period for earning the awards. This action was taken as part of the changes discussed above under “Principle 1.” For the first payment, the extension was from December 2008 to April 2009, doubling the original period for earning the first payment. For the second payment, the extension was until April 2010. In addition, all of AIG’s Senior Partners, including Messrs. Herzog and Moor, gave up the right to receive unpaid retention awards in the case of involuntary termination.

AIG is working with the Department of the Treasury and NY Fed to establish a framework for further extending the period for earning retention awards and making them performance-based. The payments currently scheduled for 2010 also will be addressed, and payment of any scheduled retention award will be subject to compliance with any then-applicable regulations under the ARRA. See “New TARP Compensation Limits and 2009 Framework.” Once a framework has been established, we intend to seek the voluntary agreement of the affected executive officers, although each retains his or her pre-existing contractual rights at this time.

Arrangements with Former and Separating Executives

Arrangements with Mr. Sullivan. In June 2008, Mr. Sullivan resigned as President and Chief Executive Officer after nearly 37 years of service to AIG. From the time of his 2005 promotion to President and Chief Executive Officer, Mr. Sullivan’s employment was governed by an agreement with AIG under which he was eligible to receive payments and benefits on certain terminations of his employment. These included an involuntary termination without “Cause” and a resignation for “Good Reason.” Mr. Sullivan styled his resignation as for “Good Reason” under his agreement. Consistent with a comprehensive assessment of expenses and

36


compensation that it has undertaken, AIG is reviewing potential payments to Mr. Sullivan and has not made any such payments pending the completion of its assessment. For more information on AIG’s arrangements with Mr. Sullivan, see “2008 Compensation” and “Potential Payments on Termination and Arrangements with Former Officers.”

Arrangements with Mr. Willumstad. Mr. Sullivan was replaced as Chief Executive Officer by Mr. Willumstad, who previously served as our non-executive Chairman of the Board. When Mr. Willumstad succeeded Mr. Sullivan, he and AIG entered into a letter agreement providing for sign-on grants of restricted shares of AIG Common Stock and options, as well as for Mr. Willumstad’s participation in AIG’s Executive Severance Plan (ESP). For more information on Mr. Willumstad’s sign-on grants, see “2008 Grants of Plan-Based Awards.”

In September 2008, shortly after AIG announced that it would enter into a credit agreement with the NY Fed, Mr. Willumstad stepped down as Chairman and Chief Executive Officer as these positions were assumed by Mr. Liddy, whom the Department of the Treasury had recruited to lead AIG. In connection with Mr. Willumstad’s resignation, which was treated as an involuntary termination without “Cause,” Mr. Willumstad voluntarily waived any severance payments to which he was entitled, waiving $22.5 million in payments under the ESP. Mr. Willumstad and AIG also agreed to rescind his special sign- on grant of restricted shares. Mr. Willumstad has continued to receive certain other benefits in connection with his service as Chairman and Chief Executive Officer of AIG. For more information on AIG’s arrangements with Mr. Willumstad, see “2008 Compensation” and “Potential Payments on Termination and Arrangements with Former Officers.”

Arrangements with Mr. Bensinger. In October 2008, Mr. Bensinger, our former Chief Financial Officer, resigned from AIG. Like Mr. Sullivan, Mr. Bensinger was party to an employment agreement with AIG that provided for certain termination payments and benefits. Mr. Bensinger also styled his resignation as for “Good Reason” under his agreement. AIG is reviewing potential payments to Mr. Bensinger and has not made any payments pending its assessment. For more information on AIG’s arrangements with Mr. Bensinger, see “2008 Compensation” and “Potential Payments on Termination and Arrangements with Former Officers.”

Arrangements with Mr. Tse. As we announced in March, Mr. Tse will retire both from our Board and from his position as Senior Vice Chairman—Life Insurance at our 2009 Annual Meeting of Shareholders. Mr. Tse is retiring at age 71, having worked with AIG since 1961. Mr. Tse will not be entitled to any severance payments or special separation rights as a result of his retirement. Mr. Tse is entitled only to the retirement benefits that he has accrued under our retirement programs for his 48 years of service and awards previously earned for performance in prior years under our plans that require continuing long-term service. Under our share-based incentive plans, Mr. Tse is entitled to receive 90,224 shares of AIG Common Stock on retirement, and, under our Senior Partners Plan, Mr. Tse is entitled to receive $14,388,500 earned for years before 2008.

At our request, Mr. Tse has agreed to enter into a Service Agreement with American International Assurance Company, Limited (AIA), an insurance subsidiary of AIG based in Hong Kong, that will become effective upon his retirement from AIG. As part of that agreement, Mr. Tse agreed to serve as Honorary Chairman of AIA and Non-Executive Chairman of each of Nan Shan Life Insurance Company, Limited and The Philippine American Life and General Insurance Company for a one-year period, subject to future extensions as agreed between AIA and Mr. Tse. We requested this continuing service so that we would continue to benefit from Mr. Tse’s expertise and relationships in Asia as we continue our restructuring and divestiture program.

As part of the agreement, Mr. Tse agreed to abide by certain restrictive covenants and to execute a release of claims in favor of AIG. Mr. Tse will receive an annual fee of U.S. $250,000 for his service. The agreement is terminable on 30 days’ notice by either party, in which case the fee would be prorated. In addition, Mr. Tse will be eligible to receive a transaction bonus in an amount to be determined by AIG in its sole discretion in the event of a sale or initial public offering of any of AIG’s foreign life operations (subject to limitations imposed by any other agreement or arrangement to which we are subject).

New TARP Compensation Limits and 2009 Framework

As part of the ARRA, the Department of the Treasury will issue additional regulations with further restrictions on executive compensation by companies that have participated in the TARP. These regulations may include additional limitations that will require us to reconsider our compensation framework for members of the Leadership Group and other Senior Partners (especially with respect to incentive compensation). Any

37


compensation that AIG awards to senior executives in 2009 and future years will need to comply with regulations under the ARRA and will be undertaken with a view toward our repayment goals and in consultation with our stakeholders.

The major additional limitations on executive compensation under the ARRA are likely to include:

 

 

 

 

Prohibition on bonuses to top 25. While it has assistance under the TARP, AIG will not be able to accrue or pay the named executives and our 20 most highly paid other employees any bonus, retention award or incentive compensation, other than long-term restricted stock that is not more than one third of total compensation and does not fully vest while assistance under the TARP remains outstanding.

 

 

 

 

Expanded limits on termination payments and benefits. In addition to the named executives, AIG’s five most highly paid other employees will not be able to receive any termination payments or benefits (other than fully vested, previously earned amounts).

 

 

 

 

Expanded clawback on incentive compensation. The requirement that any incentive award earned during the Treasury Department’s investment in AIG will be subject to recovery by AIG if it is determined to have been based on materially inaccurate financial results will be expanded beyond the named executives to include our 20 most highly paid other employees.

Indirect Compensation Components

Retirement Benefits. AIG provides a number of retirement benefits to eligible employees, including both traditional pension plans (called defined benefit plans) and defined contribution plans (such as 401(k) plans).

Defined benefit plans. AIG’s defined benefit plans include a tax-qualified pension plan, the Excess Retirement Income Plan and the Supplemental Executive Retirement Plan (SERP). Each of these plans provides for a yearly benefit based on years of service and the employee’s salary over a three-year period. The Excess Retirement Income Plan is designed to pay the portion of the benefit under the tax-qualified plan that is not payable under that plan due to restrictions imposed by the Internal Revenue Code (the Code). The SERP provides for a different, generally higher benefit to a small number of key employees selected by the Board, but this benefit is offset by payments under the tax-qualified plan and the Excess Retirement Income Plan. These plans and their benefits are described in greater detail in “Post-Employment Compensation—Pension Benefits.” We believe that these plans have provided significant retention and competitive advantages. Mr. Liddy does not participate in these plans.

Defined contribution plans. Through 2008, AIG’s defined contribution plans included a tax-qualified plan (401(k)), the Supplemental Incentive Savings Plan (SISP), the Executive Deferred Compensation Plan (EDCP) and other plans sponsored by AIG, including plans acquired through acquisitions. In November 2008, AIG terminated the SISP, the EDCP and certain other defined contribution plans, providing that no further deferrals would be made after December 31, 2008, and that plan balances would be paid in the first quarter of 2009 for current employees other than AIG’s executive officers. These plans are described in greater detail in “Post-Employment Compensation—Nonqualified Deferred Compensation.” AIG matched participants’ contributions to the 401(k) plan up to the annual maximum pre-tax contribution limit of $15,500 in 2008, but did not provide matching contributions to the SISP or the EDCP.

Mr. Tse participates in a different defined contribution plan in connection with his years of service in Hong Kong, as described in greater detail in “Post-Employment Compensation—Nonqualified Deferred Compensation.”

Perquisites. To facilitate the performance of their management responsibilities, AIG provides certain employees with automobile allowances and parking and financial and tax planning. In addition, AIG also provided club memberships and recreational opportunities, but Mr. Liddy has not participated in these club memberships or recreational opportunities, and AIG has now largely eliminated payments for them.

Historically, AIG has provided its Chief Executive Officer with access to corporate aircraft for personal travel consistent with the recommendations of outside security reviews. However, since Mr. Liddy’s election as Chairman and Chief Executive Officer, he has generally used commercial air travel to commute between his home in Chicago and AIG’s headquarters in New York City at AIG’s expense. In addition, AIG has provided an apartment for Mr. Liddy’s use in New York City. These steps were necessary and directly related to Mr. Liddy’s

38


immediate service. However, AIG is disclosing the incremental cost of those items as a “benefit” to Mr. Liddy in the 2008 Summary Compensation Table in accordance with SEC requirements. The 2008 Summary Compensation Table also reflects payments made by AIG for work performed by Mr. Liddy’s counsel in an effort to develop appropriate compensation structures for Mr. Liddy and other AIG senior employees in the current circumstances. (Although an equity arrangement for Mr. Liddy was substantially negotiated, Mr. Liddy has now stated that he does not think it would be appropriate to enter into the proposed arrangement and has declined to move forward with it, especially in light of changing business, regulatory and legislative considerations.) AIG also made additional payments to offset any tax obligation Mr. Liddy incurred in accordance with the preceding arrangements to avoid his effectively having to pay to work at AIG. AIG does not believe that any of the amounts described in this paragraph represents an actual compensation benefit for Mr. Liddy.

AIG pays a portion of Mr. Tse’s living expenses, consistent with benefits AIG provides to certain other senior executives living in Hong Kong. In March 2008, and as previously noted in our 2008 Proxy Statement, AIG resolved certain foreign payroll tax obligations relating to amounts paid to employees by AIG and its affiliates in overseas jurisdictions prior to 2007. Under these arrangements, AIG made payments to the Hong Kong taxing authority relating to amounts paid by AIG and its affiliates to affected AIG employees based in Hong Kong, including Mr. Tse, as reflected in the 2008 Summary Compensation Table.

The Committee’s review of AIG’s practices with respect to perquisites is ongoing. In particular, the Committee expects to adopt a formal perquisites policy in response to the requirements of the ARRA.

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

Termination Benefits and Policies. AIG took significant steps to limit termination benefits in 2008.

No severance for named executives. As discussed above under “Principle 1,” as part of AIG’s agreements with the Department of the Treasury, severance benefits for the named executives have been eliminated. In addition, AIG limited severance benefits for all other Senior Partners.

Executive Severance Plan. In 2005, the Committee established a plan that provided severance payments and benefits to a select group of key executives. This plan was replaced by an expanded ESP in March 2008. The ESP generally extends to employees who participated in the Partners Plan, who would be eligible for severance payments and benefits if terminated by AIG without “Cause.” ESP participants who are Senior Vice Presidents or higher generally are also eligible for severance on a “Good Reason” termination by the participant. However, although the named executives other than Mr. Liddy have participated in the ESP in the past, as part of their agreement to eliminate their severance entitlements, they may not receive payments or benefits under the ESP on any termination while they are named executives. Mr. Liddy does not participate in the ESP.

In the event of a qualifying termination, subject to the restrictions on our named executives and Senior Partners described above, a participant is eligible to receive an annual amount equal to the sum of salary, annual quarterly bonuses and three-year-average performance-based bonuses for a severance period of up to two years that is based on the executive’s seniority or length of service. In addition, unvested long-term awards that would have vested during the severance period will continue to vest, but other unvested awards generally will be forfeited (subject to discretionary reinstatement as described below). The ESP does not provide for tax gross-up payments. In addition, the ESP was amended in March 2009 to provide that, beginning in March 2010, any severance payments that would otherwise be payable under the ESP will be offset by any amounts due to the participant’s subsequent employment by another employer.

Termination and retirement provisions in long-term awards. AIG’s normal retirement age is 65. For employees who retire after reaching normal retirement age, time-vested equity-based awards will generally vest upon retirement. Additionally, earned but unvested awards under the Senior Partners Plan and the Partners Plan (as well as the AIG and SICO predecessors to the Partners Plan) will generally vest and be delivered shortly thereafter. Historically, AIG has generally elected to reinstate equity-based and Senior Partners Plan awards for employees who retire before reaching normal retirement age, but whose combined age and years of service to AIG total 70 years or more (a rule of 70). In the case of reinstatements under the rule of 70, awards are not accelerated and will generally vest and be delivered at the normally scheduled time, subject to the employee’s continued compliance with a release and restrictive covenant agreement.

39


No change-in-control benefits for named executives. None of AIG’s compensation components in which the named executives participate has a change-in-control trigger. AIG’s equity plans for the named executives and the Senior Partners Plan do not accelerate vesting on a change in control. The employment agreements with Messrs. Sullivan and Bensinger provided for tax gross-up payments upon termination of employment in certain circumstances. For more information, see “Potential Payments on Termination and Arrangements with Former Officers.”

Process for Compensation Decisions

The Committee determines the compensation of AIG’s Chief Executive Officer, and the Board approves or ratifies the amounts to be awarded to him. After considering the recommendation of AIG’s Chief Executive Officer, the Committee reviews and approves the compensation of approximately 20 other key employees under its purview, which includes all of the other named executives.

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

Attendance at Committee meetings generally includes internal legal and human resources executives and their staff members (depending upon agenda items), outside counsel and the Committee’s independent consultant. Following September 2008, attendance also regularly includes representatives of the NY Fed and their advisors.

Independent Consultant. To provide independent advice, the Committee has used the services of Frederic W. Cook & Co. 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 evaluation of compensation against business results, comparisons to industry peers and comparisons to “best practices” in general. The Cook firm responds on a regular basis to questions from the Committee and the Committee’s other advisors, providing its opinions with respect to the design and implementation of current or proposed compensation programs. Frederic W. Cook & Co. does not provide any other services to AIG or its management except with respect to director compensation.

In June 2008, the Committee also considered materials presented by Watson Wyatt Worldwide, Inc., related to retention planning and possible changes to AIG’s long-term incentive compensation programs. Watson Wyatt was engaged for this purpose by AIG to assist the human resources area in the consideration of AIG’s compensation components and long-term vesting periods in the context of evolving pay practices and has not otherwise presented materials to the Committee.

Consideration of Competitive Compensation Levels. In reviewing compensation decisions over the year and in making decisions about the compensation of the named executives, the Committee is provided with competitive market information and information about AIG’s business results. For these purposes, the Committee currently considers a competitor group of ten financial companies that is broader than the group of peer insurance companies used in AIG’s Annual Report on Form 10-K. These companies are listed below:

Allstate
American Express
Bank of America
Citigroup
HSBC Holdings
JPMorgan Chase
MetLife
Prudential Financial
Travelers
Wells Fargo

Consideration of Prior Years’ Compensation. The cumulative amounts realizable from prior years’ equity-based and other long-term awards generally are not considered in determining the amount or the components of current year compensation. We believe that this approach is most consistent with the goal of motivating strong performance in each year. However, the grant of retention awards noted above was in part a response to the decline in AIG’s share price.

40


Consideration of Risk Management. As part of AIG’s participation in the TARP, the Committee reviewed (and will continue to review on an annual basis or more frequently as may be required by the ARRA) the incentive compensation arrangements of the named executives with AIG’s senior risk officers to ensure that the compensation arrangements do not encourage the named executives to take unnecessary and excessive risks that could threaten the value of AIG. The Committee completed its initial review in February 2009. In addition, the Committee will apply the results of its review as it develops the ongoing compensation structure for AIG. However, this structure may require substantial modification in view of pending legal requirements. For the Committee’s related certification, see the Report of the Compensation and Management Resources Committee.

Other Considerations

Deductibility of Executive Compensation. As a participant in the TARP, AIG is now subject to Section 162(m)(5) of the Code, which limits AIG’s ability to take a federal income tax deduction for compensation paid to the named executives. Section 162(m)(5) generally lowers the cap on the deductibility of compensation paid to these individuals from $1,000,000 to $500,000 per year and removes the exemption for compensation determined to be “performance-based” under applicable tax regulations. Accordingly, any amounts over $500,000 paid to a named executive during this time will not be deductible for U.S. federal income tax purposes.

Until 2008, AIG’s strategy for maximizing the deductibility of executive compensation was to structure the compensation of senior employees so that it would qualify as performance-based and not be subject to the deductibility cap. To this end, AIG adopted an Executive Incentive Plan that provided that an executive subject to the plan could be paid no more than 0.3 percent of AIG’s adjusted net income in performance compensation for a given year (although the Committee reserved the right to make awards outside of the Plan). The retention awards and annual variable performance-based pay for executives (other than our Leadership Group, who received no annual variable performance-based pay for 2008) were made outside of the Executive Incentive Plan. Although the Committee is mindful of the deductibility of executive compensation and is committed to awarding compensation that it believes is in fact based on performance, deductibility is necessarily no longer a primary focus of compensation design.

Share Ownership Guidelines. In 2007, AIG adopted share ownership guidelines. These guidelines established levels of ownership of AIG Common Stock at five times salary for the Chief Executive Officer and three times salary for other officers at the level of Senior Vice President and above. Until the guidelines were met, such officers were required to retain 50 percent of the shares of AIG Common Stock received upon the exercise of stock options or upon the vesting of RSUs granted by AIG. Shares held for purposes of the guidelines include stock owned outright by the officer or his or her spouse and earned but unvested share-based awards.

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

AIG’s compensation framework also provides the Committee with specific authority to cancel certain awards if an employee engages in misconduct. Additionally, as noted above, any future bonus or incentive payments made to the named executives will be subject to recovery by AIG if they are based on inaccurate financial results.

Conclusion

AIG continues to face extraordinary challenges that demand focus and difficult decisions in regard to the compensation of AIG’s seniormost employees, including the Leadership Group. Using the guiding principles described above, AIG intends to face these challenges and strike the best possible balance between motivating its experienced, capable and technically proficient employees to achieve results that matter to American taxpayers and conserving scarce liquidity resources.

41


2008 COMPENSATION

Summary Compensation Table

The following tables contain information with respect to AIG’s named executives. As required by SEC rules, AIG’s named executives include the Chief Executive Officer, Chief Financial Officer and three other most highly paid executive officers, as well as three former executives who served as either Chief Executive Officer or Chief Financial Officer during 2008. The following presentation differs substantially from the manner in which AIG’s Compensation and Management Resources Committee administers the compensation of key employees. Please see the Compensation Discussion and Analysis for additional detail regarding the Committee’s compensation philosophy, practices and 2008 compensation decisions.

2008 Summary Compensation Table(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name and
Principal Position

 

Year

 

Salary

 

Bonus(2)

 

Stock
Awards(3)

 

Option
Awards(4)

 

Non-Equity
Incentive Plan
Compensation(5)

 

Change in
Pension
Value(6)

 

All Other
Compensation(7)

 

Total

Edward M. Liddy

 

 

 

2008

   

 

$

 

1

   

 

$

 

0

   

 

$

 

0

   

 

$

 

0

   

 

$

 

0

   

 

$

 

0

   

 

$

 

460,477

   

 

$

 

460,478

(1)

 

President and Chief

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David L. Herzog

 

 

 

2008

   

 

$

 

675,000

   

 

$

 

0

   

 

$

 

430,329

   

 

$

 

681,155

   

 

$

 

27,164

   

 

$

 

111,400

   

 

$

 

14,626

   

 

$

 

1,939,674

 

Executive Vice

 

 

 

2007

   

 

$

 

526,923

   

 

$

 

628,750

   

 

$

 

133,158

   

 

$

 

566,648

   

 

$

 

693,235

   

 

$

 

21,785

   

 

$

 

11,115

   

 

$

 

2,581,614

 

President and Chief

 

 

 

2006

   

 

$

 

500,962

   

 

$

 

578,750

   

 

$

 

202,498

   

 

$

 

482,226

   

 

$

 

418,616

   

 

$

 

13,920

   

 

$

 

22,693

   

 

$

 

2,219,665

 

Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Edmund S.W. Tse(8)

 

 

 

2008

   

 

$

 

950,902

   

 

$

 

0

   

 

$

 

2,168,443

   

 

$

 

982,027

   

 

$

 

285,842

   

 

$

 

718,065

   

 

$

 

4,227,888

   

 

$

 

9,333,166

 

Senior Vice

 

 

 

2007

   

 

$

 

848,776

   

 

$

 

1,863,963

   

 

$

 

(470,227

)

 

 

 

$

 

2,630,852

   

 

$

 

4,950,546

   

 

$

 

0

   

 

$

 

197,715

   

 

$

 

10,021,625

 

Chairman—Life Insurance

 

 

 

2006

   

 

$

 

848,776

   

 

$

 

1,838,455

   

 

$

 

3,729,295

   

 

$

 

3,370,727

   

 

$

 

5,860,619

   

 

$

 

0

   

 

$

 

193,060

   

 

$

 

15,840,932

 

Win J. Neuger

 

 

 

2008

   

 

$

 

1,000,000

   

 

$

 

555,000

   

 

$

 

2,549,374

   

 

$

 

1,602,183

   

 

$

 

142,921

   

 

$

 

460,663

   

 

$

 

44,828

   

 

$

 

6,354,969

 

Executive Vice

 

 

 

2007

   

 

$

 

942,000

   

 

$

 

1,223,000

   

 

$

 

1,223,230

   

 

$

 

1,576,646

   

 

$

 

2,475,273

   

 

$

 

285,971

   

 

$

 

56,573

   

 

$

 

7,782,693

 

President and Chief

 

 

 

2006

   

 

$

 

942,000

   

 

$

 

1,613,000

   

 

$

 

1,499,042

   

 

$

 

1,519,533

   

 

$

 

2,930,309

   

 

$

 

252,127

   

 

$

 

33,070

   

 

$

 

8,789,081

 

Investment Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kris P. Moor

 

 

 

2008

   

 

$

 

959,615

   

 

$

 

561,563

   

 

$

 

2,296,747

   

 

$

 

1,428,522

   

 

$

 

163,338

   

 

$

 

535,339

   

 

$

 

38,990

   

 

$

 

5,984,114

 

Executive Vice

 

 

 

2007

   

 

$

 

725,962

   

 

$

 

1,823,750

   

 

$

 

631,881

   

 

$

 

1,379,472

   

 

$

 

2,828,884

   

 

$

 

0

   

 

$

 

35,540

   

 

$

 

7,425,489

 

President—Property

 

 

 

2006

   

 

$

 

700,962

   

 

$

 

1,663,750

   

 

$

 

861,355

   

 

$

 

1,381,947

   

 

$

 

3,348,925

   

 

$

 

0

   

 

$

 

30,571

   

 

$

 

7,987,510

 

Casualty Group

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Separated During 2008

 

 

 

 

 

 

 

 

 

 

 

 

Martin J. Sullivan

 

 

 

2008

   

 

$

 

538,462

   

 

$

 

562,500

   

 

$

 

6,423,012

(9)

 

 

 

$

 

8,094,376

(9)

 

 

 

$

 

277,483

   

 

$

 

1,447,154

   

 

$

 

11,888,583

(9)

 

 

 

$

 

29,231,570

(1)

 

President and Chief

 

 

 

2007

   

 

$

 

1,000,000

   

 

$

 

3,625,000

   

 

$

 

921,876

   

 

$

 

2,461,946

   

 

$

 

5,607,439

   

 

$

 

30,021

   

 

$

 

697,910

   

 

$

 

14,344,192

 

Executive Officer,

 

 

 

2006

   

 

$

 

1,000,000

   

 

$

 

10,125,000

   

 

$

 

1,265,689

   

 

$

 

1,917,216

   

 

$

 

5,838,656

   

 

$

 

275,701

   

 

$

 

703,432

   

 

$

 

21,125,694

 

January 1 through

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 15, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert B. Willumstad

 

 

 

2008

   

 

$

 

269,231

   

 

$

 

0

   

 

$

 

24,626,614

(10)

 

 

 

$

 

12,000,000

   

 

$

 

0

   

 

$

 

0

   

 

$

 

659,108

   

 

$

 

37,554,953

(1)

 

President and Chief

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Officer,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 15 through

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 18, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Steven J. Bensinger

 

 

 

2008

   

 

$

 

726,923

   

 

$

 

487,500

   

 

$

 

2,418,664

(9)

 

 

 

$

 

2,073,593

(9)

 

 

 

$

 

122,327

   

 

$

 

0

   

 

$

 

3,408,172

(9)

 

 

 

$

 

9,237,179

(1)

 

Executive Vice

 

 

 

2007

   

 

$

 

751,923

   

 

$

 

1,450,000

   

 

$

 

598,408

   

 

$

 

864,801

   

 

$

 

2,786,927

   

 

$

 

113,043

   

 

$

 

35,274

   

 

$

 

6,600,376

 

President and Chief

 

 

 

2006

   

 

$

 

750,000

   

 

$

 

3,250,000

   

 

$

 

753,666

   

 

$

 

617,647

   

 

$

 

2,093,078

   

 

$

 

108,143

   

 

$

 

18,323

   

 

$

 

7,590,857

 

Financial Officer,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 1 through

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 8, 2008; Vice

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chairman and Acting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chief Financial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Officer, May 8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

through

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

October 9, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

42


Footnotes to 2008 Summary Compensation Table

 

(1)

 

 

 

The footnotes to this table are important. In some cases, the amounts presented in the table do not represent value actually received by the named executive, and in some cases, the amounts represent value specifically forfeited. The footnotes to this table provide important detail so that you can evaluate these amounts. For example:

 

 

 

 

Mr. Liddy’s compensation consists almost wholly of items that are required to be disclosed as perquisites by SEC rules. This includes items that relate directly to Mr. Liddy’s volunteering for immediate service in New York, notwithstanding that he and his family live in Chicago, and to Mr. Liddy’s efforts to develop appropriate compensation arrangements for AIG executives in the current environment. This is discussed in footnote 7.

 

 

 

 

Mr. Willumstad’s compensation reflects $24.5 million of accounting expense for an award of restricted shares that was rescinded by mutual agreement of AIG and Mr. Willumstad. Although Mr. Willumstad never realized any value from these shares, accounting and SEC rules require them to be reflected in full in this table. This is discussed in footnotes 3 and 10.

 

 

 

 

Compensation for Messrs. Sullivan and Bensinger includes termination payments and benefits that they have not received but for which they would be eligible if their resignations were for “Good Reason” under their respective employment agreements. AIG is reviewing their arrangements as part of a comprehensive assessment of expenses and compensation, and no payments will be made pending completion of the review. This is discussed in footnotes 6 and 9.

 

(2)

 

 

 

AIG did not pay annual performance compensation to the named executives for 2008. For 2008, amounts in this column solely represent payments under AIG’s quarterly bonus program for the first three quarters of 2008, after which payments were suspended for the members of AIG’s Leadership Group. Mr. Liddy does not participate in AIG’s quarterly bonus program.

 

(3)

 

 

 

No stock-based awards were granted in 2008 to the named executives who remain at AIG. Stock-based awards were granted to Mr. Sullivan in March 2008 and to Mr. Willumstad for his services as a non-employee director and when he became Chief Executive Officer. This column represents the dollar amount recognized for financial statement reporting purposes (without regard to any estimate of forfeiture related to service-based vesting conditions) of outstanding stock-based awards under AIG’s stock incentive plans, the Partners Plan, the DCPPP and the SICO plans, as well as DSUs granted to Mr. Willumstad prior to his election as Chief Executive Officer. The amount recognized for the awards granted by AIG was calculated using the assumptions described in Note 17 to the Consolidated Financial Statements included in AIG’s 2008 Annual Report on Form 10-K (in the case of awards granted in 2008) and the assumptions described in Notes 17, 14 and 14 to the Consolidated Financial Statements included in AIG’s Annual Report on Form 10-K or Form 10-K/A, as applicable, for the years ended December 31, 2007, 2006 and 2005, respectively (in the case of awards granted prior to 2008). The amount recognized for the awards granted by SICO was calculated using the fair value of the underlying shares of AIG Common Stock as of the date of grant recognized ratably over the vesting period, which generally begins in the first year of the plan performance period and ends in the year the executive reaches age 65. SICO has stated that it intends to settle awards in equity rather than cash, permitting AIG to record expense for these awards on a grant date fair value basis. For more information, see Note 14 to the Consolidated Financial Statements included in AIG’s Annual Report on Form 10-K/A for the year ended December 31, 2005.

43


Footnotes to 2008 Summary Compensation Table, continued

Because of the decline in the value of AIG Common Stock in 2008, the amounts recognized in this column are not representative of the current value of outstanding stock-based awards. If the portions of the awards expensed in 2008 had been expensed based on the market value of AIG Common Stock at year-end 2008 instead of the value at grant, the amounts reported in this column for 2008 would have been as follows:

Stock Awards

 

 

 

 

 

 

 

Name

 

Expense Reported in
2008 Summary
Compensation Table

 

Pro Forma Based
on Market Value at
December 31, 2008

 

Difference

Edward M. Liddy

 

 

$

 

0

   

 

$

 

0

   

 

$

 

0

 

David L. Herzog

 

 

$

 

430,239

   

 

$

 

12,278

   

 

$

 

(417,961

)

 

Edmund S.W. Tse

 

 

$

 

2,168,443

   

 

$

 

68,610

   

 

$

 

(2,099,833

)

 

Win J. Neuger

 

 

$

 

2,549,374

   

 

$

 

71,486

   

 

$

 

(2,477,888

)

 

Kris P. Moor

 

 

$

 

2,296,747

   

 

$

 

64,641

   

 

$

 

(2,232,106

)

 

Separated During 2008

 

 

 

 

 

 

Martin J. Sullivan

 

 

$

 

6,423,012

   

 

$

 

330,326

   

 

$

 

(6,092,686

)

 

Robert B. Willumstad

 

 

$

 

24,626,614

   

 

$

 

5,052

   

 

$

 

(24,621,562

)

 

Steven J. Bensinger

 

 

$

 

2,418,664

   

 

$

 

61,036

   

 

$

 

(2,357,628

)

 

 

 

 

 

 

For more information on the amounts reported for Messrs. Sullivan and Bensinger, see footnote 9 below. For more information on the amount reported for Mr. Willumstad, see footnote 10 below.

 

 

 

 

 

The amounts in this column for 2006 are different from the amounts reported in AIG’s prior Summary Compensation Tables due to a correction in the dollar amount recognized for outstanding stock-based awards under the SICO plans in 2006.

 

(4)

 

 

 

No options were granted in 2008 to the named executives who remain at AIG. Options were granted to Mr. Willumstad when he was named Chief Executive Officer. This column represents the dollar amount recognized for financial statement reporting purposes (without regard to any estimate of forfeiture related to service-based vesting conditions) of options granted to Mr. Willumstad in 2008 and to the other named executives other than Mr. Liddy from 2004 to 2007 under AIG’s stock option and stock incentive plans. The amount recognized for these awards was calculated based on AIG’s binomial option-pricing model, using the assumptions described in Note 17 to the Consolidated Financial Statements included in AIG’s 2008 Annual Report on Form 10-K (in the case of awards granted in 2008) and the assumptions described in Notes 17, 14 and 14 to the Consolidated Financial Statements included in AIG’s Annual Report on Form 10-K or Form 10-K/A, as applicable, for the years ended December 31, 2007, 2006 and 2005, respectively (in the case of awards granted prior to 2008).

 

 

 

 

 

All outstanding options to purchase AIG Common Stock are far out of the money. Consequently, the amounts recognized in this column are not representative of the current value of outstanding options. If the portions of the awards expensed in 2008 had been expensed based on their value at year-end 2008 according to the same option-pricing model, the amounts reported in this column would have been as follows:

Option Awards

 

 

 

 

 

 

 

Name

 

Expense Reported in
2008 Summary
Compensation Table

 

Pro Forma Based
on Market Value at
December 31, 2008

 

Difference

Edward M. Liddy

 

 

$

 

0

   

 

$

 

0

   

 

$

 

0

 

David L. Herzog

 

 

$

 

681,155

   

 

$

 

14,730

   

 

$

 

(666,425

)

 

Edmund S.W. Tse

 

 

$

 

982,027

   

 

$

 

17,285

   

 

$

 

(964,742

)

 

Win J. Neuger

 

 

$

 

1,602,183

   

 

$

 

32,950

   

 

$

 

(1,569,233

)

 

Kris P. Moor

 

 

$

 

1,428,522

   

 

$

 

29,905

   

 

$

 

(1,398,617

)

 

Separated During 2008

 

 

 

 

 

 

Martin J. Sullivan

 

 

$

 

8,094,376

   

 

$

 

197,821

   

 

$

 

(7,896,555

)

 

Robert B. Willumstad

 

 

$

 

12,000,000

   

 

$

 

908,000

   

 

$

 

(11,092,000

)

 

Steven J. Bensinger

 

 

$

 

2,073,593

   

 

$

 

49,448

   

 

$

 

(2,024,145

)

 

44


Footnotes to 2008 Summary Compensation Table, continued

 

 

 

 

 

The amounts in this column for 2007 and 2006 are different from the amounts reported in AIG’s prior Summary Compensation Tables due to a correction in the dollar amount recognized for option awards to exclude estimates of forfeitures due to service-based vesting conditions.

 

(5)

 

 

 

No long-term performance cash awards were earned under the Senior Partners Plan for the performance period that ended in 2008. For 2008, amounts in this column solely represent quarterly cash payments related to previously earned (but unvested) Senior Partners Plan awards. Quarterly payments ceased when AIG ceased paying dividends on its Common Stock.

 

(6)

 

 

 

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 all of AIG’s defined benefit (pension) plans. These plans are described in “Post-Employment Compensation—Pension Benefits.”

 

 

 

 

 

Mr. Tse. The amount in this column for Mr. Tse for 2008 does not reflect the decline in Mr. Tse’s total post-retirement benefits in 2008. The payments that Mr. Tse will be eligible to receive under AIG’s pension plans will be offset by the company-contributed portion of his balance under the defined contribution plan in which he participates in Hong Kong. In previous years, Mr. Tse’s Hong Kong plan balance fully offset his pension benefits. However, due to market losses in 2008, Mr. Tse’s balance has declined so that it now provides only a partial offset. As a result, as required by SEC rules, the amount in this column for Mr. Tse for 2008 represents the actuarial increase resulting from the new eligibility to receive some pension benefits following retirement. By contrast, Mr. Tse’s Hong Kong plan balance decreased by $1,841,972 in 2008. Therefore, on a present value basis, Mr. Tse’s total post- retirement benefits under AIG’s pension plans and the Hong Kong plan decreased by $1,123,907 in 2008. For more information, see “Post-Employment Compensation—Pension Benefits” and “—Nonqualified Deferred Compensation.” The actual change in pension value for Mr. Tse for 2006 was a loss of $376,015, due to gains in the offsetting portion of Mr. Tse’s Hong Kong plan balance in that year.

 

 

 

 

 

Mr. Moor. The actual change in pension value for Mr. Moor in 2007 and 2006 was a loss of $11,425 and a loss of $2,490, respectively, primarily due to changes in actuarial assumptions.

 

 

 

 

 

Messrs. Sullivan and Bensinger. The amount in this column for Mr. Sullivan for 2008 reflects the value of additional age and service credit and earlier commencement of benefit payments that would have resulted if his resignation were for “Good Reason” under his employment agreement. Without this age and service credit, Mr. Sullivan would not have reached the minimum retirement age under AIG’s nonqualified pension plans, which would have resulted in a decrease of $2,322,122 in the present value of his pension benefits versus 2007 levels due to forfeitures under those plans.

 

 

 

 

 

For Mr. Bensinger, even with the additional age and service credit that would have resulted if his resignation were for “Good Reason” under his employment agreement, Mr. Bensinger would not have reached the minimum service requirement for early retirement under AIG’s nonqualified pension plans. As a result, the amount in this column for Mr. Bensinger for 2008 reflects his forfeitures under those plans. The actual change in pension value for Mr. Bensinger in 2008 would have been a loss of $211,982 or $248,807, depending on whether he was credited with additional age and service under AIG’s U.S. tax-qualified retirement plan in connection with receipt of benefits under his employment agreement that would have been delivered if his resignation were for “Good Reason.”

 

 

 

 

 

For more information, see “Potential Payments on Termination and Arrangements with Former Officers.”

45


Footnotes to 2008 Summary Compensation Table, continued

 

(7)

 

 

 

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
Aircraft(a)

 

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

 

Financial,
Tax and Legal
Planning(c)

 

Personal Use of Club
Memberships and
Recreational
Opportunities

 

Housing, Home
Security and
Other Living
Expenses(c)

 

Tax-Related
Payments(d)

 

Total

Edward M. Liddy

 

 

$

 

47,578

   

 

$

 

31,348

   

 

$

 

162,686

   

 

$

 

0

   

 

$

 

38,368

   

 

$

 

180,431

   

 

$

 

460,411

 

David L. Herzog

 

 

$

 

0

   

 

$

 

3,286

   

 

$

 

0

   

 

$

 

0

   

 

$

 

0

   

 

$

 

0

   

 

$

 

3,286

 

Edmund S.W. Tse

 

 

$

 

0

   

 

$

 

43,613

   

 

$

 

3,226

   

 

$

 

7,421

   

 

$

 

6,302

   

 

$

 

0

   

 

$

 

60,562

 

Win J. Neuger

 

 

$

 

0

   

 

$

 

12,138

   

 

$

 

15,600

   

 

$

 

0

   

 

$

 

0

   

 

$

 

0

   

 

$

 

27,738

 

Kris P. Moor

 

 

$

 

0

   

 

$

 

6,300

   

 

$

 

15,600

   

 

$

 

0

(e)

 

 

 

$

 

0

   

 

$

 

0

   

 

$

 

21,900

 

Separated During 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Martin J. Sullivan

 

 

$

 

179,257

   

 

$

 

48,764

   

 

$

 

13,000

   

 

$

 

5,369

(e)

 

 

 

$

 

0

   

 

$

 

0

   

 

$

 

246,390

 

Robert B. Willumstad

 

 

$

 

22,824

   

 

$

 

19,938

   

 

$

 

339,992

   

 

$

 

0

   

 

$

 

0

   

 

$

 

0

   

 

$

 

382,754

 

Steven J. Bensinger

 

 

$

 

0

   

 

$

 

4,929

   

 

$

 

15,600

   

 

$

 

0

   

 

$

 

0

   

 

$

 

0

   

 

$

 

20,529

 


 

 

(a)

 

 

 

The cost of personal use of corporate aircraft by the named executives is calculated based on the aggregate incremental cost of the flight to AIG. Aggregate incremental cost is calculated based on a cost-per-flight-hour charge developed by a nationally recognized and independent service. The cost-per-flight-hour charge reflects the direct operating cost of the aircraft, including fuel, additives and lubricants, airport fees and assessments, crew expenses and in-flight supplies and catering. In addition, the cost-per-flight-hour charge also reflects an allocable allowance for maintenance and engine restoration. For Mr. Liddy, this amount also includes the actual cost of the ticket for commercial flights between New York and Chicago that are reimbursed by AIG.

 

(b)

 

 

 

For Messrs. Liddy, Sullivan and Willumstad, who are or were provided with a dedicated car and driver, car use reflects an allocated portion of the annual lease valuation of the assigned car, annual driver compensation, parking, fuel and maintenance. Although AIG provides this benefit to enhance the security and efficient travel of its Chief Executive Officer, SEC rules require that costs of commuting and other uses not directly and integrally related to AIG’s business be disclosed as compensation to the executive. Because AIG does not track car use in this way, 100 percent of the preceding costs have been allocated to compensation for business days its Chief Executive Officer was locally based. For the other named executives, the incremental cost for car-related perquisites represents AIG’s direct expenditures.

 

(c)

 

 

 

Incremental costs related to financial, tax and legal planning and to housing and other living expenses represent AIG’s direct expenditures. In the case of Mr. Liddy, AIG has provided an apartment for Mr. Liddy’s use in New York City to facilitate his immediate service upon his election as Chairman and Chief Executive Officer. In addition, for Mr. Liddy, amounts shown for financial, legal and tax planning solely represent expenses for work performed by his counsel in an effort to develop appropriate compensation structures for Mr. Liddy and also for other AIG executives. For more information, see “Compensation Discussion and Analysis—Indirect Compensation Components—Perquisites.” In the case of Mr. Willumstad, AIG also reimbursed work performed by his counsel related to compensation arrangements. Amounts shown for financial, legal and tax planning for Mr. Willumstad include $326,992 of these legal fees.

 

(d)

 

 

 

AIG made payments to Mr. Liddy to offset any tax obligation Mr. Liddy incurred in accordance with his working arrangements to avoid his effectively having to pay to work at AIG. For more information, see “Compensation Discussion and Analysis—Indirect Compensation Components—Perquisites.”

 

(e)

 

 

 

AIG reimbursed Mr. Moor for membership fees for a golf club used for business purposes. Mr. Moor may not use the club for personal purposes and would be required to resign his membership if he departed from AIG. These costs were considered ordinary and necessary business expenses of AIG. Any personal benefit Mr. Moor may have derived from this club membership is regarded as incidental, and no incremental cost related to any personal benefit has been incurred by AIG.

In 2007, AIG reimbursed Mr. Sullivan for an initiation fee and membership fees for a golf club to be used for business purposes. These amounts also were considered to be ordinary and necessary business expenses of AIG, and AIG stopped reimbursing Mr. Sullivan for membership fees after his resignation from AIG. AIG had reimbursed Mr. Sullivan’s fees for 2008 before his resignation, and the

46


Footnotes to 2008 Summary Compensation Table, continued

     

 

 

 

amount for Mr. Sullivan reflects one half of these fees (based on his July 1 resignation date under his letter agreement with AIG). Mr. Sullivan still may use the club for personal purposes (though he now must pay his own membership fees).

 

 

   

 

Other Benefits. This column also includes life insurance premiums paid by AIG for the benefit of the named executives and matching contributions by AIG under its 401(k) plan and the defined contribution plan in which Mr. Tse participates in Hong Kong. These matching contributions include the following amounts in 2008: Herzog—$10,350; Tse—$119,149; Neuger—$16,100; Moor—$16,100; Sullivan—$16,100; Willumstad—$1,538; and Bensinger—$10,350. See “Post-Employment Compensation—Nonqualified Deferred Compensation” for additional detail.

 

 

 

 

 

Mr. Willumstad. The amount in this column for Mr. Willumstad for 2008 also includes $137,500 in director’s fees paid to Mr. Willumstad in 2008 before he became Chief Executive Officer, as well as $2,463 in continued medical and life insurance benefits and $134,605 in office and secretarial support provided by AIG in 2008 after Mr. Willumstad’s resignation. The medical, life insurance and office benefits were provided under Mr. Willumstad’s letter agreement with AIG, and the amounts indicated reflect AIG’s direct expenditures, including allocated portions of office leases and compensation and benefits of individuals providing secretarial support. For more information, see “Potential Payments on Termination and Arrangements with Former Officers.”

 

 

 

 

 

Messrs. Sullivan and Bensinger. The amounts in this column for Messrs. Sullivan and Bensinger for 2008 also include the payments and benefits that have not been paid but that would have been accrued in 2008 in connection with a “Good Reason” termination of employment under their employment agreements. These amounts are discussed in footnote 9.

 

 

 

 

 

Mr. Tse. In March 2008, AIG resolved certain foreign payroll tax obligations relating to amounts paid to employees by AIG and its affiliates in overseas jurisdictions prior to 2007. Under these arrangements, and as noted in AIG’s 2008 Proxy Statement, AIG made payments to the Hong Kong taxing authority relating to amounts paid to affected AIG employees based in Hong Kong, including Mr. Tse. The amount in this column for Mr. Tse for 2008 includes $4,046,327, representing an internal allocation of the payments made by AIG, and no amount was actually paid to Mr. Tse.

 

(8)

 

 

 

Mr. Tse is based in AIG’s Hong Kong office. The Committee determines the amounts of Mr. Tse’s salary and bonuses in U.S. dollars. These amounts are paid to Mr. Tse in Hong Kong dollars based upon the prevailing exchange rate on the date of the relevant payment. In addition, AIG records expense for Mr. Tse’s company-provided benefits, including matching contributions, in Hong Kong dollars. The amount of this contribution included in “All Other Compensation” in the 2008 Summary Compensation Table for 2008 for Mr. Tse reflects conversion to U.S. dollars at a rate of HK$7.75 per U.S. dollar, the month-end rate for December 2008.

 

(9)

 

 

 

The amounts for Messrs. Sullivan and Bensinger in the Summary Compensation Table for 2008 include termination payments and benefits that they have not received. They would be eligible for these payments and benefits if their resignations were for “Good Reason” under their respective employment agreements. AIG is reviewing the arrangements for Messrs. Sullivan and Bensinger as part of a comprehensive assessment of expenses and compensation, and no payments will be made pending completion of the review (except for benefits initially provided to Mr. Sullivan in the third quarter of 2008 prior to AIG’s review).

All Other Compensation. The amounts in this column include the payments and benefits that would have accrued in 2008 in connection with a “Good Reason” termination of employment. For Mr. Sullivan, the amounts that would have been accrued in 2008 are $11.5 million in cash severance payments, $6,830 in continued medical and life insurance benefits and $118,273 in office and secretarial support that would have been provided under his letter agreement with AIG (calculated based on AIG’s actual and estimated expenses for the same items listed for Mr. Willumstad). For Mr. Bensinger, the amounts that would have been accrued in 2008 are $3.375 million in cash severance payments and $1,303 in continued medical and life insurance benefits. Under SEC rules, the amounts that would have been accrued consist of amounts that would have been payable in 2008, assuming an entitlement to payment and continued compliance with restrictive covenants, without giving effect to payment delays required by Section 409A of the Code. These amounts would not have been payable in connection with a termination by the executive without “Good Reason” or by AIG for “Cause.” For more information, see “Potential Payments on Termination and Arrangements with Former Officers.”

47


Footnotes to 2008 Summary Compensation Table, continued

 

 

 

 

 

Stock Awards and Option Awards. The amounts in this column for Messrs. Sullivan and Bensinger for 2008 for stock-based and option awards reflect an acceleration into 2008 of the expense of awards that they may be entitled to receive or exercise, as applicable, after their departure from AIG. A portion of this expense generally would have been recognized in future years based on the continued service of Messrs. Sullivan and Bensinger. For Mr. Sullivan, the amounts recognized reflect the expense of stock-based and option awards that would have been reinstated following a “Good Reason” termination of employment under Mr. Sullivan’s employment agreement and letter agreement with AIG. For Mr. Bensinger, the amounts recognized reflect the expense of stock-based and option awards that would have vested and been delivered or become exercisable, as applicable, during a two-year continued vesting period following a “Good Reason” termination of employment under Mr. Bensinger’s employment agreement. At the time of his resignation, Mr. Bensinger also held stock-based and option awards that were scheduled to vest after the end of this two-year period. These awards also are shown in the Outstanding Equity Awards at December 31, 2008 table below, as they also remain subject to AIG’s comprehensive assessment of Mr. Bensinger’s arrangements. For more information, see “Exercises and Holdings of Previously Awarded Equity—Outstanding Equity Awards at December 31, 2008.”

 

 

 

 

 

In addition, AIG had recorded expenses for 2007 and prior years for awards for Messrs. Sullivan and Bensinger under the DCPPP and the SICO plans. In 2008, upon Mr. Sullivan’s departure, his SICO awards and a portion of his DCPPP awards were considered modified for accounting purposes, so that previously recorded expense was reversed and expense was recognized in 2008 for the awards based on AIG’s share price of $26.46 on June 30, 2008, the date of Mr. Sullivan’s letter agreement with AIG. This modification resulted in a reversal in 2008 of $5,495,832 and $110,145 in expense from prior years related to Mr. Sullivan’s SICO awards and DCPPP awards, respectively, resulting in a net expense recognition in 2008 of $(1,555,687) and $2,977,952 for Mr. Sullivan’s SICO awards and DCPPP awards, respectively. However, in accordance with SEC rules, only $1,360,472 of the total reversed expense is reflected in the 2008 Summary Compensation Table for 2008 for Mr. Sullivan because the remaining $4,245,505 was recognized prior to 2006 and thus was not previously reported in the Summary Compensation Table. Consequently, the amount reported for Mr. Sullivan for 2008 overstates the reported expense that otherwise would be shown in the Summary Compensation Table by $4,245,505. Similarly, upon Mr. Bensinger’s departure, his SICO awards and a portion of his DCPPP awards that would have vested after Mr. Bensinger’s two-year continued vesting period were assumed to be forfeited for accounting purposes, so that previously recorded expense was reversed for those awards. These assumed forfeitures resulted in a reversal in 2008 of $170,263 and $37,492 in expense from prior years related to Mr. Bensinger’s SICO awards and DCPPP awards, respectively, resulting in a net expense recognition in 2008 of $(164,064) and $1,385,291 for Mr. Bensinger’s SICO awards and DCPPP awards, respectively. However, in accordance with SEC rules described above, only $93,706 of the total reversed expense is reflected in the 2008 Summary Compensation Table for 2008 for Mr. Bensinger because the remaining $114,049 was recognized prior to 2006. Accordingly, the amount reported for Mr. Bensinger for 2008 overstates the reported expense that otherwise would be shown in the Summary Compensation Table by $114,049.

 

(10)

 

 

 

Mr. Willumstad’s reported compensation includes $24.5 million of accounting expense for an award of restricted shares that was rescinded by mutual agreement of AIG and Mr. Willumstad. The amount in this column for Mr. Willumstad represents expenses relating to DSUs granted to Mr. Willumstad for his services as a non-employee director ($126,614) and to Mr. Willumstad’s Sign-On Restricted Stock Award granted in 2008 ($24.5 million). The Sign-On Restricted Stock Award was rescinded by mutual agreement of AIG and Mr. Willumstad on December 26, 2008, and Mr. Willumstad did not receive delivery of the underlying shares. However, because by the terms of the award Mr. Willumstad could have retired from AIG and retained the Sign-On Restricted Stock Award (with restrictions lapsing over four years), the full expense relating to the award was recognized upon grant and was not reversed as a result of the rescission.

In connection with the employment and relocation to New York in 1997 of Mr. Frank G. Wisner, a former executive officer who retired in March 2009, AIG paid certain expenses involved with his purchase of a cooperative apartment and, until his retirement from AIG, provided credit support for his mortgage. Mr. Wisner paid off the mortgage in February 2009, and the credit support was terminated in March 2009.

AIG maintains a policy of directors and officers liability insurance for itself, its directors and officers, its subsidiaries and their directors and officers. The premium for this policy for the year ending September 22, 2009 was approximately $38 million. In addition, AIG purchased coverage in 2008 that will be in effect until 2014 and

48


will allow AIG and its subsidiaries to report claims that relate to director and officer conduct during the period from May 24, 2005 to September 22, 2008, at a total cost of approximately $75.1 million.

2008 Grants of Plan-Based Awards

Total 2008 Grants. The following table details all equity-based and non-equity plan-based awards granted to each of the named executives in 2008. As noted above in the Compensation Discussion and Analysis, none of the named executives who remain at AIG received any equity or non-equity plan- based awards in 2008. Mr. Sullivan received a grant of Performance RSUs for the 2008-2009 performance period and Senior Partner Units for the 2006-2008 performance period in March 2008. These grants were made to other executives in late 2007, but the grant for Mr. Sullivan was made only after final audited financial statements for 2007 were available. In addition, the following table reflects a grant of restricted shares to Mr. Willumstad that was later rescinded by mutual agreement of Mr. Willumstad and AIG before year-end. Consequently, no shares will be delivered to him and no value realized by him under this grant. For more information, see footnotes 3 and 10 to the 2008 Summary Compensation Table and footnote 2 to this table.

2008 Grants of Plan-Based Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name

 

Grant
Date

 

Plan
Units

 

Estimated Possible
Payouts Under
Non-equity
Incentive Plan
Awards(1)

 

Estimated Possible
Payouts Under Equity
Incentive Plan Awards

 

All
Other
Stock
Awards
(# of
AIG
Shares)

 

All Other
Option
Awards
(# of
AIG
(Shares)

 

Exercise
Price of
Option
Awards
($/Sh)

 

Grant Date
Fair Value
of Equity
Awards
($)(2)

 

Threshold

 

Target

 

Maximum

Edward M. Liddy

 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

David L. Herzog

 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Edmund S.W. Tse

 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Win J. Neuger

 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Kris P. Moor

 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Separated During 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Martin J. Sullivan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2008-2009 Performance RSUs

 

 

 

3/12/08

   

 

 

38,400

 

 

 

 

 

 

9,600

   

 

 

38,400

   

 

 

57,600

 

 

 

 

 

 

 

 

 

$

 

2,359,296

 

2006-2008 Senior Partner Units

 

 

 

3/12/08

   

 

 

2,000

   

 

$

 

5,408,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert B. Willumstad

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sign-On Option Award

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Time-vested

 

 

 

7/16/08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

378,333

   

 

$

 

23.28

   

 

$

 

4,055,730

 

Performance-vested

 

 

 

7/16/08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

378,333

   

 

$

 

23.28

   

 

$

 

3,976,280

 

Performance-vested

 

 

 

7/16/08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

378,334

   

 

$

 

23.28

   

 

$

 

3,967,990

 

Sign-On Restricted Stock
Award

 

 

 

7/16/08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,052,406

 

 

 

 

 

 

 

$

 

24,500,000

 

Deferred Stock Units

 

 

 

1/2/08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

$

 

338

 

Deferred Stock Units

 

 

 

4/1/08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

 

$

 

329

 

Deferred Stock Units

 

 

 

5/14/08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,169

 

 

 

 

 

 

 

$

 

124,985

 

Deferred Stock Units

 

 

 

7/1/08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

36

 

 

 

 

 

 

 

$

 

962

 

Steven J. Bensinger

 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


 

 

(1)

 

 

 

Amounts shown for Mr. Sullivan’s 2006-2008 Senior Partner Units represent the amounts that would have been earned if performance for 2007 had been repeated for 2008 on the same basis that the Committee determined earnout for 2005-2007 Senior Partner Units. However, Mr. Sullivan’s 2006-2008 Senior Partner Units were forfeited due to failure to meet related performance thresholds under the Partners Plan for the performance period ending in 2008, and no value will be delivered under the Senior Partner Units. For more information on the Senior Partners Plan, see “Post-Employment Compensation—Nonqualified Deferred Compensation.”

 

(2)

 

 

 

Amounts shown represent the total grant date fair values in accordance with FAS 123R of Mr. Sullivan’s 2008-2009 Performance RSUs, Mr. Willumstad’s Sign-On Restricted Stock Award and Sign-On Option Award and Mr. Willumstad’s 2008 DSUs, all of which were granted under AIG’s 2007 Stock Incentive Plan.

 

 

 

 

 

With respect to 2008-2009 Performance RSUs, in accordance with SEC rules, these values assume future payouts at the maximum level. However, 2008-2009 Performance RSUs are extremely unlikely to be earned at all because of the earnings per share growth that would be required in 2009 after the significant losses in 2008, and AIG is currently not recognizing any expense for these awards in its financial statements in recognition of the low likelihood of earnout. Earned 2008-2009 Performance RSUs, if any, would vest in equal installments promptly after the third and fourth anniversaries of the first day of the performance period. Performance RSUs do not pay dividends. The grant date fair value reported for Mr. Sullivan’s 2008-2009 Performance RSUs reflects a reduction for the expected value of dividend payments that are foregone

49


 

 

 

 

during the vesting period. The grant date fair value per 2008-2009 Performance RSU vesting in three years was $41.32. The grant date fair value per 2008-2009 Performance RSU vesting in four years was $40.60.

 

 

 

 

 

In July 2008, in connection with his promotion to Chief Executive Officer of AIG, AIG granted Mr. Willumstad two special sign-on awards. Mr. Willumstad’s Sign-On Restricted Stock Award consisted of restricted shares of AIG Common Stock that would have vested and been delivered in equal installments on the second, third and fourth anniversaries of the date of grant. The grant date fair value per restricted share granted on July 16, 2008 was $23.28. However, on December 26, 2008, this award was rescinded by mutual agreement of AIG and Mr. Willumstad. Mr. Willumstad returned all dividends previously paid on the restricted shares, and no shares or other property will be delivered under the award.

 

 

 

 

 

Mr. Willumstad’s Sign-On Option Award consists of options to purchase AIG Common Stock at $23.28 per share. The options designated as “Time-vested” in this table will vest and become exercisable in three equal installments on each of the first three anniversaries of the date of grant. The first tranche of options designated as “Performance-vested” in this table will vest and become exercisable only if and when the price of AIG Common Stock reaches $29.10 (125 percent of the closing sale price on the date of grant), and the second tranche of options designated as “Performance-vested” will vest and become exercisable only if and when the price of AIG Common Stock reaches $34.92 (150 percent of the closing sale price on the date of grant). Although Mr. Willumstad retains these options following his retirement, no options were exercisable as of year-end.

 

 

 

 

 

Mr. Willumstad’s DSUs were granted in 2008 for service as a director before Mr. Willumstad became Chief Executive Officer. Under each DSU, Mr. Willumstad received one share of AIG Common Stock upon his retirement from AIG. The grant date fair value per DSU granted on the following dates in 2008 was: January 2—$56.30; April 1—$47.00; May 14—$39.44; and July 1—$26.73.

EXERCISES AND HOLDINGS OF PREVIOUSLY AWARDED EQUITY

Outstanding Equity Awards at December 31, 2008

Equity-based awards held at the end of 2008 by each named executive, including awards under AIG’s Partners Plan and DCPPP, were issued under the incentive plans and arrangements described below. Shares of AIG Common Stock deliverable under the Partners Plan, the DCPPP and AIG’s time- vested equity and option awards will be delivered under the 2007 Stock Incentive Plan, AIG’s Amended and Restated 2002 Stock Incentive Plan or AIG’s Amended and Restated 1999 Stock Option Plan, as applicable. Also included in outstanding equity-based awards were grants historically made by SICO under a series of two-year Deferred Compensation Profit Participation Plans.

The following table sets forth outstanding equity-based awards held by each named executive as of December 31, 2008.

Outstanding Equity Awards at December 31, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name

 

Option Awards(1)

 

Stock Awards

 

Plan(2)(3)(4)

 

Unvested
(No Longer
Subject to
Performance
Conditions)

 

Unvested
and Subject
to Performance
Conditions
under Equity
Incentive Plans

 

Year
Granted(1)

 

Number
Exercisable

 

Number
Unexercisable

 

Exercise
Price

 

Expiration
Date

 

Number

 

Market
Value(5)

 

Number

 

Market
Value(5)

Edward M. Liddy

 

 

 

   

 

 

   

 

 

   

 

 

 

 

 

   

 

 

   

 

 

   

 

 

 

David L. Herzog

 

 

 

2007

   

 

 

8,750

   

 

 

26,250

   

$57.05

 

12/13/2017

 

2008 PP

 

 

 

   

 

 

   

 

 

2,875

   

 

$

 

4,514

 

 

 

 

2006

   

 

 

15,000

   

 

 

15,000

   

$71.00

 

12/11/2016

 

2006 PP

 

 

 

4,923

   

 

$

 

7,729

 

 

 

 

 

 

 

 

 

2005

   

 

 

18,750

   

 

 

6,250

   

$65.99

 

12/14/2015

 

DCPPP

 

 

 

14,580

   

 

$

 

22,891

 

 

 

 

 

 

 

 

2005

   

 

 

11,250

   

 

 

3,750

   

$59.35

 

09/01/2015

 

RSUs

 

 

 

630

   

 

$

 

989

 

 

 

 

 

 

 

 

 

2004

   

 

 

15,000

   

 

 

   

$64.47

 

12/16/2014

 

SICO

 

 

 

16,200

   

 

$

 

25,434

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2003

   

 

 

8,000

   

 

 

   

$63.95

 

12/17/2013

 

Total

 

 

 

36,333

   

 

$

 

57,043

   

 

 

2,875

   

 

$

 

4,514

 

 

 

 

 

2003

   

 

 

8,000

   

 

 

   

$47.00

 

02/10/2013

 

 

 

 

 

 

 

 

 

 

 

 

 

2002

   

 

 

8,000

   

 

 

   

$61.30

 

12/16/2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2002

   

 

 

28,946

   

 

 

   

$79.61

 

01/17/2012

 

 

 

 

 

 

 

 

 

 

 

 

 

2001

   

 

 

28,949

   

 

 

   

$65.77

 

01/17/2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2000

   

 

 

23,159

   

 

 

   

$44.50

 

03/02/2010

 

 

 

 

 

 

 

 

 

 

Edmund S.W. Tse

 

 

 

2007

   

 

 

15,000

   

 

 

45,000

   

$57.05

 

12/13/2017

 

2008 PP

 

 

 

   

 

 

   

 

 

9,600

   

 

$

 

15,072

 

 

 

 

 

2006

   

 

 

30,000

   

 

 

30,000

   

$71.00

 

12/11/2016

 

2006 PP

 

 

 

23,020

   

 

$

 

36,142

 

 

 

 

 

 

 

 

2005

   

 

 

45,000

   

 

 

15,000

   

$65.99

 

12/14/2015

 

DCPPP

 

 

 

76,800

   

 

$

 

120,576

 

 

 

 

 

 

 

 

 

2005

   

 

 

41,250

   

 

 

13,750

   

$59.35

 

09/01/2015

 

RSUS

 

 

 

22,404

   

 

$

 

35,174

 

 

 

 

 

 

 

 

2004

   

 

 

55,000

   

 

 

   

$64.47

 

12/16/2014

 

SICO

 

 

 

0

   

 

$

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2003

   

 

 

50,000

   

 

 

   

$63.95

 

12/17/2013

 

Total

 

 

 

122,224

   

 

$

 

191,892

   

 

 

9,600

   

 

$

 

15,072

 

 

 

 

2003

   

 

 

50,000

   

 

 

   

$47.00

 

02/10/2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2002

   

 

 

50,000

   

 

 

   

$61.30

 

12/16/2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

50


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name

 

Option Awards(1)

 

Stock Awards

 

Plan(2)(3)(4)

 

Unvested
(No Longer
Subject to
Performance
Conditions)

 

Unvested
and Subject
to Performance
Conditions
under Equity
Incentive Plans

 

Year
Granted(1)

 

Number
Exercisable

 

Number
Unexercisable

 

Exercise
Price

 

Expiration
Date

 

Number

 

Market
Value(5)

 

Number

 

Market
Value(5)

 

 

 

 

2001

   

 

 

50,000

   

 

 

   

$79.61

 

12/13/2011

 

 

 

 

 

 

 

 

 

 

 

 

 

2000

   

 

 

40,000

   

 

 

   

$96.56

 

12/14/2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1999

   

 

 

45,000

   

 

 

   

$60.13

 

09/15/2009

 

 

 

 

 

 

 

 

 

 

Win J. Neuger

 

 

 

2007

   

 

 

15,000

   

 

 

45,000

   

$57.05

 

12/13/2017

 

2008 PP

 

 

 

   

 

 

   

 

 

8,400

   

 

$

 

13,188

 

 

 

 

 

2006

   

 

 

30,000

   

 

 

30,000

   

$71.00

 

12/11/2016

 

2006 PP

 

 

 

19,567

   

 

$

 

30,720

 

 

 

 

 

 

 

 

2005

   

 

 

45,000

   

 

 

15,000

   

$65.99

 

12/14/2015

 

DCPPP

 

 

 

65,280

   

 

$

 

102,490

 

 

 

 

 

 

 

 

 

2005

   

 

 

37,500

   

 

 

12,500

   

$59.35

 

09/01/2015

 

SICO

 

 

 

256,121

   

 

$

 

402,110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2004

   

 

 

50,000

   

 

 

   

$64.47

 

12/16/2014

 

Total

 

 

 

340,968

   

 

$

 

535,320

   

 

 

8,400

   

 

$

 

13,188

 

 

 

 

 

2003

   

 

 

40,000

   

 

 

   

$63.95

 

12/17/2013

 

 

 

 

 

 

 

 

 

 

 

 

 

2003

   

 

 

25,000

   

 

 

   

$47.00

 

02/10/2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2002

   

 

 

25,000

   

 

 

   

$61.30

 

12/16/2012

 

 

 

 

 

 

 

 

 

 

 

 

 

2001

   

 

 

15,000

   

 

 

   

$79.61

 

12/13/2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2000

   

 

 

7,500

   

 

 

   

$96.56

 

12/14/2010

 

 

 

 

 

 

 

 

 

 

 

 

 

1999

   

 

 

7,500

   

 

 

   

$60.13

 

09/15/2009

 

 

 

 

 

 

 

 

 

 

Kris P. Moor

 

 

 

2007

   

 

 

15,000

   

 

 

45,000

   

$57.05

 

12/13/2017

 

2008 PP

 

 

 

   

 

 

   

 

 

8,400

   

 

$

 

13,188

 

 

 

 

2006

   

 

 

30,000

   

 

 

30,000

   

$71.00

 

12/11/2016

 

2006 PP

 

 

 

20,143

   

 

$

 

31,625

 

 

 

 

 

 

 

 

 

2005

   

 

 

37,500

   

 

 

12,500

   

$65.99

 

12/14/2015

 

DCPPP

 

 

 

67,200

   

 

$

 

105,504

 

 

 

 

 

 

 

 

2005

   

 

 

30,000

   

 

 

10,000

   

$59.35

 

09/01/2015

 

SICO

 

 

 

192,465

   

 

$

 

302,170

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2004

   

 

 

40,000

   

 

 

   

$64.47

 

12/16/2014

 

Total

 

 

 

279,808

   

 

$

 

439,299

   

 

 

8,400

   

 

$

 

13,188

 

 

 

 

2003

   

 

 

35,000

   

 

 

   

$63.95

 

12/17/2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2003

   

 

 

30,000

   

 

 

   

$47.00

 

02/10/2013

 

 

 

 

 

 

 

 

 

 

 

 

 

2002

   

 

 

30,000

   

 

 

   

$61.30

 

12/16/2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2001

   

 

 

15,000

   

 

 

   

$79.61

 

12/13/2011

 

 

 

 

 

 

 

 

 

 

 

 

 

2000

   

 

 

7,000

   

 

 

   

$96.56

 

12/14/2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1999

   

 

 

9,000

   

 

 

   

$60.13

 

09/15/2009

 

 

 

 

 

 

 

 

 

 

Separated During 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Martin J. Sullivan(6)

 

 

 

2007

   

 

 

35,851

   

 

 

107,553

   

$57.05

 

12/13/2017

 

2008 PP

 

 

 

   

 

 

   

 

 

2,400

   

 

$

 

3,768

 

 

 

 

2006

   

 

 

87,500

   

 

 

87,500

   

$71.00

 

12/11/2016

 

2006 PP

 

 

 

23,020

   

 

$

 

36,141

 

 

 

 

 

 

 

 

 

2005

   

 

 

64,931

   

 

 

21,644

   

$65.99

 

12/14/2015

 

DCPPP

 

 

 

76,800

   

 

$

 

120,576

 

 

 

 

 

 

 

 

2005

   

 

 

37,500

   

 

 

12,500

   

$59.35

 

09/01/2015

 

SICO

 

 

 

218,433

   

 

$

 

342,940

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2004

   

 

 

50,000

   

 

 

   

$64.47

 

12/16/2014

 

Total

 

 

 

318,253

   

 

$

 

499,657

   

 

 

2,400

   

 

$

 

3,768

 

 

 

 

2003

   

 

 

40,000

   

 

 

   

$63.95

 

12/17/2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2003

   

 

 

40,000

   

 

 

   

$47.00

 

02/10/2013

 

 

 

 

 

 

 

 

 

 

 

 

 

2002

   

 

 

40,000

   

 

 

   

$61.30

 

12/16/2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2001

   

 

 

15,000

   

 

 

   

$79.61

 

12/13/2011

 

 

 

 

 

 

 

 

 

 

 

 

 

2000

   

 

 

7,000

   

 

 

   

$96.56

 

12/14/2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1999

   

 

 

7,500

   

 

 

   

$60.13

 

09/15/2009

 

 

 

 

 

 

 

 

 

 

Robert B. Willumstad

 

 

 

2008

   

 

 

   

 

 

1,135,000

   

$23.28

 

07/16/2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2006

   

 

 

2,500

   

 

 

   

$62.50

 

05/17/2016

 

 

 

 

 

 

 

 

 

 

 

 

 

2006

   

 

 

2,500

   

 

 

   

$68.61

 

01/18/2016

 

 

 

 

 

 

 

 

 

 

Steven J. Bensinger(6)

 

 

 

2007

   

 

 

15,000

   

 

 

45,000

   

$57.05

 

12/13/2017

 

2008 PP

 

 

 

   

 

 

   

 

 

2,344

   

 

$

 

3,680

 

 

 

 

2006

   

 

 

25,750

   

 

 

25,750

   

$71.00

 

12/11/2016

 

2006 PP

 

 

 

11,510

   

 

$

 

18,071

 

 

 

 

 

 

 

 

 

2005

   

 

 

22,192

   

 

 

7,398

   

$65.99

 

12/14/2015

 

RSUs(7)

 

 

 

23,780

   

 

$

 

37,335

 

 

 

 

 

 

 

 

2005

   

 

 

30,000

   

 

 

10,000

   

$59.35

 

09/01/2015

 

DCPPP

 

 

 

38,400

   

 

$

 

60,288

 

 

 

 

 

 

 

 

 

2004

   

 

 

12,000

   

 

 

   

$64.47

 

12/16/2014

 

SICO

 

 

 

9,000

   

 

$

 

14,130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2003

   

 

 

10,000

   

 

 

   

$63.95

 

12/17/2013

 

Total

 

 

 

82,690

   

 

$

 

129,823

   

 

 

2,344

   

 

$

 

3,680

 

 

 

 

 

2003

   

 

 

5,000

   

 

 

   

$47.00

 

02/10/2013

 

 

 

 

 

 

 

 

 

 

 

 

 

2002

   

 

 

5,000

   

 

 

   

$63.67

 

11/13/2012

 

 

 

 

 

 

 

 

 

 


 

 

(1)

 

 

 

None of the named executives who remain at AIG received options in 2008. Except for Mr. Willumstad’s options, all previously granted options had four-year pro rata vesting schedules, and all options have an exercise price equal to the closing sale price on the NYSE on the date of grant. Mr. Willumstad holds 378,333 options granted in 2008 that vest and become exercisable in equal installments on each of the first three anniversaries of July 16, 2008, 378,333 options that vest and become exercisable if and when the price of AIG Common Stock reaches $29.10 (125 percent of the closing sale price on the date of grant) and 378,334 options that vest and become exercisable if and when the price of AIG Common Stock reaches $34.92 (150 percent of the closing sale price on the date of grant). Mr. Willumstad also holds 5,000 options granted in 2006 for his services as a non-management director. Although Mr. Willumstad’s options remain outstanding following his retirement, all options were far out of the money as of year-end. All options held by the other named executives also were far out of the money as of year-end.

 

(2)

 

 

 

AIG’s Partners Plan, which has been discontinued, operated for successive overlapping two-year performance periods. The first performance period was January 1, 2006 through December 31, 2007, and the last performance period was January 1, 2008 through December 31, 2009. Participants received Performance RSUs that entitled them to earn shares of AIG Common Stock based on the average of the percentage increase of AIG’s adjusted diluted earnings per share for the first year of the performance period over the prior year and the percentage increase of AIG’s adjusted diluted earnings per share for the second year of the performance period over the first year. Performance was relative to pre-established goals and

51


 

 

 

 

ranges established by the Committee at the start of the period. The number of Performance RSUs that could be earned at the end of each period ranged from 0 to 150 percent of target.

 

 

 

 

 

Performance RSUs for the 2007-2008 performance period were forfeited due to AIG’s performance in 2008, and no shares will be delivered. Performance RSUs for the 2008-2009 performance period (2008 PP) are outstanding, but are extremely unlikely to be earned because of the earnings per share growth that would be required in 2009 after the significant losses in 2008. In accordance with SEC rules, the number and market value of 2008 PP awards is presented as if the relevant performance conditions had been satisfied at the threshold level (resulting in earnout of 25 percent of target). However, AIG is currently not recognizing any expense for these awards in its financial statements in recognition of the low likelihood of earnout. If earned, 2008 PP awards would vest in equal installments promptly after the third and fourth anniversaries of the first day of the performance period.

 

 

 

 

 

Outstanding Performance RSUs for the 2006-2007 performance period (2006 PP) were earned and will vest in equal installments promptly after the fourth and sixth anniversaries of the first day of the performance period. Any unvested awards generally will be forfeited if the named executive ceases employment with AIG prior to normal retirement at age 65. Performance RSUs, whether earned or unearned, pay no dividends.

 

(3)

 

 

 

The DCPPP was modeled on plans previously provided by SICO, described in footnote 4, except that it is administered by AIG and its costs are borne directly by AIG. Under the DCPPP, in 2007 participants were awarded time-vested RSUs based upon the number of plan units they had been granted. These time-vested RSUs will vest in equal portions in May of 2009 and 2010. An incremental allocation of RSUs equal to 20 percent or 35 percent of the RSUs initially allocated was made in 2009, and the incremental RSUs will vest in 2012. Any unvested RSUs generally will be forfeited if the named executive ceases employment with AIG prior to normal retirement at age 65.

 

(4)

 

 

 

Prior to 2005, key employees participated in a series of two-year Deferred Compensation Profit Participation Plans that historically were provided by SICO. The original SICO Plan came into being in 1975. Participation in the SICO plans by any person, and the extent of such participation, has been 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 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 has not yet reached age 65, he will be contingently allocated additional shares equal to 20 percent of the shares initially allocated. The contingent allocations are reflected in this table.

 

(5)

 

 

 

Based on AIG’s closing sale price on the NYSE on December 31, 2008 of $1.57 per share.

 

(6)

 

 

 

For Messrs. Sullivan and Bensinger, amounts represent the total number of shares that may be delivered and options that may be exercised, as applicable, following their resignations.

 

 

 

 

 

For Mr. Sullivan, in connection with a “Good Reason” termination under his employment agreement and his letter agreement with AIG, all of Mr. Sullivan’s AIG share-based awards shown in this table would have been reinstated and would have vested and been delivered at the originally scheduled times. Additionally, AIG would have guaranteed delivery of Mr. Sullivan’s awards under SICO plans, which also would have vested and been delivered at the originally scheduled times. Mr. Sullivan’s options would have continued to become exercisable in accordance with their terms and would have remained exercisable until the earlier of their expiration dates or April 1, 2011, when they would have expired or been forfeited, respectively.

 

 

 

 

 

For Mr. Bensinger, in connection with a “Good Reason” termination under his employment agreement, Mr. Bensinger generally would have been eligible to receive the share-based awards and exercise the options that would have vested during the two-year period following termination of his employment, and other share-based awards and options shown in this table also could potentially have been subject to reinstatement as described above.

52


 

 

 

 

 

Upon a termination by the executive without “Good Reason” or by AIG for “Cause,” and without reinstatement of any awards, the share-based awards and options shown in this table for Messrs. Sullivan and Bensinger would have been forfeited (except that previously vested options would have been exercisable for a period of 90 days following termination with the consent of the Committee). For more information, see “Potential Payments on Termination and Arrangements with Former Officers.”

 

(7)

 

 

 

The outstanding time-vested RSU award for Mr. Bensinger consists of an award granted to Mr. Bensinger on January 6, 2006, which is scheduled to vest promptly after the fourth anniversary of the grant date.

Vesting of Stock-Based Awards During 2008

The following table sets forth the amounts notionally realized in accordance with SEC rules by each named executive as a result of the vesting of stock-based awards in 2008. In the case of Mr. Willumstad, due to deferred delivery, the amount actually realized was much lower. For more information, see footnote 2. There were no options exercised in 2008 by any of the named executives.

2008 Vesting of Stock-Based Awards

 

 

 

 

 

Name

 

Stock-Based Awards
Vested in 2008

 

Number of
Shares
Acquired on
Vesting

 

Value
Realized on
Vesting

Edward M. Liddy

 

 

 

0

   

 

$

 

0

 

David L. Herzog

 

 

 

0

   

 

$

 

0

 

Edmund S.W. Tse(1)

 

 

 

76,800

   

 

$

 

4,335,360

 

Win J. Neuger

 

 

 

0

   

 

$

 

0

 

Kris P. Moor

 

 

 

0

   

 

$

 

0

 

Separated During 2008

 

 

 

 

Martin J. Sullivan

 

 

 

0

   

 

$

 

0

 

Robert B. Willumstad(2)

 

 

 

3,218

   

 

$

 

126,614

 

Steven J. Bensinger(3)

 

 

 

1,060

   

 

$

 

21,878

 


 

 

(1)

 

 

 

Represents delivery of shares allocated under the final SICO Plan, which Mr. Tse was eligible to receive due to having reached age 65.

 

(2)

 

 

 

Represents DSUs granted to Mr. Willumstad in 2008 for his service as a director before becoming Chief Executive Officer. DSUs are vested upon grant. Accordingly, as required by SEC rules, the value realized on vesting is determined based on the market value on the date of grant of shares of AIG Common Stock underlying DSUs. However, because delivery of shares is deferred until retirement from the Board, this amount does not reflect the value of shares delivered to Mr. Willumstad following his retirement. The total market value of shares of AIG Common Stock underlying DSUs granted in 2008, which were delivered to Mr. Willumstad in September 2008, was only $8,656 based on the closing price on the NYSE of $2.69 on September 18, 2008, the date of Mr. Willumstad’s resignation.

 

(3)

 

 

 

Represents a partial early payout of SICO awards, which Mr. Bensinger was eligible to receive in accordance with the terms of the SICO plans.

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 or non-citizens working in the United States are covered under the American International Group, Inc. Retirement Plan, a U.S. tax-qualified defined benefit retirement plan. Participants whose formula benefit is restricted from being fully paid from the tax-qualified retirement plan due to IRS limits on compensation and benefits are eligible to participate in the Excess Retirement Income Plan. Messrs. Tse, Neuger and Moor also participate, and Messrs. Sullivan and Bensinger participated, in the Supplemental Executive Retirement Plan (SERP). In addition, Mr. Sullivan was covered under the AIG Pension Plan in the United Kingdom (the UK Pension Plan) in connection with his years of service in the United Kingdom, and Mr. Herzog has a benefit under the American General Corporation Supplemental Executive Retirement Plan

53


for service accrued to December 31, 2002. This benefit vested and was frozen upon the acquisition of the American General Corporation.

Participants receive the tax-qualified retirement plan benefit, the Excess Retirement Income Plan benefit and any amount of the SERP benefit in excess of the Excess Retirement Income Plan benefit. Mr. Tse’s SERP benefit will be reduced by the annuity equivalent of company contributions to his account balance under the American International Companies (Hong Kong) Staff Provident Fund (AICSPF), which is described in “Nonqualified Deferred Compensation” below, and Mr. Sullivan’s SERP benefit will also be reduced by the amount of any payments received from the UK Pension Plan.

The Excess Retirement Income Plan provides a benefit equal to the portion of the benefit that is not permitted to be paid from the tax-qualified retirement plan due to IRS limits on compensation and benefits. The tax-qualified retirement plan and Excess Retirement Income Plan 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.

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 actually payable from the Excess Retirement Income Plan, the tax-qualified retirement plan, Social Security and any predecessor plan or foreign deferred compensation plan sponsored by AIG. Messrs. Liddy and Herzog do not, and Mr. Willumstad did not, participate in the SERP.

For purposes of all of the domestic retirement plans, average final salary is the average pensionable salary 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.

Early retirement benefits. Each of the domestic retirement plans provides for reduced early retirement benefits. These benefits are available to participants in the tax-qualified retirement plan who have reached age 55 and have 10 or more years of credited service. The Excess Retirement Income Plan provides reduced early retirement benefits to participants who have reached age 60 with five or more years of service, or who have reached age 55 with 10 or more years of service unless the Committee determines otherwise. The SERP provides reduced early retirement benefits beginning at the same times, 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 percent for each year that retirement precedes age 65. Participants in the tax-qualified retirement plan and the Excess Retirement Income Plan 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. Participants in the tax-qualified retirement plan with at least 10 years of continuous service to AIG have a vested reduced retirement allowance pursuant to which, in the case of termination of employment prior to reaching age 55, such participants may elect to receive a reduced early retirement benefit commencing at any date between age 55 and age 65. Participants in the domestic retirement plans may not choose to receive a lump sum payment upon normal or early retirement.

Mr. Tse is eligible to retire and receive benefits from the SERP and has announced that he will retire effective at our 2009 Annual Meeting of Shareholders. Mr. Neuger would be eligible to receive a reduced early retirement benefit under the tax-qualified plan and the Excess Retirement Income Plan.

Death and disability benefits. Each of the domestic retirement plans also provides for death and disability benefits. In the case of death, the SERP provides a participant with at least five years of credited service to AIG with a survivor annuity equal to 40 percent of the participant’s accumulated benefit, and potentially reduced based on the age of the surviving spouse. The tax-qualified plan and the Excess Retirement Income Plan generally provide a death benefit to active employees who die before age 65 equal to 50 percent of the benefit the participant would have received if he had terminated employment on his date of death, survived until his earliest retirement date and elected a 50 percent joint and survivor annuity.

Under the tax-qualified retirement plan and the Excess Retirement Income Plan, participants continue to accrue credited service while receiving payments under AIG’s long-term disability plan or during periods of

54


unpaid medical leave before reaching age 65. 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 Excess Retirement Income Plan and the SERP is reduced by amounts payable under the tax-qualified retirement plan, and participants in both the SERP and the Excess Retirement Income Plan may receive the formula benefit from the SERP only to the extent that it exceeds the benefit payable from the Excess Retirement Income Plan and the tax-qualified plan.

2008 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 with the exception of Mr. Tse, who has reached age 65 and is eligible to retire, the benefits shown for the named executives who remain at AIG 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. In particular, as of year-end 2008, neither Mr. Herzog nor Mr. Moor was eligible for any form of early retirement under AIG’s nonqualified pension plans. Mr. Liddy has not accrued any benefit under any AIG pension plan.

AIG has not granted extra years of credited service under the defined benefit plans described above to any named executive, other than credit for Mr. Herzog’s prior service to American General Corporation (as required by Code regulations applicable to plans assumed in acquisitions) and potential age and service credits as contemplated by Mr. Sullivan’s and Mr. Bensinger’s employment agreements. For more information, with respect to Messrs. Sullivan and Bensinger, see “Potential Payments on Termination and Arrangements with Former Officers.”

55


2008 Pension Benefits

 

 

 

 

 

 

 

 

 

Name

 

Plan Name

 

Years of
Credited
Service(1)

 

Present
Value of
Accumulated
Benefit(2)

 

Payments
During 2008

Edward M. Liddy

 

AIG Retirement Plan

 

 

 

0

   

 

$

 

0

   

 

$

 

0

 

 

 

Excess Retirement Income Plan

 

 

 

0

   

 

$

 

0

   

 

$

 

0

 

 

Total

 

 

 

 

$

 

0

   

 

$

 

0

 

David L. Herzog

 

AIG Retirement Plan

 

 

 

8.917

   

 

$

 

103,034

   

 

$

 

0

 

 

Excess Retirement Income Plan

 

 

 

8.917

   

 

$

 

214,934

   

 

$

 

0

 

 

 

American General Corporation Supplemental Executive
Retirement Plan

 

 

 

2.917

   

 

$

 

68,698

   

 

$

 

0

 

 

Total

 

 

 

 

$

 

386,666

   

 

$

 

0

 

Edmund S.W. Tse(3)

 

AIG Retirement Plan

 

 

 

0

   

 

$

 

0

   

 

$

 

0

 

 

Excess Retirement Income Plan

 

 

 

0

   

 

$

 

0

   

 

$

 

0

 

 

 

Supplemental Executive Retirement Plan

 

 

 

25

   

 

$

 

718,065

   

 

$

 

0

 

 

Total

 

 

 

 

$

 

718,065

   

 

$

 

0

 

Win J. Neuger

 

AIG Retirement Plan

 

 

 

13.333

   

 

$

 

271,712

   

 

$

 

0

 

 

Excess Retirement Income Plan

 

 

 

13.333

   

 

$

 

1,057,473

   

 

$

 

0

 

 

 

Supplemental Executive Retirement Plan

 

 

 

13.917

   

 

$

 

900,035

   

 

$

 

0

 

 

Total

 

 

 

 

$

 

2,229,220

   

 

$

 

0

 

Kris P. Moor

 

AIG Retirement Plan

 

 

 

23.750

   

 

$

 

287,915

   

 

$

 

0

 

 

Excess Retirement Income Plan

 

 

 

23.750

   

 

$

 

851,786

   

 

$

 

0

 

 

 

Supplemental Executive Retirement Plan

 

 

 

25

   

 

$

 

854,977

   

 

$

 

0

 

 

Total

 

 

 

 

$

 

1,994,678

   

 

$

 

0

 

Separated During 2008

Martin J. Sullivan(4)(5)

 

AIG Retirement Plan

 

 

 

11.833

   

 

$

 

178,987

   

 

$

 

0

 

 

 

Excess Retirement Income Plan

 

 

 

11.833

   

 

$

 

787,839

   

 

$

 

0

 

 

Supplemental Executive Retirement Plan

 

 

 

25

   

 

$

 

1,825,029

   

 

$

 

0

 

 

 

UK Pension Plan

 

 

 

17.166

   

 

$

 

759,531

   

 

$

 

0

 

 

Total

 

 

 

 

$

 

3,551,386

   

 

$

 

0

 

Robert B. Willumstad

 

AIG Retirement Plan

 

 

 

0

   

 

$

 

0

   

 

$

 

0

 

 

Excess Retirement Income Plan

 

 

 

0

   

 

$

 

0

   

 

$

 

0

 

 

 

Total

 

 

 

0

   

 

$

 

0

   

 

$

 

0

 

Steven J. Bensinger(5)

 

AIG Retirement Plan

 

 

 

5.583

   

 

$

 

82,024

   

 

$

 

0

 

 

 

Excess Retirement Income Plan

 

 

 

5.583

   

 

$

 

261,714

   

 

$

 

0

 

 

Supplemental Executive Retirement Plan

 

 

 

6.083

   

 

$

 

168,661

   

 

$

 

0

 

 

 

Total

 

 

 

 

$

 

512,399

   

 

$

 

0

 


 

 

(1)

 

 

 

The named executives had the following years of service with AIG as of December 31, 2008: Liddy—0.333, Herzog—7.417; Tse—47.5; Neuger—13.917; Moor—27.333; Sullivan—36.917; Willumstad—0.333; and Bensinger—6.083. Mr. Herzog had more years of credited service than actual service under the tax-qualified retirement plan and the Excess Retirement Income Plan because those plans provided credit for Mr. Herzog’s years of employment with American General Corporation before its acquisition by AIG. Mr. Herzog’s benefit under the American General Corporation Supplemental Executive Retirement Plan was frozen at December 31, 2002 upon AIG’s acquisition of American General Corporation. Messrs. Tse, Moor and Sullivan had fewer years of credited service than actual service under the SERP because 25 years is the maximum amount of credited service under the SERP. Messrs. Liddy, Neuger, Willumstad and Bensinger had fewer years of credited service than actual service under the tax-qualified retirement plan and the Excess Retirement Income Plan because participants must wait six months after commencing employment with AIG before enrolling in those plans. Mr. Moor had fewer years of credited service than actual service under the tax-qualified retirement plan and the Excess Retirement Income Plan because he did not participate in the tax-qualified retirement plan during his first several years at AIG. Mr. Sullivan had fewer years of credited service than actual service under the tax-qualified retirement plan, the Excess Retirement Income Plan and the UK Pension Plan because of differences in eligibility to participate in these plans during Mr. Sullivan’s years of service in the United Kingdom and the United States and the minimum age requirement for participating in the UK Pension Plan.

56


 

 

 

 

 

Mr. Tse does not participate in the U.S. tax-qualified retirement plan or the Excess Retirement Income Plan because he is employed outside the United States.

 

 

 

 

 

Mr. Sullivan’s and Mr. Bensinger’s years of credited service are based upon termination dates of June 15, 2008 and October 9, 2008, respectively. For more information on their benefits under these plans, see footnote 5.

 

(2)

 

 

 

The actuarial present values of the accumulated benefits are based on service and earnings as of December 31, 2008 (the pension plan measurement date for purposes of AIG’s financial statement reporting). The actuarial present values of the accumulated benefits under the tax-qualified retirement plan, the Excess Retirement Income Plan and the SERP are calculated based on payment of a life annuity beginning at age 65 consistent with the assumptions described in Note 18 to the Consolidated Financial Statements included in AIG’s 2008 Annual Report on Form 10-K. As described in that Note, the discount rate assumption is 6 percent, and mortality assumptions are based on the 2009 PPA separate static annuitant and nonannuitant mortality tables. The actuarial present value of Mr. Sullivan’s accumulated benefit under the UK Pension Plan is calculated based on payment of a 50 percent joint and survivor annuity beginning at age 65, consistent with a discount rate assumption of 6.25 percent and mortality assumptions based on the PA92 medium cohort mortality table at December 31, 2008. Additionally, the actuarial present value of Mr. Sullivan’s accumulated benefit assumes that a 2.75 percent increase will be applied to a portion of Mr. Sullivan’s formula benefit under the UK Pension Plan to reflect the rate of inflation.

 

(3)

 

 

 

Mr. Tse’s formula benefit under the SERP is partially offset by his benefits under the AICSPF. The amount shown is the present value of Mr. Tse’s formula benefit net of the offset. See “Nonqualified Deferred Compensation—AICSPF” below. As noted above, Mr. Tse does not participate in the U.S. tax-qualified retirement plan or the Excess Retirement Income Plan.

 

(4)

 

 

 

Mr. Sullivan participated in the UK Pension Plan from 1978 until 1996. The UK Pension Plan provided a benefit equal to 1.67 percent times final pensionable earnings for each year of service. Under the UK Pension Plan, normal retirement age is 65. With the consent of the plan’s trustees, an inactive participant in the UK Pension Plan may elect early retirement after reaching age 50 and receive a reduced benefit. As an inactive participant in the UK Pension Plan, Mr. Sullivan would be eligible to commence this reduced early retirement benefit.

 

(5)

 

 

 

The amounts for Mr. Sullivan reflect the value of his accrued pension benefits at his termination date, based upon the benefits payable upon normal retirement at age 65. In fact, as described in footnote 1, Mr. Sullivan terminated employment with AIG on June 15, 2008. Under Mr. Sullivan’s employment agreement and letter agreement with AIG, if Mr. Sullivan’s resignation had been for “Good Reason,” he would have been eligible for approved early retirement and additional age and service credit under AIG’s nonqualified pension plans, which, combined with the earlier commencement of early retirement benefits under the