Total Equity and Earnings (Loss) Per Share

6 Months Ended

Jun. 30, 2011

Total Equity and Earnings (Loss) Per Share

Total Equity and Earnings (Loss) Per Share

12. Total Equity and Earnings (Loss) Per Share

Shares Outstanding

The following table presents a rollforward of outstanding shares:

		Preferred Stock
Six Months Ended June 30, 2011														Common Stock		Treasury Stock
		AIG Series E			AIG Series F			AIG Series C			AIG Series G
Shares issued, beginning of year			400,000			300,000			100,000			-			147,124,067		6,660,908
	Issuances		-			-			-			20,000			100,066,640		11,678
	Settlement of equity unit stock purchase contracts		-			-			-			-			2,404,278		-
	Shares exchanged		(400,000	)		(300,000	)		(100,000	)		-			1,655,037,962		-
	Shares cancelled		-			-			-			(20,000	)		-		-
Shares issued, end of period			-			-			-			-			1,904,632,947		6,672,586

    See Note 1 herein for a discussion of the Recapitalization and the May 2011 Common Stock Offering and Sale.

Equity Units

    In January, March and June 2011, AIG remarketed the three series of debentures included in the Equity Units. AIG purchased and retired all of the Series B-1, B-2 and B-3 Debentures representing $2.2 billion in aggregate principal and as a result, no Series B-1, B-2 or B-3 Debentures remain outstanding.

    As of June 30, 2011, AIG had issued approximately 2.4 million shares of AIG Common Stock in connection with the settlement of the stock purchase contracts underlying its Equity Units. On August 1, 2011, AIG issued an additional 1.2 million shares of AIG Common Stock to complete the settlement of the stock purchase contracts underlying its Equity Units.

Accumulated Other Comprehensive Income

The following table presents a rollforward of Accumulated other comprehensive income:

Six Months Ended June 30, 2011 (in millions)		Unrealized Appreciation (Depreciation) of Fixed Maturity Investments on Which Other-Than- Temporary Credit Impairments Were Taken			Unrealized Appreciation (Depreciation) of All Other Investments			Foreign Currency Translation Adjustments			Net Derivative Gains (Losses) Arising from Cash Flow Hedging Activities			Change in Retirement Plan Liabilities Adjustment			Total
Balance, beginning of year, net of tax		$	(659	)	$	8,888		$	298		$	(34	)	$	(869	)	$	7,624
	Unrealized appreciation of investments		537			631			-			-			-			1,168
	Net changes in foreign currency translation adjustments		-			-			(529	)		-			-			(529	)
	Net gains on cash flow hedges		-			-			-			31			-			31
	Net actuarial gain		-			-			-			-			275			275
	Prior service cost		-			-			-			-			(17	)		(17	)
	Deferred tax asset (liability)		(248	)		484			239			40			(109	)		406
Total other comprehensive income (loss)			289			1,115			(290	)		71			149			1,334
Acquisition of noncontrolling interest			-			43			62			-			(17	)		88
Noncontrolling interests			3			(81	)		31			-			-			(47	)
Balance, end of period, net of tax		$	(373	)	$	10,127		$	39		$	37		$	(737	)	$	9,093

Noncontrolling interests

    In connection with the execution of its orderly asset disposition plan, as well as plans to timely repay the FRBNY Credit Facility, AIG transferred two of its wholly owned businesses, AIA and ALICO, to two newly created special purpose vehicles (SPVs) in exchange for all the common and preferred interests of those SPVs. On December 1, 2009, AIG transferred the preferred interests in the SPVs to the FRBNY in consideration for a $25 billion reduction of the outstanding loan balance and of the maximum amount of credit available under the FRBNY Credit Facility and amended the terms of the FRBNY Credit Facility. As part of the closing of the Recapitalization, the remaining preferred interests, with an aggregate liquidation preference of approximately $20.3 billion at January 14, 2011, were purchased from the FRBNY by AIG and transferred to the Department of the Treasury as part of the consideration for the exchange of the Series F Preferred Stock. Under the terms of the SPVs' limited liability company agreements, the SPVs generally may not distribute funds to AIG until the liquidation preferences and preferred returns on the preferred interests have been repaid in full and concurrent distributions have been made on certain participating returns attributable to the preferred interests.

    The common interests, which were retained by AIG, entitle AIG to 100 percent of the voting power of the SPVs. The voting power allows AIG to elect the boards of managers of the SPVs, who oversee the management and operation of the SPVs. Primarily due to the substantive participation rights of the preferred interests, the SPVs were determined to be variable interest entities. As the primary beneficiary of the SPVs, AIG consolidates the SPVs.

    The rights held by the FRBNY through its ownership of the preferred interests are now held by the Department of the Treasury. In connection with the Recapitalization, AIG agreed to cause the proceeds of certain asset dispositions to be used to redeem the remaining preferred interests.

    As a result of the closing of the Recapitalization on January 14, 2011, the SPV Preferred Interests held by the Department of the Treasury are not considered permanent equity on AIG's Consolidated Balance Sheet, and were classified as redeemable non-controlling interests. As part of the Recapitalization, AIG used approximately $6.1 billion of the cash proceeds from the sale of ALICO to repay a portion of the liquidation preference and accrued return of the SPV Preferred Interests. The SPV Preferred Interests were further reduced during the first quarter of 2011 by approximately $9.1 billion using proceeds from the sale of AIG Star, AIG Edison and the sale of MetLife securities received in the sale of ALICO.

The following table presents a rollforward of non-controlling interests:

				Redeemable Noncontrolling interests									Non-redeemable Noncontrolling interests
(in millions)				Held by Department of Treasury			Other			Total			Held by FRBNY			Other			Total
Six Months Ended June 30, 2011
Balance, beginning of year				$	-		$	434		$	434		$	26,358		$	1,562		$	27,920
	Repurchase of SPV preferred interests in connection with Recapitalization				-			-			-			(26,432	)		-			(26,432	)
	Exchange of consideration for preferred stock in connection with Recapitalization				20,292			-			20,292			-			-			-
	Repayment to Department of the Treasury				(9,146	)		-			(9,146	)		-			-			-
	Net distributions				-			(21	)		(21	)		-			(74	)		(74	)
	Consolidation (deconsolidation)				-			(308	)		(308	)		-			(6	)		(6	)
	Acquisition of noncontrolling interest				-			-			-			-			(468	)		(468	)
	Comprehensive income:
		Net income			319			6			325			74			22			96
		Accumulated other comprehensive loss, net of tax:
			Unrealized losses on investments		-			-			-			-			(78	)		(78	)
			Foreign currency translation adjustments		-			-			-			-			31			31
		Total accumulated other comprehensive loss, net of tax			-			-			-			-			(47	)		(47	)
	Total comprehensive income (loss)				319			6			325			74			(25	)		49
Other					-			-			-			-			(41	)		(41	)
Balance, end of period				$	11,465		$	111		$	11,576		$	-		$	948		$	948

				Redeemable Noncontrolling interests								Non-redeemable Noncontrolling interests
(in millions)				Held by Department of Treasury		Other			Total			Held by FRBNY		Other			Total
Six Months Ended June 30, 2010
Balance, beginning of year				$	-	$	959		$	959		$	24,540	$	3,712		$	28,252
	Net contributions				-		215			215			-		20			20
	Consolidation (deconsolidation)				-		757			757			-		(2,148	)		(2,148	)
	Comprehensive income:
		Net income			-		16			16			1,027		146			1,173
		Accumulated other comprehensive income (loss), net of tax:
			Unrealized gains on investments		-		7			7			-		14			14
			Foreign currency translation adjustments		-		(6	)		(6	)		-		(171	)		(171	)
		Total accumulated other comprehensive income (loss), net of tax			-		1			1			-		(157	)		(157	)
	Total comprehensive income (loss)				-		17			17			1,027		(11	)		1,016
Other					-		(25	)		(25	)		-		114			114
Balance, end of period				$	-	$	1,923		$	1,923		$	25,567	$	1,687		$	27,254

Earnings (Loss) Per Share (EPS)

    Basic and diluted earnings (loss) per share are based on the weighted average number of common shares outstanding, adjusted to reflect all stock dividends and stock splits. Diluted earnings per share is based on those shares used in basic EPS plus shares that would have been outstanding assuming issuance of common shares for all dilutive potential common shares outstanding, adjusted to reflect all stock dividends and stock splits. Basic earnings (loss) per share is not affected by outstanding stock purchase contracts. Diluted earnings per share is determined considering the potential dilution from outstanding stock purchase contracts using the treasury stock method and was not affected by the previously outstanding stock purchase contracts because they were not dilutive.

    In connection with the issuance of the Series C Preferred Stock, AIG applied the two-class method for calculating EPS. The two-class method is an earnings allocation method for computing EPS when a company's capital structure includes either two or more classes of common stock or common stock and participating securities. This method determines EPS based on dividends declared on common stock and participating securities (i.e., distributed earnings) as well as participation rights of participating securities in any undistributed earnings. The Series C Preferred Stock was retired as part of the Recapitalization on January 14, 2011.

    AIG applied the two-class method due to the participation rights of the Series C Preferred Stock through January 14, 2011. However, application of the two-class method had no effect on earnings per share for the six months ended June 30, 2011 because AIG recognized a net loss attributable to AIG common shareholders from continuing operations, applicable to common stock for EPS, for the six months ended June 30, 2011. Subsequent to January 14, 2011, AIG did not have any outstanding participating securities that subjected AIG to the two-class method.

The following table presents the computation of basic and diluted EPS:

			Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions, except per share data)			2011			2010			2011			2010
Numerator for EPS:
	Income from continuing operations		$	2,094		$	496		$	914		$	2,584
	Net income from continuing operations attributable to noncontrolling interests:
		Nonvoting, callable, junior and senior preferred interests		141			508			393			1,027
		Other		64			20			9			139
	Total net income from continuing operations attributable to noncontrolling interests			205			528			402			1,166
	Net income (loss) attributable to AIG from continuing operations			1,889			(32	)		512			1,418
	Income (loss) from discontinued operations		$	(37	)	$	(2,611	)	$	1,616		$	(2,268	)
	Net income from discontinued operations attributable to noncontrolling interests			12			13			19			23
	Net income (loss) attributable to AIG from discontinued operations			(49	)		(2,624	)		1,597			(2,291	)
	Deemed dividends			-			-			(812	)		-
	(Income) loss allocated to the Series C Preferred Stock – continuing operations			-			-			-			(1,131	)
Net income (loss) attributable to AIG common shareholders from continuing operations, applicable to common stock for EPS				1,889			(32	)		(300	)		287
	(Income) loss allocated to the Series C Preferred Stock – discontinued operations			-			-			-			1,828
Net income (loss) attributable to AIG common shareholders from discontinued operations, applicable to common stock for EPS			$	(49	)	$	(2,624	)	$	1,597		$	(463	)
Denominator for EPS:
	Weighted average shares outstanding – basic			1,836,713,069			135,813,034			1,698,001,301			135,745,903
	Dilutive shares			58,444			-			-			61,410
	Weighted average shares outstanding – diluted*			1,836,771,513			135,813,034			1,698,001,301			135,807,313
EPS attributable to AIG common shareholders:
Basic:
	Income (loss) from continuing operations		$	1.03		$	(0.25	)	$	(0.18	)	$	2.11
	Income (loss) from discontinued operations		$	(0.03	)	$	(19.32	)	$	0.94		$	(3.41	)
Diluted:
	Income (loss) from continuing operations		$	1.03		$	(0.25	)	$	(0.18	)	$	2.11
	Income (loss) from discontinued operations		$	(0.03	)	$	(19.32	)	$	0.94		$	(3.41	)

*

Dilutive shares are calculated using the treasury stock method and include dilutive shares from share-based employee compensation plans, and the warrant issued to the Department of the Treasury on April 17, 2009 to purchase up to 150 shares of AIG Common Stock (Series F Warrant). The number of shares excluded from diluted shares outstanding were 80 million and 72 million for the three- and six-month periods ended June 30, 2011 and 12 million for the three- and six-month periods ended June 30, 2010, respectively, because the effect would have been anti-dilutive. Shares excluded for the three- and six-month periods ended June 30, 2011 include 75 million and 67 million shares, respectively, representing the weighted average number of warrants to purchase AIG Common Stock that were issued to shareholders on January 19, 2011.

    Deemed dividends represent the excess of (i) the fair value of the consideration transferred to the Department of the Treasury, which consists of 1,092,169,866 shares of AIG Common Stock, $20.2 billion of redeemable SPV Preferred Interests, and a liability for a commitment by AIG to pay the Department of the Treasury's costs to dispose of all of its shares, over (ii) the carrying value of the Series E and F Preferred Stock. The fair value of the AIG Common Stock issued for the Series C Preferred Stock over the carrying value of the Series C Preferred Stock is not a deemed dividend because the Series C Preferred Stock was contingently convertible into the 562,868,096 shares of AIG Common Stock for which it was exchanged. See Note 1 herein for further discussion.