EARNINGS (LOSS) PER SHARE (EPS)

9 Months Ended

Sep. 30, 2012

EARNINGS (LOSS) PER SHARE (EPS)

EARNINGS (LOSS) PER SHARE (EPS)

12. 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 EPS 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 EPS was not affected by outstanding stock purchase contracts. Diluted EPS was not affected by outstanding stock purchase contracts because they were not dilutive.

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

	Three Months Ended September 30,					Nine Months Ended September 30,
(dollars in millions, except per share data)	2012		2011			2012		2011
Numerator for EPS:
Income (loss) from continuing operations	$	1,860	$	(3,605	)	$	7,640	$	(2,599	)
Net income from continuing operations attributable to noncontrolling interests:
Nonvoting, callable, junior and senior preferred interests		–		145			208		538
Other		5		19			45		28
Total net income from continuing operations attributable to noncontrolling interests		5		164			253		566
Net income (loss) attributable to AIG from continuing operations		1,855		(3,769	)		7,387		(3,165	)
Income (loss) from discontinued operations	$	1	$	(221	)	$	9	$	2,327
Net income (loss) from discontinued operations attributable to noncontrolling interests		–		–			–		19
Net income (loss) attributable to AIG from discontinued operations, applicable to common stock for EPS		1		(221	)		9		2,308
Deemed dividends to AIG Series E and F Preferred Stock		–		–			–		(812	)
Net income (loss) attributable to AIG common shareholders from continuing operations, applicable to common stock for EPS	$	1,855	$	(3,769	)	$	7,387	$	(3,977	)
Denominator for EPS:
Weighted average shares outstanding – basic		1,642,472,814		1,899,500,628			1,757,955,937		1,765,905,779
Dilutive shares		29,437		–			28,217		–
Weighted average shares outstanding – diluted*		1,642,502,251		1,899,500,628			1,757,984,154		1,765,905,779
EPS attributable to AIG common shareholders:
Basic:
Income (loss) from continuing operations	$	1.13	$	(1.99	)	$	4.21	$	(2.25	)
Income (loss) from discontinued operations	$	–	$	(0.11	)	$	–	$	1.30
Diluted:
Income (loss) from continuing operations	$	1.13	$	(1.99	)	$	4.21	$	(2.25	)
Income (loss) from discontinued operations	$	–	$	(0.11	)	$	–	$	1.30

*         Dilutive shares are calculated using the treasury stock method and include dilutive shares from share-based employee compensation plans, the warrants issued to the Department of the Treasury in 2009 and the warrants issued to common shareholders (other than the Department of the Treasury) in January 2011. The number of shares and warrants excluded from diluted shares outstanding were 78 million for both the three and nine months ended September 30, 2012, and 79 million and 75 million for the three and nine months ended September 30, 2011, respectively, because the effect of including those shares and warrants in the calculation would have been anti-dilutive. Included in the anti-dilutive total were 75 million shares for both the three and nine months ended September 30, 2012 and 75 million and 70 million shares for the three and nine months ended September 30, 2011, respectively, representing the weighted average number of warrants to purchase AIG Common Stock that were issued to common shareholders.

Deemed dividends resulted from the Recapitalization and represent the excess of:

•

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 AIA SPV Preferred Interests and preferred interests in the ALICO SPV, 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

•

the carrying value of the Series E Fixed Rate Non-Cumulative Perpetual Preferred Stock, par value $5.00 per share, and Series F Fixed Rate Non-Cumulative Perpetual Preferred Stock, par value $5.00 per share.

The fair value of the AIG Common Stock issued for the Series C Perpetual, Convertible, Participating Preferred Stock, par value $5.00 per share (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 Notes 1 and 17 to the Consolidated Financial Statements in the 2011 Annual Report for further discussion on the Recapitalization.