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SHARE-BASED AND OTHER COMPENSATION PLANS (Tables)
 12 Months Ended
Dec. 31, 2013
SHARE-BASED AND OTHER COMPENSATION PLANS  
Schedule of share-based compensation expense recognized in Consolidated Statements of Income

 

 

 
  


   
    
  
   
Years Ended December 31,
(in millions)
  

2013

   2012
   2011
  
   

Share-based compensation expense – pre-tax*

  
$
457
$ 286   $ (16 )

Share-based compensation expense – after tax

  
 
297
  186     (10 )
   

*  For the year ended December 31, 2013, $315 million of pre-tax compensation expense and substantially all of prior years' compensation expense were attributed to unsettled liability-classified awards, the values of which are based on our share price at the reporting date. Our share price was $51.05, $35.30 and $23.20 at December 31, 2013, 2012 and 2011, respectively, and is the primary driver of the volatility in share-based compensation expense.
Schedule of assumptions used to estimate the fair value of PSUs based on AIG's TSR

 

 

   
 
   2013
  
   

Expected dividend yield(a)

     0.38 %

Expected volatility(b)

     30.79 %

Risk-free interest rate(c)

     0.50 %
   

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

(b)  The expected volatility is equal to the interpolated value between the implied volatilities of actively traded stock options with maturities that are closest to the PSU term to maturity.

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

The following table summarizes outstanding share-settled awards*:

 

   
 
   Number of PSUs/Shares   Weighted Average
Grant-Date Fair Value		  
As of or for the Year
Ended December 31, 2013
   AIG
Plans
   SICO
Plans
   AIG
Plans
   SICO
Plans
  
   

Unvested, beginning of year

     39,249     119,944   $ 48.29   $ 1,197.96  

Granted

     8,451,368     –     36.50     –  

Vested

     (2,910,475 )   (17,977 )   36.00     524.12  

Forfeited

     (384,734 )   (16,018 )   35.73     1,178.71
   

Unvested, end of year

     5,195,408     85,949   $ 36.92   $ 1,195.05
   

*  Excludes DSUs and options, which are discussed under the Non-Employee Plans and Stock Options sections, respectively.
Schedule of stock option activity

 

 

   
As of or for the Year Ended December 31, 2013
   Shares
   Weighted Average
Exercise Price
   Weighted
Average
Remaining
Contractual
Life
  
   

Options:

                    

Exercisable at beginning of year

     514,245   $ 1,129.42     2.49  

Expired

     (224,455 ) $ 1,149.34      
   

Exercisable at end of year

     289,790   $ 1,113.99     2.58
   

 
Summary of SARs (based on target amounts) and cash-settled RSUs (excluding stock salary) including the related expenses

 

 

   
 
   Number of Units  
Year Ended December 31, 2013
   Other RSUs
   TARP RSUs
   SARs
  
   

Unvested, beginning of year

     686,290     1,889,434     12,356,573  

Granted(a)

     1,149,626     –     1,738,691  

Vested(b)

     (149,346 )   (824,098 )   (4,400,053 )

Forfeited

     (122,883 )   (207,757 )   (728,965 )
   

Unvested, end of year(c)

     1,563,687     857,579     8,966,246
   

Net compensation expense for the year (in millions)

   $ 43   $ 37   $ 154
   

(a)  Represents additional SARs earned as a result of the completion of the performance period for the 2011 LTIP.

(b)  Also includes SARs for which vesting was accelerated for employees who became retirement eligible or were deceased.

(c)  Includes 4,773,976 SARs from the 2010 LTIP that vested on January 1, 2014.
Schedule of total unrecognized compensation cost (net of expected forfeitures) related to unvested SARs and cash-settled RSUs excluding stock salary and the weighted-average periods over which those costs are expected to be recognized

 

 

   
At December 31, 2013
(in millions)
   Unrecognized
Compensation
Cost
   Weighted-
Average Period
(years)
   Expected
Period
(years)
  
   

SARs

   $ 14     0.62     1  

TARP RSUs

     15     0.76     2  

RSUs

     41     0.95     2
   
Schedule of weighted average assumptions used to estimate the fair value of SARs

 

 

   
 
   2013
  
   

Expected dividend yield(a)

     1.08 %

Expected volatility(b)

     29.45 – 49.22 %

Weighted-average volatility

     30.04 %

Risk-free interest rate(c)

     0.31 %

Expected term(d)

     1.0 year
   

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

(b)  The expected volatilities are the implied volatilities with the nearest maturity and strike price as of the valuation date from actively traded stock options on AIG Common Stock.

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

(d)  The term to maturity is specified in the agreement for each SAR grant.