DEF 14A 1 d125322ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

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

Exchange Act of 1934 (Amendment No.       )

Filed by the Registrant þ

 Filed by a Party other than the Registrant  ¨

Check the appropriate box:

¨  Preliminary Proxy Statement

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

þ   Definitive Proxy Statement

¨  Definitive Additional Materials

¨  Soliciting Material Pursuant to §240.14a-12

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):

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LOGO

March 29, 2016

Dear AIG Shareholder,

Your Board and management team are committed to creating long-term value for our investors. We believe that good governance and dialogue with shareholders through ongoing direct engagement enhances value for all shareholders.

A focus on positioning AIG for the future of insurance. Your Board and management team are focused on driving AIG towards becoming a leaner, more profitable and focused insurer. To that end, the Board recently approved a long-term strategic plan that focuses on expense reductions, profitability, and capital returns. Your Board will continue to carefully oversee the company as it evolves and update shareholders as management executes its plan to reach significant value-creating milestones. By the end of 2017, we intend to:

 

   

Return at least $25 billion of capital to shareholders;

 

   

Enhance transparency by separating the company into an Operating Portfolio with a goal of over 10 percent return on equity1 and a Legacy Portfolio that will focus on return of capital;

 

   

Reorganize the company into at least nine modular, more self-contained business units to enhance accountability, transparency, and strategic flexibility;

 

   

Reduce general operating expenses by $1.6 billion, 14 percent of our 2015 expenses2;

 

   

Improve our commercial property and casualty accident year loss ratio2 by six points;

 

   

Pursue an active divestiture program, including initially the 19.9 percent initial public offering of our mortgage insurer, United Guaranty, as the first step towards full separation and the agreement to sell our broker-dealer network, AIG Advisor Group, while preserving the value of deferred tax assets.

Robust shareholder engagement. Your Board sought to undertake a more thorough approach to shareholder engagement over this past year. We engaged on topics of corporate governance and executive compensation with shareholders representing more than 45 percent of shares outstanding. We also had a number of conversations with portfolio managers and analysts that were focused on strategy and company performance. As your newly appointed Independent Chairman, I participated in a significant number of these meetings, found them extremely informative, and shared your feedback with the full Board. We learned a great deal about investor perspectives on AIG’s strategy and performance, corporate governance and executive compensation program through our conversations. In addition to strategic actions taken in response to shareholder feedback, AIG also implemented a proxy access by-law in November 2015, which allows shareholders to include director candidates in the Company’s proxy statement. This mechanism provides an additional avenue for shareholder feedback within our strong corporate governance framework. AIG prides itself on being responsive to shareholders, and we hope that you will continue to be open to dialogue with AIG over the long-term.

Join us. We invite you to join us in attending the 2016 Annual Meeting of Shareholders, which will be held at 175 Water Street, New York, New York, on May 11, 2016, at 11:00 a.m. Even if you will be attending the meeting, we encourage you to use this 2016 Proxy Statement as an informational resource, and to vote in advance of the meeting. Every vote counts.

Thank you for being a shareholder of AIG.

Sincerely,

LOGO    LOGO
Douglas M. Steenland    Peter D. Hancock
Non-Executive Chairman of the Board    President and Chief Executive Officer

 

 

1  Normalized operating ROE, excluding AOCI and DTA, a non-GAAP financial measure. See appendix of Strategic Actions to Maximize Shareholder Value at www.aig.com/strategyupdate.
2 

Non-GAAP financial measure. See appendix of Strategic Actions to Maximize Shareholder Value at www.aig.com/strategyupdate. Accident year loss ratio improvement is on a fourth quarter exit run rate basis.


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LOGO

AMERICAN INTERNATIONAL GROUP, INC.

175 Water Street, New York, N.Y. 10038

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD MAY 11, 2016

March 29, 2016

To the Shareholders of

AMERICAN INTERNATIONAL GROUP, INC.:

The Annual Meeting of Shareholders of AMERICAN INTERNATIONAL GROUP, INC. (AIG) will be held at 175 Water Street, New York, New York, on May 11, 2016, at 11:00 a.m., for the following purposes:

 

  1.

To elect the sixteen nominees specified under “Proposal 1—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, on a non-binding advisory basis, to approve executive compensation;

 

  3.

To act upon a proposal to ratify the selection of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2016; and

 

  4.

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

Shareholders of record at the close of business on March 21, 2016 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 May 11, 2016. The Proxy Statement and 2015 Annual Report to Shareholders and other Soliciting Material are available in the Investors section of AIG’s corporate website at www.aig.com.

By Order of the Board of Directors

JEFFREY A. WELIKSON

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 must bring an account statement or other acceptable evidence of ownership of AIG Common Stock as of the close of business on March 21, 2016. If you cannot be present at the meeting, please sign and date your proxy and return it at once or vote your shares by telephone or through the internet.


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LOGO

AMERICAN INTERNATIONAL GROUP, INC.

175 Water Street, New York, N.Y. 10038

PROXY STATEMENT

March 29, 2016

 

TIME AND DATE    11:00 a.m. on Wednesday, May 11, 2016.
PLACE    175 Water Street, New York, New York 10038.
MAILING DATE    This Proxy Statement, 2015 Annual Report and proxy card or voting instructions were either made available to you over the internet or mailed to you on or about March 29, 2016.
ITEMS OF BUSINESS   

•     To elect the sixteen nominees specified under “Proposal 1—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, on a non-binding advisory basis, to approve executive compensation;

  

•     To act upon a proposal to ratify the selection of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2016; 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 March 21, 2016.
INSPECTION OF LIST OF SHAREHOLDERS OF RECORD    A list of the shareholders of record as of March 21, 2016 will be available for inspection during ordinary business hours during the ten days prior to the meeting at AIG’s offices, 175 Water Street, New York, New York 10038.
ADDITIONAL INFORMATION    Additional information regarding the matters to be acted on at the meeting is included in this proxy statement.
PROXY VOTING    YOU CAN VOTE YOUR SHARES OVER THE INTERNET OR BY TELEPHONE. IF YOU RECEIVED A PAPER PROXY CARD BY MAIL, YOU MAY ALSO VOTE BY SIGNING, DATING AND RETURNING THE PROXY CARD IN THE ENVELOPE PROVIDED.

 

 

 


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TABLE OF CONTENTS

 

EXECUTIVE SUMMARY

     3   

VOTING INSTRUCTIONS AND INFORMATION

     8   

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

     12   

PROPOSAL 1—ELECTION OF
DIRECTORS

     13   

CORPORATE GOVERNANCE

     22   

Governance

     22   

Report of the Nominating and Corporate Governance Committee

     26   

Committees

     28   

Compensation of Directors

     32   

Compensation and Management Resources Committee Interlocks and Insider Participation

     34   

OWNERSHIP OF CERTAIN SECURITIES

     35   

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     37   

RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

     37   

OUR EXECUTIVE OFFICERS

     38   

EXECUTIVE COMPENSATION

     39   

Report of the Compensation and Management Resources Committee

     39   

Compensation Discussion and Analysis

     41   

2015 Compensation

     53   

Holdings of and Vesting of Previously Awarded Equity

     56   

Post-Employment Compensation

     58   

Potential Payments on Termination

     65   

PROPOSAL 2—NON-BINDING ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

     70   

REPORT OF AUDIT COMMITTEE AND RATIFICATION OF SELECTION OF ACCOUNTANTS

     71   

Report of the Audit Committee

     71   

PROPOSAL 3—RATIFICATION OF SELECTION OF PRICEWATERHOUSECOOPERS LLP

     73   

Fees Paid to PricewaterhouseCoopers LLP

     74   

EQUITY COMPENSATION PLAN INFORMATION

     75   

OTHER MATTERS

     76   

Other Matters to be Presented at the 2016 Annual Meeting of Shareholders

     76   

Shareholder Proposals for the 2017 Annual Meeting

     76   

Communications with the Board of Directors

     76   

Electronic Delivery of Proxy Materials

     76   

Important Notice Regarding Delivery of Shareholder Documents

     77   

Incorporation by Reference

     77   

CORPORATE GOVERNANCE GUIDELINES

     A-1   

NON-GAAP FINANCIAL MEASURES

     B-1   

 

 

 

LOGO   2  


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LOGO

EXECUTIVE SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information you should consider in making a voting decision, and you should read the entire Proxy Statement carefully before voting. These proxy materials are first being sent to shareholders of AIG commencing on or about March 29, 2016. For information on the details of the voting process and how to attend the Annual Meeting, please see “Voting Instructions and Information” on page 8.

Voting Matters and Vote Recommendation

 

Proposal

  

Board Vote

Recommendation

  

For More Information, see:

1.

 

Election of 16 Directors

   FOR EACH DIRECTOR NOMINEE    Proposal 1—Election of Directors, page 13

2.

  Advisory vote on executive compensation    FOR    Proposal 2—Non-Binding Advisory Vote to Approve Executive Compensation, page 70

3.

  Ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2016    FOR    Proposal 3—Ratification of Selection of PricewaterhouseCoopers LLP, page 73

 

LOGO   3  


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PROPOSAL 1—ELECTION OF DIRECTORS

The following table provides summary information about each of our sixteen director nominees. AIG aims to maintain a balanced and independent board that is committed to representing the long-term interests of AIG’s shareholders, and which has the substantial and diverse expertise necessary to oversee AIG’s strategic and business planning as well as management’s approach to addressing significant risks and challenges facing AIG. Each nominee is elected annually by a majority of votes cast.

 

Name

  Age     Director
Since
   

Occupation/Background

 

Indepen-
dent

 

Other Public Boards

 

Current Committee
Memberships (1)

W. Don Cornwell

    68        2011      Former Chairman and CEO of Granite Broadcasting Corporation   ü   Avon Products, Inc.; Pfizer Inc.  

CMRC (Chair)

NCGC

Peter R. Fisher

    59        2014      Senior Fellow at the Center for Global Business and Government, and Senior Lecturer, at the Tuck School of Business at Dartmouth College; Former Head of Fixed Income Portfolio Management of BlackRock, Inc.   ü    

Regulatory

RCC

John H. Fitzpatrick

    59        2011      Chairman of White Oak Global Advisors; Former Secretary General of The Geneva Association; Former Chief Financial Officer, Head of the Life and Health Reinsurance Business Group and Head of Financial Services of Swiss Re   ü    

Audit

RCC (Chair)

Peter D. Hancock

    57        2014      President and CEO, AIG      

William G. Jurgensen

    64        2013      Former CEO of Nationwide Insurance   ü   ConAgra Foods, Inc.  

Audit (Chair)

RCC

Christopher S. Lynch

    58        2009      Independent Consultant and Former National Partner in Charge of Financial Services of KPMG LLP   ü   Federal Home Loan Mortgage Corporation  

Audit

RCC

Samuel J. Merksamer (2)

    35        N/A      Managing Director of Icahn Capital LP   ü   Cheniere Energy Inc.; Hertz Global Holdings, Inc.; Navistar International Corporation; Transocean Partners LLC (3); Transocean Ltd.   N/A

George L. Miles, Jr.

    74        2005      Chairman Emeritus of The Chester Group, Inc.; Former President and CEO of WQED Multimedia   ü   EQT Corporation; Harley-Davidson, Inc.; HFF, Inc.  

CMRC

NCGC

Tech

Henry S. Miller

    70        2010      Chairman of Marblegate Asset Management, LLC; Former Chairman and Managing Director of Miller Buckfire & Co., LLC   ü   The Interpublic Group of Companies, Inc.  

Regulatory

RCC

Robert S. Miller

    74        2009      President and Chief Executive Officer of International Automotive Components Group S.A.; Former CEO of Hawker Beechcraft, Inc.; Former Executive Chairman of Delphi Corporation   ü   Symantec Corporation; The Dow Chemical Company  

NCGC

Tech

Linda A. Mills

    66        2015      Former Corporate Vice President of Operations of Northrop Grumman Corporation; Former Corporate Vice President and President of Information Systems/Information Technology   ü   Navient Corporation  

CMRC

Tech

Suzanne Nora Johnson

    58        2008      Former Vice Chairman of The Goldman Sachs Group, Inc.   ü   Intuit Inc.; Pfizer Inc.; Visa Inc.  

CMRC

NCGC (Chair)

John A. Paulson (2)

    60        N/A      President and Portfolio Manager of Paulson & Co. Inc.   ü     N/A

Ronald A. Rittenmeyer

    68        2010      Former Chairman, President and CEO of Expert Global Solutions, Inc.; Former Chairman, CEO and President of Electronic Data Systems Corporation   ü   IMS Health Holdings, Inc.; Tenet Healthcare Corporation  

Audit

CMRC

Tech (Chair)

Douglas M. Steenland

    64        2009      Former President and CEO of Northwest Airlines Corporation   ü   Hilton Worldwide Holdings Inc.; Performance Food Group Company; Travelport Limited   (4)

Theresa M. Stone

    71        2013      Former Executive Vice President and Treasurer of the Massachusetts Institute of Technology; Former Executive Vice President and Chief Financial Officer of Jefferson-Pilot Corporation; Former President of Chubb Life Insurance Company   ü    

Audit

Regulatory (Chair)

 

(1) The full Committee names are as follows:

Audit—Audit Committee

CMRC—Compensation and Management Resources Committee

NCGC—Nominating and Corporate Governance Committee

Regulatory—Regulatory, Compliance and Public Policy Committee

RCC—Risk and Capital Committee

Tech—Technology Committee

(2) Messrs. Merksamer and Paulson are new director nominees and were recommended for nomination as directors pursuant to certain Nomination Agreements as described further in “Proposal 1—Election of Directors.”
(3) Mr. Merksamer will not be re-appointed to the board of directors of Transocean Partners LLC at its annual meeting of shareholders on May 5, 2016.
(4) Mr. Steenland, as Chairman of the Board, is an ex-officio, non-voting member of each of the Committees.

 

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Strong Corporate Governance Practices

The AIG Board is committed to good corporate governance and regularly reviews our practices and corporate governance developments to ensure continued effectiveness.

 

    

ü      Highly engaged Board with balanced tenure and substantial and diverse expertise necessary to evaluate and oversee strategy and performance

    

ü      Independent Chairman is required in by-laws

    

ü      Independent Chairman role is clearly defined and the Chairman generally does not serve longer than a five-year term

    

ü      Directors are elected annually by a majority of votes cast (in uncontested elections)

    

ü      All directors are independent (except CEO)

    

ü      Former AIG CEOs cannot serve on the Board

    

ü      Annual evaluations of Board, individual directors and all Board Committees

    

ü      No re-nomination for director attending less than 75% of meetings for two consecutive years

    

ü      Directors may not stand for election after reaching age 75

    

ü      All directors may contribute to agenda for Board meetings

    

ü      Board Committee structure organized around key strategic issues and designed to facilitate dialogue and efficiency

    

ü      Board Committee Chairs generally do not serve longer than a five-year term

    

ü      Strong risk management oversight including through the Risk and Capital Committee, Audit Committee and other Board Committees

    

ü      Extensive shareholder engagement program with director participation

    

ü      Proxy access by-law

 

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PROPOSAL 2—NON-BINDING ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

2015 Pay-for-Performance Alignment

Our compensation philosophy centers on creating a culture of performance management and pay for performance to motivate all AIG employees to achieve sustainable value through a strategic focus on our core businesses and achieving the right balance between growth, profitability and risk. Consistent with this philosophy, our short-term incentive awards for our leadership team are based solely on objective Company measures. The five objective goals and achievements(a) that together drove our 2015 Company-wide annual short-term incentive determination were:

 

 

BUSINESS

PROFITABILITY

 

¡   Achieved Normalized Insurance Company Pre-Tax Operating Income (Normalized Insurance Company PTOI) of $8.3 billion, below target of $9.1 billion

 

 

weighted 30%

   

 

AIG

PROFITABILITY

 

 

¡   Achieved Normalized Return on Equity (excluding deferred tax assets) (Normalized AIG ROE) of 6.8%, below target of 7.9%

 

 

weighted 30%

   

 

EXPENSE

MANAGEMENT

 

¡   Achieved Normalized Gross General Operating Expenses (Normalized AIG GOE) of $11.63 billion, underperforming against target of $11.58 billion

 

 

weighted 20%

   

 

RISK-ADJUSTED GROWTH

 

¡   Achieved Normalized Production Risk-Adjusted Profitability for Property Casualty and Personal Insurance operating segments (Normalized Production RAP) of $1.26 billion, above target of $1.13 billion

 

 

weighted 10%

 

¡   Achieved Normalized Value of New Business for Retirement, Life, Institutional Markets and Mortgage Guaranty operating segments (Normalized VoNB) of $1.52 billion, exceeding target of $1.42 billion

 

 

weighted 10%

 

(a) Each of these goals represents a non-GAAP measure. For how these measures are calculated, see Appendix B.

These 2015 achievements resulted in a Company performance score of 11 percent below target, or 89 percent, compared with a Company performance score of 111 percent in 2014.

 

Paying Our Leadership Team for Performance

 

For our Executive Leadership Team, compensation is designed to provide an appropriate balance of fixed and variable pay, drive achievement of AIG’s short- and long-term business strategies and align each executive’s economic interests with the long-term interests of AIG and our shareholders.

 

As applied to our President and Chief Executive Officer, Mr. Hancock, this balanced structure with an emphasis on performance incentives and deferred payouts is illustrated on the right. For Mr. Hancock and all members of the Executive Leadership Team, the largest component of pay is based on company-wide performance over a three-year period and paid over a five-year period. At least 75 percent of each executive’s total target compensation is “at risk” and based on performance, with both short- and long-term incentives subject to deferral.

 

To determine short-term incentive awards for the Executive Leadership Team, the Company performance score is multiplied by two to appropriately reflect objective Company performance (whether positive or negative) and results in a payout range of 0 to 150 percent. Accordingly, in early 2016, Mr. Hancock and our other executives received an earned award equal to 78 percent of their target amount. Payment of 50 percent of this amount is deferred until 2017.

   LOGO

 

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PROPOSAL 3—RATIFICATION OF SELECTION OF PRICEWATERHOUSECOOPERS LLP

We are asking shareholders to ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2016.

The Audit Committee annually evaluates the qualifications, performance and independence of the independent auditor, including the lead partner. As a result of this evaluation, the Audit Committee and Board believe the continued retention of PricewaterhouseCoopers LLP is in the best interests of AIG and its shareholders.

 

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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 May 11, 2016, or at any adjournment thereof (Annual Meeting or 2016 Annual Meeting of Shareholders).

When and where is our Annual Meeting?

We will hold our Annual Meeting on Wednesday, May 11, 2016 at 11:00 a.m., Eastern Daylight Time, at our offices at 175 Water Street, New York, New York 10038.

How are we distributing our proxy materials?

We are using the rule of the United States Securities and Exchange Commission (SEC) that allows companies to furnish proxy materials to their shareholders over the internet. In accordance with this rule, on or about March 29, 2016, we sent shareholders of record at the close of business on March 21, 2016, a Notice Regarding the Availability of Proxy Materials (Notice) or a full set of proxy materials. The Notice contains instructions on how to access our Proxy Statement and Annual Report for the year ended December 31, 2015 (2015 Annual Report) via the internet and how to vote. If you receive a Notice, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice instructs you on how to access and review all of the important information contained in the proxy materials. The Notice also instructs you on how you may submit your proxy via the internet. If you received a Notice and would like to receive a copy of our proxy materials, follow the instructions contained in the Notice to request a copy electronically or in paper form on a one-time or ongoing basis. Shareholders who do not receive the Notice will receive either a paper or electronic copy of our Proxy Statement and 2015 Annual Report, which will be sent on or about March 29, 2016.

Who can vote at the Annual Meeting?

You are entitled to vote or direct the voting of your shares of AIG’s 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 March 21, 2016. On that date, 1,133,817,031 shares of AIG Common Stock (exclusive of shares held by AIG and certain subsidiaries) were outstanding, held by 28,346 shareholders of record. Each share of AIG Common Stock held by you on the record date is entitled to one vote.

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 175 Water Street, New York, New York 10038.

 

   

If you hold AIG Common 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 shares in “street name.”

What do I need to attend, and vote at, 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 must bring an account statement or other acceptable evidence of ownership of AIG Common Stock as of the close of business on March 21, 2016, the record date for voting. In order to vote at the Annual Meeting if you hold shares in “street name,” 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.

 

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What proposals will be voted on at the Annual Meeting?

Three proposals from AIG will be considered and voted on at the Annual Meeting:

 

  1. To elect the sixteen nominees specified under “Proposal 1—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, on a non-binding advisory basis, to approve executive compensation; and

 

  3. To act upon a proposal to ratify the selection of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2016.

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 specified under “Proposal 1—Election of Directors” to the Board of Directors.

 

  2. “FOR” the proposal to approve, on a non-binding advisory basis, executive compensation.

 

  3. “FOR” the proposal to ratify the selection of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2016.

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.proxyvote.com. You may submit a proxy by internet 24 hours a day. To be valid, your proxy by internet must be received by 11:59 p.m., Eastern Daylight Time, on May 10, 2016. Please have your Notice or your proxy card in hand when you access the website and follow the instructions to create an electronic voting instruction form.

 

   

By Submitting a Proxy by Telephone. To submit a proxy using the telephone, call 1-800-690-6903 any time on a touch-tone telephone. There is NO CHARGE to you for the call in the United States or Canada. International calling charges apply outside the United States and Canada. You may submit a proxy by telephone 24 hours a day, 7 days a week. Follow the simple instructions provided by the recorded message. To be valid, your proxy by telephone must be received by 11:59 p.m., Eastern Daylight Time, on May 10, 2016.

 

   

By Submitting a Proxy by Mail. Mark your proxy card, sign and date it, and return it in the prepaid envelope that has been provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. To be valid, your proxy by mail must be received by 10:00 a.m., Eastern Daylight Time, on May 11, 2016.

 

   

At the Annual Meeting. You can vote your shares in person at the Annual Meeting (see “What do I need to attend, and vote at, 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 photo 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, and vote at, 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 that is received by 11:59 p.m., Eastern Daylight Time, on May 10, 2016; or

 

   

Executing and mailing a later-dated proxy card that is received prior to 10:00 a.m., Eastern Daylight Time, on May 11, 2016; or

 

   

Voting in person at the Annual Meeting.

 

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For a Proxy Submitted by Mail

 

   

Subsequently executing and mailing another proxy card bearing a later date that is received prior to 10:00 a.m., Eastern Daylight Time, on May 11, 2016; or

 

   

Giving written notice of revocation to AIG’s Secretary at 175 Water Street, New York, New York 10038 that is received by AIG prior to 10:00 a.m., Eastern Daylight Time, on May 11, 2016; 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 specified under “Proposal 1—Election of Directors”; FOR the proposal to approve on a non-binding advisory basis, executive compensation; FOR the ratification of the appointment of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2016; 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 proposal regarding the ratification of the appointment of independent auditors because this is 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 that proposal.

Under NYSE rules, each of the election of directors and the non-binding advisory vote on executive compensation 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 either 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 holders of AIG Common Stock. In other words, directors in an uncontested election must receive more votes “for” their election than “against” their election. Pursuant to AIG’s By-laws and 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 fails to receive the required vote at the Annual Meeting, AIG’s 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 Advisory Vote to Approve Executive Compensation. Adoption of the resolution on the non-binding advisory vote to approve executive compensation requires a “for” vote of a majority of the votes cast by the holders of AIG Common Stock, which votes cast are either “for” or “against” the resolution.

Proposal 3—Ratification of the Selection of PricewaterhouseCoopers LLP. Ratification of the selection of accountants requires a “for” vote of a majority of the votes cast by the holders of AIG Common Stock, which votes cast are either “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

 

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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.

Broker Non-Votes and Abstentions. Because directors are elected by a majority of the votes cast, an abstention 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 non-binding advisory vote to approve executive compensation and the ratification of the appointment of PricewaterhouseCoopers LLP, only votes cast “for” or “against” the proposal 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.

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 outstanding shares of AIG Common Stock entitled to vote 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.

How do I obtain more information about AIG?

A copy of AIG’s 2015 Annual Report, which includes AIG’s Annual Report on Form 10-K for the year ended December 31, 2015 (AIG’s 2015 Annual Report on Form 10-K) filed with the SEC, has been delivered or made available to shareholders. You also may obtain, free of charge, a copy of the 2015 Annual Report and AIG’s 2015 Annual Report on Form 10-K by writing to American International Group, Inc., 175 Water Street, New York, New York 10038, Attention: Investor Relations. These documents also are available in the Investors section of AIG’s corporate website at www.aig.com.

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 certain officers and regular employees of AIG and its subsidiaries. In addition to the foregoing, AIG has retained Innisfree M&A Incorporated to assist in the solicitation of proxies for a fee of approximately $20,000 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.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Proxy Statement and other publicly available documents may include, and AIG’s officers and representatives may from time to time make, projections, goals, assumptions and statements that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These projections, goals, assumptions 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, goals, assumptions and statements include statements preceded by, followed by or including words such as “will,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “focused on achieving,” “view,” “target,” “goal” or “estimate.” These projections, goals, assumptions and statements may address, among other things, AIG’s:

 

   

exposures to subprime mortgages, monoline insurers, the residential and commercial real estate markets, state and municipal bond issuers, sovereign bond issuers, the energy sector and currency exchange rates;

 

   

exposure to European governments and European financial institutions;

 

   

strategy for risk management;

 

   

sales of business;

 

   

restructuring of business operations;

 

   

generation of deployable capital;

 

   

strategies to increase return on equity and earnings per share;

   

strategies to grow net investment income, efficiently manage capital, grow book value per common share, and reduce expenses;

 

   

anticipated restructuring charges and annual cost savings;

 

   

anticipated business or asset divestitures or monetizations;

 

   

anticipated organizational and business changes;

 

   

strategies for customer retention, growth, product development, market position, financial results and reserves; and

 

   

subsidiaries’ revenues and combined ratios.

 

 

It is possible that AIG’s actual results and financial condition will differ, possibly materially, from the results and financial condition indicated in these projections, goals, assumptions and statements. Factors that could cause AIG’s actual results to differ, possibly materially, from those in the specific projections, goals, assumptions and statements include:

 

   

changes in market conditions;

 

   

negative impacts on customers, business partners and other stakeholders;

 

   

the occurrence of catastrophic events, both natural and man-made;

 

   

significant legal proceedings;

 

   

the timing and applicable requirements of any new regulatory framework to which AIG is subject as a nonbank systemically important financial institution and as a global systemically important insurer;

 

   

concentrations in AIG’s investment portfolios;

 

   

actions by credit rating agencies;

 

   

judgments concerning casualty insurance underwriting and insurance liabilities;

 

   

AIG’s ability to successfully manage run-off insurance portfolios;

 

   

AIG’s ability to successfully reduce costs and expenses and make business and organizational changes without negatively impacting client relationships or its competitive position;

 

   

AIG’s ability to successfully dispose of, or monetize, businesses or assets;

 

   

judgments concerning the recognition of deferred tax assets;

 

   

judgments concerning estimated restructuring charges and estimated cost savings; and

 

   

such other factors discussed in:

 

   

Part I, Item 1A. Risk Factors in AIG’s 2015 Annual Report on Form 10-K; and

 

   

Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in AIG’s 2015 Annual Report on Form 10-K.

 

 

AIG is not under any obligation (and expressly disclaims any obligation) to update or alter any projections, goals, assumptions or other statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise.

 

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PROPOSAL 1—ELECTION OF DIRECTORS

AIG’s Board of Directors currently consists of fourteen directors. All directors serve a one-year term. We are asking our shareholders to elect sixteen directors 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. It is not expected that any of the nominees will become unavailable for election as a director, but if any should become unavailable 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, except as specified below.

Directors will be elected by a majority of the votes cast by the shareholders of the AIG Common Stock, 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 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 fails to receive the required vote, AIG’s 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.

All of the nominees, with the exception of Samuel J. Merksamer and John A. Paulson, are currently members of AIG’s Board of Directors. Messrs. Merksamer and Paulson were recommended for nomination as directors pursuant to certain Nomination Agreements (the Nomination Agreements), dated February 11, 2016, by and between AIG and each of (i) High River Limited Partnership, Icahn Partners Master Fund LP, Icahn Partners LP and Carl C. Icahn (collectively, the Icahn Parties) and (ii) Paulson & Co. Inc., on behalf of several funds and accounts for which it and its affiliates serve as investment advisor, and John A. Paulson (collectively, the Paulson Parties and, together with the Icahn Parties, the Shareholder Parties). If either Mr. Merksamer or Mr. Paulson is unable to or refuses to stand for election, the Icahn Parties or the Paulson Parties, respectively, may designate another person to stand for election. The Nomination Agreements provide that, among other things, AIG will nominate two designees (Messrs. Merksamer and Paulson) for election at the Annual Meeting. The Nomination Agreements also require the Shareholder Parties to adhere to certain standstill obligations and to vote the shares of AIG Common Stock they beneficially own for each of the sixteen director nominees. See AIG’s Current Report on Form 8-K filed on February 11, 2016 for further information regarding the Nomination Agreements, including copies of the Nomination Agreements.

The Board believes that, if elected, the nominees will continue to provide effective oversight of AIG’s business and continue to advance our shareholders’ interests by drawing upon their collective qualifications, skills and experiences. This diverse and complementary set of skills, experience and backgrounds creates a highly qualified and independent Board of Directors. The following table highlights relevant key attributes and professional experience of our director nominees:

 

 

Key Attributes:

 

    

Professional experience in:

 

 

ü      Experience in business transformations and strategic restructurings

    

ü      Insurance and reinsurance

 

ü      Experience managing large, complex, international institutions

    

ü      Financial services, the banking industry and asset management

 

ü      Risk oversight and management expertise

    

ü      Operations

 

ü      Corporate governance expertise

    

ü      Information technology and cyber security

 

ü      High level of financial literacy and accounting expertise

    

ü      Regulatory markets, government, academia and research

 

ü      Global consumer, commercial and industrial backgrounds

    

ü      Public company accounting

 

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Below are biographies of each of the nominees for director, including the principal occupation or affiliation and public company directorships held by each nominee during the past five years. The nominees as a group have extensive direct experience in the oversight of public companies as a result of their service on AIG’s Board and/or the boards of other public companies and/or as a result of their involvement in the other organizations described below.

 

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W. DON CORNWELL

 

Director since 2011

  

Former Chairman of the Board and Chief Executive Officer of Granite Broadcasting Corporation

 

Age 68

Mr. Cornwell is the former Chairman of the Board and Chief Executive Officer of Granite Broadcasting Corporation, serving from 1988 until his retirement in August 2009, and Vice Chairman until December 2009. Mr. Cornwell spent 17 years at Goldman, Sachs & Co. where he served as Chief Operating Officer of the Corporate Finance Department from 1980 to 1988 and Vice President of the Investment Banking Division from 1976 to 1988. Mr. Cornwell is currently a director of Avon Products, Inc., where he is Lead Director, Chairman of the Finance Committee and a member of the Audit Committee and Nominating and Corporate Governance Committee, and Pfizer Inc., where he is Chairman of the Audit Committee and a member of the Compensation, Regulatory and Compliance, and Science and Technology Committees. Mr. Cornwell was Chairman of the Board and Chief Executive Officer of Granite Broadcasting when it filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code in December 2006 and emerged from its restructuring in June 2007. In light of Mr. Cornwell’s experience in finance and strategic business transformations, as well as his professional experience across the financial services industry, AIG’s Board has concluded that Mr. Cornwell should be re-elected to the Board.

 

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PETER R. FISHER

 

Director since 2014

  

Senior Fellow at the Center for Global Business and Government, and Senior Lecturer, at the Tuck School of Business at Dartmouth College; Former Head of Fixed Income Portfolio Management of BlackRock, Inc.

 

Age 59

Mr. Fisher is a Senior Fellow at the Center for Global Business and Government, and also a Senior Lecturer, at the Tuck School of Business at Dartmouth College, positions he has held since July 2013. Mr. Fisher previously served as an officer of BlackRock, Inc. and certain of its subsidiaries (BlackRock) from 2004 through 2013, as a Senior Managing Director (2010 to 2013) and a Managing Director (2004 to 2009). While at BlackRock, Mr. Fisher served as Head (2010 to 2013) and as Co-Head (2008 to 2009) of BlackRock’s Fixed Income Portfolio Management Group, overseeing portfolio managers responsible for more than $1 trillion of fixed income client accounts and funds, and as Chairman of BlackRock Asia (2005 to 2007). Mr. Fisher has been a Senior Director of the BlackRock Investment Institute since March 2013, and has served in such capacity as an independent consultant since January 2014. Prior to joining BlackRock in 2004, Mr. Fisher served as Under Secretary of the U.S. Department of the Treasury for Domestic Finance from 2001 to 2003, and, in that capacity, served on the board of the Securities Investor Protection Corporation, as a member of the Airline Transportation Stabilization Board and as the U.S. Treasury representative to the Pension Benefit Guaranty Corporation. From 2007 to 2013, Mr. Fisher was a non-executive director of the Financial Services Authority of the United Kingdom, where he was a member of the Risk Committee. Mr. Fisher also worked at the Federal Reserve Bank of New York from 1985 to 2001, ending his service there as an Executive Vice President and Manager of the System Open Market Account. In light of Mr. Fisher’s broad experience in asset management and government and his knowledge of the regulation of financial services companies, AIG’s Board has concluded that Mr. Fisher should be re-elected to the Board.

 

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LOGO   

JOHN H. FITZPATRICK

 

Director since 2011

  

Chairman of White Oak Global Advisors; Former Secretary General of The Geneva Association;

Former Chief Financial Officer, Head of the Life and Health Reinsurance Business Group and Head of Financial Services of Swiss Re

 

Age 59

Mr. Fitzpatrick has been Chairman of White Oak Global Advisors, an asset management firm lending to small and medium sized companies, since September 1, 2015, and Chairman of Oak Street Management Co., LLC, an insurance / management consulting company, and Oak Family Advisors, LLC, a registered investment advisor, since 2010. In May 2014, he completed a two-year term as Secretary General of The Geneva Association. From 2006 to 2010, Mr. Fitzpatrick was a partner at Pension Corporation and a director of Pension Insurance Corporation Ltd. From 1998 to 2006, he was a member of Swiss Re’s Executive Board Committee and served at Swiss Re as Chief Financial Officer, Head of the Life and Health Reinsurance Business Group and Head of Financial Services. From 1996 to 1998, Mr. Fitzpatrick was a partner in insurance private equity firms sponsored by Zurich Financial Services, Credit Suisse and Swiss Re. From 1990 to 1996, Mr. Fitzpatrick served as the Chief Financial Officer and a Director of Kemper Corporation, a NYSE-listed insurance and financial services organization where he started his career in corporate finance in 1978. From February 2010 until March 2011, Mr. Fitzpatrick was a director of Validus Holdings, Ltd., where he served on the Audit and Finance Committees. Mr. Fitzpatrick is a Certified Public Accountant and a Chartered Financial Analyst. In light of Mr. Fitzpatrick’s broad experience in the insurance and reinsurance industry, as well as his professional experience in insurance policy and regulation, AIG’s Board has concluded that Mr. Fitzpatrick should be re-elected to the Board.

 

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PETER D. HANCOCK

 

Director since 2014

  

President and Chief Executive Officer, AIG

 

Age 57

Mr. Hancock has been AIG’s President and Chief Executive Officer since September 2014, when he also joined the Board of Directors. Previously, he served as AIG’s Executive Vice President—Property and Casualty Insurance and joined AIG in February 2010 as Executive Vice President, Finance, Risk and Investments. From December 2008 to February 2010, Mr. Hancock served as Vice Chairman of KeyCorp, where he was responsible for Key National Banking. Previously, Mr. Hancock co-founded and served as President of Integrated Finance Limited, an advisory firm specializing in strategic risk management, asset management, and innovative pension solutions. Mr. Hancock also spent 20 years at J.P. Morgan, beginning in 1980, where he established the Global Derivatives Group, ran the Global Fixed Income business and Global Credit portfolio, and served as the firm’s Chief Financial Officer and Chief Risk Officer. In light of Mr. Hancock’s experience managing large, complex, international institutions and his professional experience across industries including insurance, banking and financial services, AIG’s Board has concluded that Mr. Hancock should be re-elected to the Board.

 

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LOGO   

WILLIAM G. JURGENSEN

 

Director since 2013

  

Former Chief Executive Officer of Nationwide Insurance

 

Age 64

Mr. Jurgensen is the former Chief Executive Officer of Nationwide Mutual Insurance Company and Nationwide Financial Services, Inc., serving from May 2000 to February 2009. During this time, he also served as director and Chief Executive Officer of several other companies within the Nationwide enterprise. Prior to his time in the insurance industry, he spent 27 years in the commercial banking industry. Before joining Nationwide, Mr. Jurgensen was an Executive Vice President with BankOne Corporation (now a part of JPMorgan Chase & Co.) where he was responsible for corporate banking products, including capital markets, international banking and cash management. He managed the merger integration between First Chicago Corporation and NBD Bancorp, Inc. and later was Chief Executive Officer for First Card, First Chicago’s credit card subsidiary. At First Chicago, he was responsible for retail banking and began his career there as Chief Financial Officer in 1990. Mr. Jurgensen started his banking career at Norwest Corporation (now a part of Wells Fargo & Company) in 1973. The majority of Mr. Jurgensen’s career has involved capital markets, securities trading and investment activities, with the balance in corporate banking. Mr. Jurgensen has been a director of ConAgra Foods, Inc. since 2002, where he has served on the Audit Committee and currently serves on the Human Resources and the Nominating, Governance and Public Affairs Committees. He was also a director of The Scotts Miracle-Gro Company from 2009 to 2013, where he served on the Audit, Finance, and Governance and Nominating Committees. In light of Mr. Jurgensen’s experience in insurance, financial services and risk management, AIG’s Board has concluded that Mr. Jurgensen should be re-elected to the Board.

 

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CHRISTOPHER S. LYNCH

 

Director since 2009

  

Former National Partner in Charge of Financial Services, KPMG LLP

 

Age 58

Mr. Lynch has been an independent consultant since 2007, providing a variety of services to public and privately held financial intermediaries, including corporate restructuring, risk management, strategy, governance, financial accounting and regulatory reporting, and troubled-asset management. Mr. Lynch is the former National Partner in Charge of KPMG LLP’s Financial Services Line of Business. He held a variety of positions with KPMG from 1979 to 2007, including chairing KPMG’s Americas Financial Services Leadership team and being a member of the Global Financial Services Leadership and the U.S. Industries Leadership teams. Mr. Lynch was an audit signing partner under Sarbanes Oxley for some of KPMG’s largest financial services clients. He also served as a Partner in KPMG’s National Department of Professional Practice and as a Practice Fellow at the Financial Accounting Standards Board. Mr. Lynch is a member of the Advisory Board of the Stanford Institute for Economic Policy Research and a member of the National Audit Committee Chair Advisory Council of the National Association of Corporate Directors. Mr. Lynch is currently Non-Executive Chairman of the Federal Home Loan Mortgage Corporation, where he is also Chairman of the Executive Committee. In light of Mr. Lynch’s experience in finance, accounting and risk management and strategic business transformations, as well as his professional experience across the financial services industry, AIG’s Board has concluded that Mr. Lynch should be re-elected to the Board.

 

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LOGO    SAMUEL J. MERKSAMER   

Managing Director of Icahn Capital LP

 

Age 35

Mr. Merksamer is a Managing Director of Icahn Capital LP, a subsidiary of Icahn Enterprises L.P., a diversified holding company engaged in multiple business segments, where he has been employed since 2008. Mr. Merksamer is a director of Cheniere Energy Inc., where he serves on the Audit and Compensation Committees, Hertz Global Holdings, Inc., where he serves on the Financing and Nominating and Governance Committees, Navistar International Corporation, where he serves on the Audit and Compensation Committees, Transocean Partners LLC, where he serves on the Compensation Committee, and Transocean Ltd., where he serves on the Finance and Health, Safety and Environment Committees. Mr. Merksamer’s term as a director will end and he will not be re-appointed to the board of directors of Transocean Partners LLC at its annual meeting of shareholders on May 5, 2016, which is prior to the AIG Annual Meeting of Shareholders. He previously served as a director of American Railcar Industries, Inc. from 2011 to 2013; Dynegy Inc. from 2011 to 2012; Hologic Inc. from 2013 to 2016 and Talisman Energy Inc. from 2013 to 2015. Pursuant to the Nomination Agreement with the Icahn Parties, AIG’s Board is recommending that Mr. Merksamer be elected to the Board.

 

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GEORGE L. MILES, JR.

 

Director since 2005

  

Chairman Emeritus, The Chester Group, Inc.; Former President and Chief Executive Officer, WQED Multimedia

 

Age 74

Mr. Miles has been Chairman Emeritus since April 2012 and is the former Executive Chairman of The Chester Group, Inc. (formerly known as Chester Engineers, Inc.) serving from October 2010 to April 2012 and the former President and Chief Executive Officer of WQED Multimedia, serving from 1994 to 2010. Mr. Miles served as an Executive Vice President and Chief Operating Officer of WNET/Thirteen from 1984 to 1994. Prior to WNET/Thirteen, he was Business Manager and Controller of KDKA-TV and KDKA Radio in Pittsburgh; Controller and Station Manager of WPCQ in Charlotte; Vice President and Controller of Westinghouse Broadcasting Television Group in New York; and Station Manager of WBZ-TV in Boston. Mr. Miles is currently a director of HFF, Inc., where he is Chairman of the Audit Committee and serves on the Compensation Committee, Harley-Davidson, Inc., where he serves on the Audit and Nominating and Corporate Governance Committees and EQT Corporation, where he serves on the Executive Committee and as Chairman of the Corporate Governance Committee. Mr. Miles formerly served as a director of WESCO International, Inc., where he served on the Compensation Committee. Mr. Miles is a Certified Public Accountant. In light of Mr. Miles’ experience in accounting as well as his professional experience across the operations and technology industry, AIG’s Board has concluded that Mr. Miles should be re-elected to the Board.

 

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LOGO   

HENRY S. MILLER

 

Director since 2010

  

Chairman, Marblegate Asset Management, LLC; Former Chairman and Managing Director, Miller Buckfire & Co., LLC

 

Age 70

Mr. Miller co-founded and has been Chairman of Marblegate Asset Management, LLC since 2009. Mr. Miller was co-founder, Chairman and a Managing Director of Miller Buckfire & Co., LLC, an investment bank, from 2002 to 2011 and Chief Executive Officer from 2002 to 2009. Prior to founding Miller Buckfire & Co., LLC, Mr. Miller was Vice Chairman and a Managing Director at Dresdner Kleinwort Wasserstein and its predecessor company Wasserstein Perella & Co., where he served as the global head of the firm’s financial restructuring group. Prior to that, Mr. Miller was a Managing Director and Head of both the Restructuring Group and Transportation Industry Group of Salomon Brothers Inc. From 1989 to 1992, Mr. Miller was a managing director and, from 1990 to 1992, co-head of investment banking at Prudential Securities. Mr. Miller is currently a director of The Interpublic Group of Companies, Inc., where he serves on the Corporate Governance Committee and the Finance Committee. Mr. Miller was also a director of Ally Financial Inc., from 2012 until July 2014, where he served on the Risk and Compliance Committee. In light of Mr. Miller’s experience in strategic business transformations as well as his professional experience across the financial services industry, AIG’s Board has concluded that Mr. Miller should be re-elected to the Board.

 

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ROBERT S. MILLER

 

Director since 2009

  

President and Chief Executive Officer of International Automotive Components Group S.A.; Former Chief Executive Officer, Hawker Beechcraft, Inc.; Former Executive Chairman, Delphi Corporation

 

Age 74

Mr. Miller has been President, Chief Executive Officer and a director of International Automotive Components Group S.A. since August 2015. He has also been Chairman of MidOcean Partners, a leading middle market private equity firm, since December 2009. Mr. Miller was Chief Executive Officer of Hawker Beechcraft, Inc., a manufacturer of aircraft, serving from February 2012 to February 2013. He also served as the Executive Chairman of the Delphi Corporation from 2007 to 2009. He was previously Chairman and Chief Executive Officer of Delphi Corporation from 2005 to 2007. Prior to joining Delphi Corporation, Mr. Miller served in a number of corporate restructuring situations, including as Chairman and Chief Executive Officer of Bethlehem Steel Corporation, Chairman and Chief Executive Officer of Federal Mogul Corporation, Chairman and Chief Executive Officer of Waste Management, Inc., and Executive Chairman of Morrison Knudsen Corporation. He has also served as Vice Chairman and Chief Financial Officer of Chrysler Corporation. Mr. Miller is a director of The Dow Chemical Company, where he is a member of the Governance and the Environment, Health, Safety and Technology Committees, and Symantec Corporation, where he is a member of the Compensation and Leadership Development Committee and Nominating and Governance Committee. In the past five years, Mr. Miller has also served as a director of Sbarro, Inc. and WL Ross Holding Corp., where he was Chairman of the Compensation Committee and served on the Audit Committee. Mr. Miller was Chief Executive Officer of Hawker Beechcraft, Inc. when the company filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code in May 2012. In light of Mr. Miller’s experience in managing large, complex, international institutions, his experience in finance, accounting and risk management and strategic business transformations, as well as his professional experience across the financial services industry, AIG’s Board has concluded that Mr. Miller should be re-elected to the Board.

 

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LOGO   

LINDA A. MILLS

 

Director since 2015

  

Former Corporate Vice President of Operations of Northrop Grumman Corporation

 

Age 66

Ms. Mills is the former Corporate Vice President of Operations for Northrop Grumman Corporation, with responsibility for operations, including information technology. During her 12 years with Northrop Grumman, from 2002 to 2014, Ms. Mills held a number of operational positions, including Corporate Vice President and President of Information Systems and Information Technology sectors; President of the Civilian Agencies Group; and Vice President of Operations and Process in the firm’s Information Technology Sector. Prior to joining Northrop Grumman, Ms. Mills was Vice President of Information Systems and Processes at TRW, Inc. She began her career as an engineer at Bell Laboratories, Inc. Ms. Mills also serves on the board of Navient Corporation where she is the Chair of the Compensation Committee and serves on the Finance & Operations Committee. In light of Ms. Mills’ in-depth experience in operations, information technology and cyber security, and her success in managing a significant line of business at Northrop Grumman, AIG’s Board has concluded that Ms. Mills should be re-elected to the Board.

 

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SUZANNE NORA JOHNSON

 

Director since 2008

  

Former Vice Chairman, The Goldman Sachs Group, Inc.

 

Age 58

Ms. Nora Johnson is the former Vice Chairman of The Goldman Sachs Group, Inc., serving from 2004 to 2007. During her 21 years at Goldman Sachs, she also served as the Chairman of the Global Markets Institute, Head of the Global Investment Research Division and Head of the Global Investment Banking Healthcare Business. Ms. Nora Johnson is currently a director of Intuit Inc., where she is Lead Director and Chairman of the Compensation and Organizational Development Committee and serves on the Nominating and Governance Committee, Pfizer Inc., where she serves on the Audit, Compensation and Science and Technology Committees, and Visa Inc., where she is Chairman of the Compensation Committee and serves on the Nominating and Corporate Governance Committee. In light of Ms. Nora Johnson’s experience in managing large, complex, international institutions, her experience in finance as well as her professional experience across the financial services industry, AIG’s Board has concluded that Ms. Nora Johnson should be re-elected to the Board.

 

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LOGO    JOHN A. PAULSON   

President and Portfolio Manager of Paulson & Co. Inc.

 

Age 60

Mr. Paulson is the President and Portfolio Manager of Paulson & Co. Inc. Paulson & Co. Inc. is an SEC-registered investment advisor specializing in global merger, event arbitrage and credit strategies. Prior to forming Paulson & Co. Inc. in 1994, Mr. Paulson was a general partner of Gruss Partners and a managing director in mergers and acquisitions at Bear Stearns. Pursuant to the Nomination Agreement with the Paulson Parties, AIG’s Board is recommending that Mr. Paulson be elected to the Board.

 

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RONALD A. RITTENMEYER

 

Director since 2010

  

Former Chairman, President and Chief Executive Officer, Expert Global Solutions, Inc.; Former Chairman, Chief Executive Officer and President, Electronic Data Systems Corporation

 

Age 68

Mr. Rittenmeyer is the former Chairman, President and Chief Executive Officer of Expert Global Solutions, Inc. (formerly known as NCO Group, Inc.), a global provider of business process outsourcing services, serving from 2011 to 2014. Mr. Rittenmeyer is also the former Chairman, Chief Executive Officer and President of Electronic Data Systems Corporation, serving from 2005 to 2008. Prior to that, Mr. Rittenmeyer was a Managing Director of the Cypress Group, a private equity firm, serving from 2004 to 2005. Mr. Rittenmeyer also served as Chairman, Chief Executive Officer and President of Safety-Kleen Corp. from 2001 to 2004. Among his other leadership roles, Mr. Rittenmeyer served as President and Chief Executive Officer of AmeriServe Food Distribution Inc. from 2000 to 2001, Chairman, Chief Executive Officer and President of RailTex, Inc. from 1998 to 2000, President and Chief Operating Officer of Ryder TRS, Inc. from 1997 to 1998, President and Chief Operating Officer of Merisel, Inc. from 1995 to 1996 and Chief Operating Officer of Burlington Northern Railroad Co. from 1994 to 1995. Mr. Rittenmeyer is currently a director of IMS Health Holdings, Inc., where he is Chairman of the Audit Committee and serves on the Leadership Development and Compensation Committee, and Tenet Healthcare Corporation, where he is Chairman of the Human Resources Committee and serves on the Health Information Technology, Audit and Executive Committees. In light of Mr. Rittenmeyer’s experience in managing large, complex, international institutions, his experience in finance and strategic business transformations as well as his professional experience across the financial services industry and technology industry, AIG’s Board has concluded that Mr. Rittenmeyer should be re-elected to the Board.

 

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DOUGLAS M. STEENLAND

 

Director since 2009

  

Former President and Chief Executive Officer, Northwest Airlines Corporation

 

Age 64

Mr. Steenland is the former Chief Executive Officer of Northwest Airlines Corporation, serving from 2004 to 2008, and President, serving from 2001 to 2004. Prior to that, he served in a number of Northwest Airlines executive positions after joining Northwest Airlines in 1991, including Executive Vice President, Chief Corporate Officer and Senior Vice President and General Counsel. Mr. Steenland retired from Northwest Airlines upon its merger with Delta Air Lines, Inc. Prior to joining Northwest Airlines, Mr. Steenland was a senior partner at a Washington, D.C. law firm that is now part of DLA Piper. Mr. Steenland is currently a director of Travelport Limited, where he serves as Chairman of the Board and Chairman of the Nominating and Corporate Governance Committee, Performance Food Group Company, where he serves as Chairman of the Board and a member of the Audit Committee and the Compensation Committee, and Hilton Worldwide Holdings Inc., where he serves as Chairman of the Audit Committee and a member of the Nominating and Corporate Governance Committee. In the past five years, Mr. Steenland has also served as a director of Delta Air Lines, Inc., Chrysler Group LLC (now FCA US LLC), where he served as Chairman of the Audit Committee, International Lease Finance Corporation (ILFC), a former AIG subsidiary, now a part of AerCap Holdings N.V. (AerCap), and Digital River, Inc., where he was Chairman of the Compensation Committee and served on the Finance and Nominating and Corporate Governance Committees. In light of Mr. Steenland’s experience in managing large, complex, international institutions and his experience in strategic business transformations as well as his professional experience in the airline industry, AIG’s Board has concluded that Mr. Steenland should be re-elected to the Board.

 

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THERESA M. STONE

 

Director since 2013

  

Former Executive Vice President and Treasurer of the Massachusetts Institute of Technology; Former Executive Vice President and Chief Financial Officer of Jefferson-Pilot Corporation; Former President of Chubb Life Insurance Company

 

Age 71

Ms. Stone is the former Executive Vice President and Treasurer of the Massachusetts Institute of Technology (MIT), serving from February 2007 until October 2011. In her role as Executive Vice President and Treasurer, Ms. Stone served as MIT’s Chief Financial Officer and was also responsible for MIT’s operations, including capital projects, campus planning, facilities operations, information technology, environmental health and safety, human resources, medical services and police. Ms. Stone also served as the Special Assistant to the President of MIT from October 2011 to January 2012. From November 2001 to March 2006, Ms. Stone served as Executive Vice President and Chief Financial Officer of Jefferson-Pilot Corporation (now Lincoln Financial Group) and, from 1997 to 2006, she also served as President of Jefferson-Pilot Communications. Ms. Stone also served as the President of Chubb Life Insurance Company from 1994 to 1997. From 1990 to 1994, Ms. Stone served as Senior Vice President—Acquisitions of The Chubb Corporation, in which role she advised the Chairman and Chief Executive Officer on domestic and international property casualty and life insurance strategy, acquisitions and divestitures. Ms. Stone also served as a director of the Federal Reserve Bank of Richmond from 2003 to 2007 and as Deputy Chairman from 2005 to 2007. Ms. Stone began her career as an investment banker, advising clients primarily in the insurance and financial services industries on financial and strategic matters. Ms. Stone served as a director of Progress Energy, Inc. from 2005 to 2012, where she served as Chairman of the Audit and Corporate Performance Committee and a member of the Executive, Finance and Governance Committees. She also served as a director of Duke Energy Corporation during July 2012 following the company’s merger with Progress Energy Inc. In light of Ms. Stone’s broad experience in both business and academia and her expertise in insurance, finance and management, AIG’s Board has concluded that Ms. Stone should be re-elected to the Board.

 

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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 current Corporate Governance Guidelines are included as Appendix A. AIG’s Corporate Governance Guidelines and the charters of the Audit Committee, the Compensation and Management Resources Committee, the Nominating and Corporate Governance Committee, the Regulatory, Compliance and Public Policy Committee, the Risk and Capital Committee and the Technology Committee are available in the Corporate Governance section of AIG’s corporate website at www.aig.com or in print by writing to American International Group, Inc., 175 Water Street, New York, New York 10038, 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.aig.com or in print by writing to American International Group, Inc., 175 Water Street, New York, New York 10038, 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.

Strong Corporate Governance Practices

The AIG Board is committed to good corporate governance and regularly reviews our practices and corporate governance developments to ensure continued effectiveness.

 

    

ü      Highly engaged Board with balanced tenure and substantial and diverse expertise necessary to evaluate and oversee strategy and performance

    

ü      Independent Chairman is required in by-laws

    

ü      Independent Chairman role is clearly defined and the Chairman generally does not serve longer than a five-year term

    

ü      Directors are elected annually by a majority of votes cast (in uncontested elections)

    

ü      All directors are independent (except CEO)

    

ü      Former AIG CEOs cannot serve on the Board

    

ü      Annual evaluations of Board, individual directors and all Board Committees

    

ü      No re-nomination for director attending less than 75% of meetings for two consecutive years

    

ü      Directors may not stand for election after reaching age 75

    

ü      All directors may contribute to agenda for Board meetings

    

ü      Board Committee structure organized around key strategic issues and designed to facilitate dialogue and efficiency

    

ü      Board Committee Chairs generally do not serve longer than a five-year term

    

ü      Strong risk management oversight including through the Risk and Capital Committee, Audit Committee and other Board Committees

    

ü      Extensive shareholder engagement program with director participation

    

ü      Proxy access by-law

 

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Director Independence and Effectiveness

AIG aims to maintain a balanced and independent board that is committed to representing the long-term interests of AIG’s shareholders, and which has the substantial and diverse expertise necessary to oversee AIG’s strategic and business planning as well as management’s approach to addressing significant risks and challenges facing AIG.

Director Independence Assessment. Using the AIG Director Independence Standards, the Board, on the recommendation of the Nominating and Corporate Governance Committee, determined that each of AIG’s fifteen non-management director nominees—Mss. Nora Johnson, Mills and Stone and Messrs. Cornwell, Fisher, Fitzpatrick, Jurgensen, Lynch, Merksamer, Miles, Henry S. Miller, Robert S. Miller, Paulson, Rittenmeyer and Steenland—are independent under NYSE listing standards and the AIG Director Independence Standards. Mr. Hancock is the only director nominee who holds an AIG management position and, therefore, is not an independent director. Mr. Arthur C. Martinez, who retired from the Board at the 2015 Annual Meeting of Shareholders, was also determined by the Board, on the recommendation of the Nominating and Corporate Governance Committee, to be independent under the NYSE listing standards and the AIG Director Independence Standards.

In making the independence determinations, the Nominating and Corporate Governance Committee and the Board of Directors considered relationships arising from: (1) contributions by AIG to charitable organizations with which Mss. Nora Johnson and Stone and Messrs. Lynch and Paulson or members of their immediate families are affiliated; (2) 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; (3) in the case of Mr. Fisher, payments made in the ordinary course of business between AIG and BlackRock, Inc.; (4) in the case of Mr. Lynch, the summer internships in 2013 and 2014 and the offer, acceptance and commencement of full-time employment of his son with AIG in 2016; and (5) in the case of Mr. Robert S. Miller, payments made in the ordinary course of business between AIG and International Automotive Components Group S.A. None of these relationships exceeded the thresholds set forth in the AIG Director Independence Standards.

The Nominating and Corporate Governance Committee and the Board of Directors also considered the relationships between AIG and MidOcean, a private equity firm. Mr. Robert S. Miller is the Chairman of the investment advisor of MidOcean and several AIG affiliates are committed to invest an aggregate of $110,000,000 in two funds advised by the investment advisor of MidOcean and made capital contributions to these funds of $574,835 and $288,422 in 2015 and 2016, respectively, pursuant to these commitments. AIG’s commitments to invest predate Mr. Miller becoming a director of AIG and his involvement with MidOcean. Mr. Miller has relinquished any profit interest in these funds to the extent arising from any funds contributed by AIG or affiliates of AIG.

Independent Chairman. AIG’s By-laws require that the role of the Chairman be separate from that of the Chief Executive Officer and that the Chairman be an independent director. AIG believes that this structure is optimal because it permits the Chairman to focus on the governance of the Board and to interact with AIG’s various stakeholders while permitting the Chief Executive Officer to focus more on AIG’s business. AIG’s Corporate Governance Guidelines provide for an annual review of the Chairman and that the Chairman generally not serve for longer than a five-year term. Effective July 1, 2015, Mr. Steenland assumed the role of independent Chairman, succeeding Mr. Robert S. Miller after he served a five-year term as Chairman.

The duties of the Chairman are clearly defined and include:

 

   

Overseeing Board meeting agenda preparation in consultation with the Chief Executive Officer;

 

   

Chairing Board meetings and executive sessions of the independent Directors;

 

   

Leading the Chief Executive Officer review process and discussions regarding management succession;

 

   

Interacting regularly with the Chief Executive Officer, including discussing strategic initiatives and their implementation;

 

   

Leading Board review of strategic initiatives and plans;

 

   

Overseeing distribution of information and reports to the Board;

 

   

Overseeing the Board and Board Committees’ annual self-evaluation process;

 

   

Serving as non-voting member of each Board Committee; and

 

   

Liaising with shareholders.

 

 

Director Tenure and Board Refreshment. Board composition and refreshment is a priority for AIG. The Board believes that it is desirable to maintain a mix of longer-tenured, experienced directors and newer directors

 

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with fresh perspectives. Since 2013, we have added four new independent directors, and in 2015, the Board appointed a new independent Chairman and elected Linda A. Mills as a director. Ms. Mills’ in-depth experience in operations, information technology and cyber security have added further strength to the Board. Further, we have nominated for election at the Annual Meeting two new directors—Messrs. Merksamer and Paulson—who were each identified by a shareholder of AIG.

The average director tenure is less than six years. In addition, under AIG’s Corporate Governance Guidelines, the Chairman and Committee Chairs generally do not serve for longer than a five-year term and former Chief Executive Officers of AIG cannot serve as directors. No individual may stand for election as a director after reaching the age of 75, and the Board may only waive this requirement for a one-year period if, on the recommendation of the Nominating and Corporate Governance Committee, it determines such waiver to be in the best interests of AIG.

Director and Board Accountability and Evaluations. The AIG Board believes that self-evaluations of the Board, the standing Committees of the Board and individual directors are important elements of corporate governance. Pursuant to AIG’s Corporate Governance Guidelines, the Board, acting through the Nominating and Corporate Governance Committee and under the general oversight of the Chairman, conducts an annual self-evaluation and evaluation of each member of the Board, and each standing Committee conducts an annual self-evaluation.

The Board considers director attendance at Board and Committee meetings an essential duty of a director. As a result, AIG’s Corporate Governance Guidelines also provide that any director who, for two consecutive calendar years, attends fewer than 75 percent of the total regular meetings of the Board and the meetings of all Committees of which such director is a voting member, will not be nominated for re-election 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.

Oversight of Risk Management

The Board oversees the management of risk through the complementary functioning of the Risk and Capital Committee and the Audit Committee and interaction with other Committees of the Board. The Risk and Capital Committee oversees AIG’s Enterprise Risk Management (ERM) as one of its core responsibilities and reviews AIG’s significant risk assessment and risk management policies. The Audit Committee also discusses the guidelines and policies governing the process by which AIG assesses and manages risk and considers AIG’s major risk exposures and how they are monitored and controlled. The Chairs of the two Committees then coordinate with each other and the Chairs of the other Committees of the Board to help ensure that each Committee has received the information that it needs to carry out its responsibilities with respect to risk management. Both the Risk and Capital Committee and the Audit Committee report to the Board with respect to any notable risk management issues. The Compensation and Management Resources Committee, in conjunction with AIG’s Chief Risk Officer, is responsible for reviewing the relationship between AIG’s risk management policies and practices and the incentive compensation arrangements applicable to senior executives.

Board Meetings

There were fourteen meetings of the Board during 2015. The non-management directors meet in executive session, without any management directors present, in conjunction with each regularly scheduled Board meeting. Until July 1, 2015, Mr. Robert S. Miller, and beginning July 1, 2015, Mr. Steenland, as Non-Executive Chairman of the Board, presided at the executive sessions. For 2014 and 2015, 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.

Shareholder Engagement

Fostering long-term relationships with shareholders and maintaining their trust is a priority for the Board. Engagement with shareholders helps us gain useful feedback on a wide variety of topics, including corporate governance, corporate social responsibility, strategy, performance and related matters. Shareholder feedback also helps in better tailoring the public information provided to address the interests and inquiries of shareholders.

Accordingly, AIG maintains an active dialogue with shareholders and other stakeholders, including through AIG’s Investor Relations department. As part of this process, the independent Chairman and the Chief Executive Officer periodically participate in meetings with shareholders to discuss and obtain feedback on issues important to AIG’s shareholders. AIG engaged on topics of corporate governance and executive compensation with

 

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shareholders representing more than 45 percent of outstanding AIG Common Stock. AIG also had a number of conversations with portfolio managers and analysts that were primarily focused on strategy and company performance. Our independent Chairman participated in a significant number of these meetings, and reported the feedback to the full Board. We had constructive dialogue regarding the Company’s executive compensation program, and the vast majority of shareholders engaged expressed support for our governance and executive compensation program, including AIG’s adoption of proxy access.

Additionally, the Chief Executive Officer and other members of senior management regularly meet with shareholders and participate in investor conferences in the United States and abroad. Shareholder feedback received in those meetings, conferences and dialogue is shared with, and considered by, the Board. Investor presentations are made available in the Investors—Webcasts and Presentations section of AIG’s corporate website at www.aig.com.

All directors standing for election at the 2015 Annual Meeting of Shareholders attended the 2015 Annual Meeting of Shareholders, and all directors are expected to attend the 2016 Annual Meeting of Shareholders.

Director Recommendations by Shareholders. The Nominating and Corporate Governance Committee considers shareholder feedback when considering whether to recommend that the Board nominate a director for re-election, and takes into account the views of interested shareholders as appropriate when filling a vacancy on the Board.

Proxy Access. In November 2015, the Board amended AIG’s By-laws to enable eligible shareholders with a significant long-term interest in AIG to include their own director nominees in AIG’s proxy statement for its annual meeting. The Board believes these amendments establish an additional mechanism for Board accountability and for ensuring that Board nominees are supported by AIG’s long-term shareholders.

Under the new proxy access by-law, a shareholder, or a group of up to 20 shareholders, owning three percent or more of AIG Common Stock continuously for at least three years may nominate and include in AIG’s annual meeting proxy materials director nominees constituting up to the greater of two individuals or 20 percent of the Board of Directors, so long as the shareholder(s) and the nominee(s) satisfy the requirements specified in AIG’s By-laws. Shareholders who wish to submit director nominees for election at the 2017 Annual Meeting of Shareholders pursuant to the proxy access by-law may do so in compliance with the procedures described in “Other Matters—Shareholder Proposals for the 2017 Annual Meeting.”

Say on Pay Advisory Vote. The Board values regular feedback from AIG’s shareholders, including the feedback received through our say-on-pay advisory vote. Since 2009, AIG has held an annual say-on-pay advisory vote.

Communicating with Directors

AIG has adopted procedures on reporting of concerns regarding accounting and other matters and on communicating with non-management directors. These procedures are available in the Corporate Governance section of AIG’s corporate website at www.aig.com.

Shareholders and other interested parties may communicate with any of the independent directors, including the Chairman and Committee Chairs, by writing in care of Vice President—Corporate Governance, American International Group, Inc., 175 Water Street, New York, New York 10038 or by email to: boardofdirectors@aig.com.

 

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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, election or appointment 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 Nominating and Corporate Governance Committee’s charter is available in the Corporate Governance section of AIG’s corporate website at www.aig.com.

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

Conduct of meetings and governance process. During 2015, the Nominating and Corporate Governance Committee held seven meetings. In discussing governance initiatives and in preparation for meetings, the Chairman of the Board, the Chair of the Nominating and Corporate Governance Committee and the Vice President—Corporate Governance met and consulted frequently with the other Committee and Board members.

Board Membership and Composition

Nomination and Election of Directors. The Nominating and Corporate Governance Committee evaluated and recommended to the Board of Directors the sixteen nominees under “Proposal 1—Election of Directors” that are standing for election at the 2016 Annual Meeting of Shareholders, based on the criteria set forth in AIG’s Corporate Governance Guidelines. These criteria are: high personal and professional ethics, values and integrity; ability to work together as part of an effective, collegial group; commitment to representing the long-term interests of AIG; skill, expertise, diversity, background, and experience with businesses and other organizations that the Board deems relevant; the interplay of the individual’s experience with the experience of other Board members; the contribution represented by the individual’s skills and experience to ensuring that the Board has the necessary tools to perform its oversight function effectively; ability and willingness to commit adequate time to AIG over an extended period of time; and the extent to which the individual would otherwise be a desirable addition to the Board and any Committees of the Board.

As provided in the Corporate Governance Guidelines, the Board generally considers it desirable for non-management directors not to serve on the boards of directors of more than four public companies (other than AIG or a company in which AIG has a significant equity interest) that require substantial time commitments, absent special circumstances. Mr. Merksamer presently serves on the boards of five public companies, but his term as a director ends and he will not be re-appointed to the board of directors of Transocean Partners LLC at its annual meeting of shareholders on May 5, 2016. This will reduce the number of public company boards on which he serves as director (other than AIG) to four, which will be consistent with AIG’s Corporate Governance Guidelines. Because Mr. Merksamer will be in compliance with this Corporate Governance Guideline by the time of the 2016 Annual Meeting of Shareholders, the Board, on the recommendation of the Nominating and Corporate Governance Committee, has waived this Guideline to allow for Mr. Merksamer’s nomination for election to the Board.

A description of the nominees recommended by the Nominating and Corporate Governance Committee is set forth under “Proposal 1—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 Nominating and Corporate Governance Committee, determined that each of AIG’s thirteen current non-management directors and each of Messrs. Merksamer and Paulson is independent within the meaning of the NYSE listing standards. Mr. Hancock is the only director nominee who holds an AIG management position and, therefore, is not an independent director.

 

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Diversity Consideration. The Nominating and Corporate Governance Committee does not have a specific diversity policy. Rather, the Nominating and Corporate Governance Committee considers diversity in terms of minority status and gender as factors in evaluating director candidates and also considers diversity in the broader sense of how a candidate’s experience and skills could assist the Board in light of the Board’s then composition.

Committee Actions in 2015

During 2015, the Committee led the processes to implement proxy access (as further described above in “—Corporate Governance—Shareholder Engagement—Proxy Access”), select Mr. Steenland as Chairman of the Board to succeed Mr. Robert S. Miller after a five-year term as Chairman, appoint Ms. Mills as a director, and enhance director engagement with AIG stakeholders, including shareholders.

Conclusion

During 2015, the Nominating and Corporate Governance Committee performed its duties and responsibilities under the Nominating and Corporate Governance Committee charter.

Nominating and Corporate Governance Committee

American International Group, Inc.

Suzanne Nora Johnson, Chair

W. Don Cornwell

George L. Miles, Jr.

Robert S. Miller

 

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COMMITTEES

AIG’s Board Committee structure is organized around key strategic issues to facilitate oversight of management. Committee Chairs regularly coordinate with one another to ensure appropriate information sharing. To further facilitate information sharing, all Committees provide a summary of significant actions to the full Board, and Committee meetings are scheduled to allow all directors to attend each meeting, with many directors attending such meetings. As required under AIG’s Corporate Governance Guidelines, each standing Committee conducts an annual self-assessment and review of its Charter.

The following table sets forth the current membership on each standing Committee of the Board and the number of Committee meetings held in 2015. Mr. Hancock does not serve on any Committees of the Board. Mr. Steenland serves as an ex-officio member of each Committee.

 

Director   Audit
Committee
  Compensation
and
Management
Resources
Committee
  Nominating
and
Corporate
Governance
Committee
  Regulatory,
Compliance
and Public Policy
Committee
  Risk and Capital
Committee
  Technology
Committee

W. Don Cornwell

      C   M            

Peter R. Fisher

              M   M    

John H. Fitzpatrick

  M               C    

William G. Jurgensen

  C               M    

Christopher S. Lynch

  M               M    

George L. Miles, Jr.

      M   M           M

Henry S. Miller

              M   M    

Robert S. Miller

          M           M

Linda A. Mills

      M               M

Suzanne Nora Johnson

      M   C            

Ronald A. Rittenmeyer

  M   M               C

Douglas M. Steenland

  *   *   *   *   *   *

Theresa M. Stone

  M           C        

Number of meetings in 2015

  10   8   7   5   18   5

M = Member

C = Chair

 

* Mr. Steenland is an ex-officio, non-voting member.

Audit Committee

The Audit Committee, which held ten meetings during 2015, assists the Board in its oversight of AIG’s financial statements, including internal control over financial reporting, and compliance with legal and regulatory requirements, the qualifications, independence and performance of AIG’s independent registered public accounting firm and the performance of AIG’s internal audit function. As part of these oversight responsibilities, the Audit Committee discusses with senior management the guidelines and policies by which AIG assesses and manages risk. 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 the appointment or removal, performance reviews and determining the compensation of AIG’s chief internal auditor. The Audit Committee’s assistance in the Board of Directors’ oversight of AIG’s compliance with legal and regulatory requirements primarily focuses on the effect of such matters on AIG’s financial statements, financial reporting and internal control over financial reporting. In considering AIG’s compliance with legal and regulatory requirements, the Audit Committee also takes into account the oversight of legal and regulatory matters by the Regulatory, Compliance and Public Policy Committee.

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 and have accounting or

 

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related financial management expertise, each as defined by NYSE listing standards, and are audit committee financial experts, as defined under SEC rules. Although designated as audit committee financial experts, no member of the Committee is an accountant for AIG or, under SEC rules, an “expert” for purposes of the liability provisions of the Securities Act of 1933, as amended (the Securities Act), or for any other purpose.

Compensation and Management Resources Committee

The Compensation and Management Resources Committee, which held eight meetings during 2015, is responsible for determining and approving the compensation awarded to AIG’s Chief Executive Officer (subject to ratification or approval by the Board), approving the compensation awarded to the other senior executives under its purview (which includes all of the named executives in the 2015 Summary Compensation Table) and reviewing and approving the performance measures and goals relevant to such compensation. The Compensation and Management Resources Committee is also responsible for making recommendations to the Board with respect to AIG’s compensation programs for senior executives and other employees, for reviewing, in conjunction with AIG’s Chief Risk Officer, the relationship between AIG’s risk management policies and practices and the incentive compensation arrangements applicable to senior executives, 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.aig.com.

Our Chief Executive Officer 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 or approves 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. (the Cook firm) 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 provide independent, analytical and evaluative advice about AIG’s compensation programs for senior executives, including comparisons to industry peers and comparisons to “best practices” in general. A senior consultant of the Cook firm regularly attends Committee meetings and provides information on compensation trends along with specific views on AIG’s compensation programs.

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 Chair of the Compensation and Management Resources Committee. Other than services provided to the Compensation and Management Resources Committee and the Nominating and Corporate Governance Committee, neither the Cook firm nor any of its affiliates provided any other services to AIG. For services related to board and executive officer compensation, the Cook firm was paid $145,743 in 2015.

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 and SEC rules.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee held seven meetings in 2015. The Board of Directors has determined that all members of the Nominating and Corporate Governance Committee are independent under NYSE listing standards. The primary responsibilities of the Nominating and Corporate Governance Committee are to identify individuals qualified to become Board members, consistent with criteria approved by the Board of Directors, and recommend these 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 matters and to oversee the evaluation of the Board and its Committees. The Nominating and Corporate Governance Committee also periodically reviews and makes recommendations to the Board regarding the form and amount of director compensation.

 

 

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The AIG Corporate Governance Guidelines, which are included as Appendix A, 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 2017 Annual Meeting of Shareholders may do so by submitting names and supporting information to: Chair, Nominating and Corporate Governance Committee, c/o Vice President—Corporate Governance, American International Group, Inc., 175 Water Street, New York, New York 10038.

In addition, in November 2015, AIG amended its By-laws to permit a shareholder, or a group of up to 20 shareholders, owning three percent or more of AIG Common Stock continuously for at least three years to nominate and include in AIG’s annual meeting proxy materials director nominees constituting up to the greater of two individuals or 20 percent of the Board of Directors, so long as the shareholder(s) and the nominee(s) satisfy the requirements specified in AIG’s By-laws (as further described above in “—Corporate Governance—Shareholder Engagement—Proxy Access”).

Regulatory, Compliance and Public Policy Committee

The Regulatory, Compliance and Public Policy Committee held five meetings in 2015. The Regulatory, Compliance and Public Policy Committee assists the Board in its oversight of AIG’s handling of 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 Regulatory, Compliance and Public Policy Committee’s duties and responsibilities include reviewing periodically with management AIG’s relations with regulators and governmental agencies, and any significant legal, compliance and regulatory matters that have arisen, and coordinating with the Audit Committee and other Committees of the Board on such matters to the extent appropriate; serving as the representative of the Board to AIG’s regulators; reviewing periodically management’s development of compliance policies and procedures and implementation of AIG’s compliance program; and receiving reports from the Chief Internal Auditor regarding internal audit’s reviews of AIG’s legal, regulatory and compliance functions and periodically reviewing such reports with the Chief Internal Auditor. The Regulatory, Compliance and Public Policy Committee’s charter is available in the Corporate Governance section of AIG’s corporate website at www.aig.com.

The Board has determined, on the recommendation of the Nominating and Corporate Governance Committee, that all members of the Regulatory, Compliance and Public Policy Committee are independent under NYSE listing standards and SEC rules.

Risk and Capital Committee

The Risk and Capital Committee held eighteen meetings in 2015. The Risk and Capital Committee reports to and assists the Board in overseeing and reviewing information regarding AIG’s ERM, including the significant policies, procedures, and practices employed to manage liquidity risk, credit risk, market risk, operational risk and insurance risk. The Risk and Capital Committee also 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 and financing, the allocation of capital to its businesses, methods of financing its businesses and other related strategic initiatives. The Risk and Capital Committee also approves issuances, investments, dispositions and other transactions and matters as authorized by the Board. The Risk and Capital Committee’s charter is available in the Corporate Governance section of AIG’s corporate website at www.aig.com.

The Board has determined, on the recommendation of the Nominating and Corporate Governance Committee, that all members of the Risk and Capital Committee are independent under NYSE listing standards and SEC rules.

Technology Committee

The Technology Committee held five meetings in 2015. The Technology Committee assists the Board in its oversight of AIG’s information technology projects and initiatives by, among other things, reviewing the financial, tactical and strategic benefits of proposed significant information technology-related projects and initiatives, reviewing and making recommendations to the Board regarding significant information technology investments in

 

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support of AIG’s information technology strategy, and reviewing AIG’s risk management and risk assessment guidelines and policies regarding information technology security, including the quality and effectiveness of AIG’s information technology security and disaster recovery capabilities. The Technology Committee’s charter is available in the Corporate Governance section of AIG’s corporate website at www.aig.com.

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

 

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COMPENSATION OF DIRECTORS

From January 2015 until the 2015 Annual Meeting of Shareholders, the annual retainer for each non-management director consisted of $150,000 cash and an annual award of Deferred Stock Units (DSUs) in an amount of $100,000. The Chairman, who is an ex-officio member of all standing Committees of the Board, received an additional annual retainer of $260,000. During the same period, the Chair of each Committee received an annual Committee retainer of $20,000, except the Chair of the Compensation and Management Resources Committee, who received $30,000, the Chair of the Audit Committee, who received $40,000, and the Chair of the Risk and Capital Committee, who received $40,000. For each other member of a Committee, the annual Committee retainer was $5,000.

As of the date of the 2015 Annual Meeting of Shareholders, the annual retainer for each non-management director consisted of $150,000 cash and an annual award of DSUs in an amount of $130,000 and annual Committee member retainers were eliminated. The additional annual retainer for the Chairman and the annual retainers for Committee Chairs remained unchanged. Non-management directors can elect to receive annual retainer amounts and Committee retainer amounts in the form of DSUs and are also eligible for the AIG Matching Grants Program on the same terms and conditions that apply to AIG employees. See “Committees” for information on current Committee memberships.

Each DSU provides that one share of AIG Common Stock will be delivered when a director ceases to be a member of the Board and includes 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 underlying the DSUs had been outstanding. DSUs are granted under the American International Group, Inc. 2013 Omnibus Incentive Plan (2013 Omnibus Incentive Plan).

Under director stock ownership guidelines, non-management directors should own a number of shares of AIG Common Stock (including deferred stock and DSUs) with a value equal to at least five times the annual retainer for non-management directors.

Mr. Hancock did not receive any compensation for service as a director.

The Cook firm provided advice to the Nominating and Corporate Governance Committee with respect to AIG director compensation and related market practices.

 

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The following table contains information with respect to the compensation of the individuals who served as non-management directors of AIG for all or part of 2015.

2015 Non-Management Director Compensation

 

Non-Management Members of the Board in 2015

   Fees
Earned or
Paid in
Cash(1)
     Stock
Awards(2)
     All Other
Compensation(3)
     Total  

W. Don Cornwell

   $ 172,692       $ 129,992       $ 10,000       $ 312,684   

Peter R. Fisher

   $ 153,654       $ 129,992       $ 0       $ 283,646   

John H. Fitzpatrick

   $ 191,827       $ 129,992       $ 0       $ 321,819   

William G. Jurgensen

   $ 173,654       $ 129,992       $ 0       $ 303,646   

Christopher S. Lynch

   $ 171,827       $ 129,992       $ 0       $ 301,819   

Arthur C. Martinez

   $ 116,923       $ 0       $ 0       $ 116,923   

George L. Miles, Jr.

   $ 155,481       $ 129,992       $ 10,000       $ 295,473   

Henry S. Miller

   $ 153,654       $ 129,992       $ 10,000       $ 293,646   

Robert S. Miller

   $ 280,000       $ 129,992       $ 10,000       $ 419,992   

Linda A. Mills

   $ 69,231       $ 107,442       $ 10,000       $ 186,673   

Suzanne Nora Johnson

   $ 171,827       $ 129,992       $ 10,000       $ 311,819   

Ronald A. Rittenmeyer

   $ 173,654       $ 129,992       $ 0       $ 303,646   

Douglas M. Steenland

   $ 291,827       $ 129,992       $ 0       $ 421,819   

Theresa M. Stone

   $ 163,654       $ 129,992       $ 10,000       $ 303,646   

 

 

(1) This column represents annual retainer fees and Committee and Committee Chair retainer fees. For Mr. Cornwell, the amount includes a prorated Committee Chair retainer fee for his service as Chair of the Compensation and Management Resources Committee, effective as of the date of the 2015 Annual Meeting of Shareholders. For Messrs. Cornwell, Fisher, Fitzpatrick, Jurgensen, Lynch, Miles, Henry S. Miller, Rittenmeyer, Steenland and Mss. Nora Johnson and Stone, the amounts include a prorated amount of the annual Committee member retainer fees that were eliminated, effective as of the date of the 2015 Annual Meeting of Shareholders. For Mr. Martinez, the amount (i) includes prorated annual retainer and Committee Chair and member fees for his service as a director until the 2015 Annual Meeting of Shareholders and (ii) does not include (a) $494,610, which represents the value of shares of AIG Common Stock delivered when he ceased to be a member of the Board in accordance with the terms of DSUs previously granted and reported and (b) $15,480, which represents a cash payment with respect to warrant equivalents granted to Mr. Martinez related to DSUs issued prior to the dividend of warrants by AIG to its shareholders on January 13, 2011. For Ms. Mills, the amount includes a prorated annual retainer fee for her service as director beginning July 15, 2015.

 

(2) This column represents the grant date fair value of DSUs granted in 2015 to directors, based on the closing sale price of AIG Common Stock on the date of grant. For Ms. Mills, the amount represents a prorated amount on the date that she joined the Board of the annual grant of $130,000 made to non-management directors.

 

(3) This column represents charitable contributions by AIG under AIG’s Matching Grants Program.

 

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The following table sets forth information with respect to the option and stock awards outstanding at December 31, 2015 for the non-management directors of AIG.

Stock and Option Awards Outstanding at December 31, 2015

 

Non-Management Members of the Board in 2015

   Option Awards(1)      Deferred
Stock(2)
     Deferred
Stock Units(3)
 

W. Don Cornwell

     0         0         10,579   

Peter R. Fisher

     0         0         4,130   

John H. Fitzpatrick

     0         0         9,489   

William G. Jurgensen

     0         0         6,146   

Christopher S. Lynch

     0         0         10,725   

Arthur C. Martinez

     0         0         0   

George L. Miles, Jr.

     125         90         10,984   

Henry S. Miller

     0         0         10,725   

Robert S. Miller

     0         0         10,725   

Linda A. Mills

     0         0         1,686   

Suzanne Nora Johnson

     0         0         13,881   

Ronald A. Rittenmeyer

     0         0         10,725   

Douglas M. Steenland

     0         0         10,725   

Theresa M. Stone

     0         0         13,328   

 

 

(1) Represents outstanding option awards made by AIG in 2006. All options are exercisable, but have an exercise price far in excess of the value of AIG Common Stock at year-end 2015 ($61.97). The exercise price of the options is $1,250.00.

 

(2) No deferred stock was awarded in 2015. 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.

 

(3) DSUs shown include DSUs awarded in 2015 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. DSUs granted prior to April 2010 were granted under the Amended and Restated 2007 Stock Incentive Plan (2007 Stock Incentive Plan). DSUs granted after April 2010 and prior to May 15, 2013 were granted under the 2010 Stock Incentive Plan and DSUs granted commencing on or after May 15, 2013 were granted under the 2013 Omnibus Incentive Plan.

COMPENSATION AND MANAGEMENT RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During his or her service on the Compensation and Management Resources Committee, no member served as an officer or employee of AIG at any time or had any relationship with AIG requiring disclosure as a related-party transaction under SEC rules. During 2015, 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.

 

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OWNERSHIP OF CERTAIN SECURITIES

AIG 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 at January 29, 2016.

 

     Shares of Common Stock
Beneficially Owned
 

Name and Address

       Number             Percent      

BlackRock, Inc.

    

55 East 52nd Street

    

New York, NY 10055

     80,762,613 (1)      6.9

The Vanguard Group

    

100 Vanguard Blvd.

    

Malvern, PA 19355

     67,605,730 (2)      5.8

 

 

(1) Based on a Schedule 13G/A filed on February 10, 2016 by BlackRock, Inc. reporting beneficial ownership as of December 31, 2015. Item 4 to this Schedule 13G/A provides details as to the voting and investment power of BlackRock, Inc. as well as the right to acquire AIG Common Stock within 60 days. All information provided in “Ownership of Certain Securities” with respect to this entity is provided based solely on information set forth in the Schedule 13G/A. 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.

 

(2) Based on a Schedule 13G/A filed on February 10, 2016 by The Vanguard Group reporting beneficial ownership as of December 31, 2015. Item 4 to this Schedule 13G/A provides details as to the voting and investment power of The Vanguard Group as well as the right to acquire AIG Common Stock within 60 days. All information provided in “Ownership of Certain Securities” with respect to this entity is provided based solely on information set forth in the Schedule 13G/A. 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.

 

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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 2015 Summary Compensation Table in “Executive Compensation—2015 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
January 29, 2016
 
     Amount and Nature
of Beneficial
Ownership(1)(2)
    Percent
of
Class
 

W. Don Cornwell

     13,127        (4

William N. Dooley

     90,367        (4

John Q. Doyle

     70,030        (4

Philip Fasano

     0        (4

Peter R. Fisher

     13,149        (4

John H. Fitzpatrick

     9,532        (4

Peter D. Hancock

     113,511        (4

David L. Herzog

     55,592        (4

Kevin T. Hogan

     33,042        (4

William G. Jurgensen

     21,174        (4

Christopher S. Lynch

     13,944        (4

Samuel J. Merksamer

     0        (4

George L. Miles, Jr.

     11,249        (4

Henry S. Miller

     10,774        (4

Robert S. Miller

     10,774        (4

Linda A. Mills

     1,693        (4

Suzanne Nora Johnson

     13,944        (4

John A. Paulson

     11,603,200 (3)      0.99

Ronald A. Rittenmeyer

     10,774        (4

Douglas M. Steenland

     10,774        (4

Theresa M. Stone

     14,092        (4

All Directors and current Executive Officers of AIG as a group (25 individuals)

     12,172,266        1.04

 

 

(1) Amount of equity securities shown includes (i) shares of AIG Common Stock subject to options which may be exercised within 60 days as follows: Herzog—3,248 shares, Dooley—4,998 shares, Doyle—1,748 shares, Miles—125 shares and all directors and current executive officers of AIG as a group—624 shares; (ii) shares receivable upon the exercise of warrants which may be exercised within 60 days as follows: Hancock—17,450 shares, Herzog—294 shares, Dooley—13,824 shares, Doyle—8,784 shares and all directors and current executive officers of AIG as a group—40,720 shares; (iii) shares receivable in April 2016 upon settlement of one-third of the earned Performance Share Units granted under the 2013 long-term incentive awards that vested in January 2016: Hancock—63,444 shares, Herzog—51,268 shares, Dooley—51,268 shares, Hogan—32,988 shares, Doyle—42,777 shares and all current executive officers of AIG as a group—205,676 shares; (iv) 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: Cornwell—10,627 shares, Fisher—4,149 shares, Fitzpatrick—9,532 shares, Jurgensen—6,174 shares, Lynch—10,774 shares, Miles—11,034 shares, Henry S. Miller—10,774 shares, Robert S. Miller—10,774 shares, Mills—1,693 shares, Nora Johnson—13,944 shares, Rittenmeyer—10,774 shares, Steenland—10,774 shares, and Stone—14,092 shares and (v) 90 shares granted to Miles as a non-employee director with delivery deferred until he ceases to be a member of the Board.

 

(2) Amount of equity securities shown 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 beneficial ownership: Hancock—32 shares, Dooley—226 shares underlying warrants and all directors and current executive officers of AIG as a group—32 shares and 226 shares underlying warrants.

 

(3) Mr. Paulson is the President and Portfolio Manager of Paulson & Co. Inc. Paulson & Co. Inc., an investment advisor that is registered under the Investment Advisors Act of 1940, and its affiliates furnish investment advice to and manage onshore and offshore investment funds and separate managed accounts (such investment funds and accounts, the Funds). In its role as investment advisor, or manager, Paulson & Co. Inc. possesses voting and/or investment power over the securities of AIG that are owned by the Funds. All AIG securities listed as beneficially owned by Mr. Paulson are directly owned by the Funds. Mr. Paulson and Paulson & Co. Inc. disclaim beneficial ownership of such securities.

 

(4) Less than .01 percent.

 

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 (Exchange Act) requires directors, certain 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 there were no late filings during 2015.

RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

Acquisition of First Principles

In September 2015, AIG acquired First Principles Capital Management, LLC (First Principles), a privately held investment management firm. Douglas A. Dachille, who became AIG’s Executive Vice President and Chief Investment Officer, was the Chief Executive Officer and a founding member of First Principles at the time of the acquisition. As part of the acquisition, Mr. Dachille received approximately $8 million in cash and approximately $12 million in the form of fully-vested AIG restricted stock units that will be settled fifty percent in each of September 2016 and 2017, respectively. The aggregate consideration received by Mr. Dachille reflected his approximately forty-three percent interest in the First Principles acquisition. The cash received by Mr. Dachille is subject to clawback if he resigns from AIG without good reason or is terminated with cause prior to September 2017.

Employment of a Family Member

The spouse of Alessandrea C. Quane, AIG’s Executive Vice President and Chief Risk Officer, is a non-executive officer employee of AIG. Ms. Quane has been an employee of AIG since 1996 and an executive officer since February 2016. Mr. Quane has been an employee of AIG since 1996. His 2015 base salary and short-term incentive award was approximately $600,000 in the aggregate, and his 2015 target long-term incentive award was approximately $315,000. He also received benefits generally available to all employees. The compensation for this employee was determined in accordance with our standard employment and compensation practices applicable to employees with similar responsibilities and positions.

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 considers:

 

   

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 Chair deems relevant.

 

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OUR EXECUTIVE OFFICERS

Information concerning the executive officers of AIG as of the date hereof is set forth below.

 

Name

  

Title

   Age      Served as
Officer
Since
 

Peter D. Hancock

   President and Chief Executive Officer      57         2010   

Douglas A. Dachille

   Executive Vice President and Chief Investment Officer      51         2015   

Philip Fasano

   Executive Vice President and Chief Information Officer      57         2014   

Martha Gallo

   Executive Vice President and Chief Auditor      58         2015   

Kevin T. Hogan

   Executive Vice President—Consumer      53         2013   

Jeffrey J. Hurd

   Executive Vice President and Chief Operating Officer      49         2010   

Alessandrea C. Quane

   Executive Vice President and Chief Risk Officer      46         2016   

Thomas A. Russo

   Executive Vice President and General Counsel      72         2010   

Siddhartha Sankaran

   Executive Vice President and Chief Financial Officer      38         2010   

Robert S. Schimek

   Executive Vice President—Commercial      51         2015   

All of AIG’s executive officers are elected to one-year terms, but serve at the pleasure of the Board of Directors. Except for Ms. Gallo and Messrs. Dachille, Fasano and Hogan, each of the executive officers has, for more than five years, occupied an executive position with AIG or one or more of its subsidiaries. There are no arrangements or understandings between any executive officer and any other person pursuant to which the executive officer was elected to such position.

Douglas A. Dachille joined AIG in September 2015 as Executive Vice President and Chief Investment Officer. Before joining AIG, from September 2003, Mr. Dachille served as Chief Executive Officer of First Principles Capital Management, LLC, an investment management firm acquired by AIG as a wholly-owned subsidiary. Prior to co-founding First Principles, from May 2002, he was President and Chief Operating Officer of Zurich Capital Markets, an integrated alternative investment asset management and structured product subsidiary of Zurich Financial Services. He began his career at JPMorgan Chase, where he served as Global Head of Proprietary Trading and co-Treasurer.

Philip Fasano joined AIG in October 2014 as Executive Vice President—Chief Information Officer. Prior to joining AIG, since February 2007, he was Executive Vice President and Chief Information Officer with Kaiser Permanente. Prior to his role at Kaiser Permanente, Mr. Fasano founded Capital Sourcing Group in 2005, a company focused on providing strategic advice and consulting services to the Fortune 500 and the Department of Homeland Security. Mr. Fasano has also served in IT leadership roles at financial services organizations. At Capital One Financial, he was the Business Information Officer; he served as Chief Information Officer at JPMorgan Chase and Deutsche Financial Services; and was a Managing Director at Bankers Trust, among other companies.

Martha Gallo joined AIG in May 2015 as Executive Vice President and Chief Auditor. Prior to joining AIG, Ms. Gallo served in a variety of roles at JPMorgan Chase since 1981, most recently as Head of Compliance and Regulatory Management from October 2011 to January 2013, and, previously, as General Auditor from April 2005.

Kevin T. Hogan joined AIG as Chief Executive Officer of AIG Global Consumer Insurance in October 2013. Mr. Hogan joined Zurich Insurance Group in December 2008, serving as Chief Executive Officer of Global Life Americas until June 2010 and as Chief Executive Officer of Global Life from July 2010 to August 2013. From 1984 to 2008, Mr. Hogan held various positions with AIG, including Chief Operating Officer of American International Underwriters, AIG’s Senior Life Division Executive for China and Taiwan and Chief Distribution Officer, Foreign Life and Retirement Services.

 

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EXECUTIVE COMPENSATION

REPORT OF THE COMPENSATION AND MANAGEMENT RESOURCES COMMITTEE

Overview

The Compensation and Management Resources Committee determines and approves the compensation awarded to AIG’s Chief Executive Officer (subject to ratification or approval by the Board) and approves the compensation awarded to the other key employees under its purview, oversees AIG’s compensation and benefits programs for key and other employees and makes recommendations to the Board with respect to these programs where appropriate, oversees AIG’s management development and succession planning programs and produces this Report on annual compensation. In carrying out these responsibilities, our objective is to maintain responsible compensation practices that attract, develop and retain high-performing senior executives and other key employees while avoiding incentives that encourage employees to take unnecessary or excessive risks that could threaten the value of AIG.

Our executive compensation program includes the following features:

 

   

Balanced mix of base, short-term and long-term pay. Target long-term incentive opportunity comprises the largest component of an executive’s target total direct compensation under our pay structure, which also includes a market-competitive base salary and target short-term incentive opportunity. We believe this structure provides an appropriate balance of fixed and variable compensation, drives achievement of AIG’s short- and long-term business strategies and aligns the economic interests of our executives with the long-term interests of AIG and our shareholders.

 

   

Defined earn-out ranges for incentive awards. Executive incentive awards are subject to a defined earn-out framework. For our Executive Leadership Team, short-term incentive awards can range from 0 to 150 percent of target and long-term incentive awards can range from 0 to 150 percent of target, in each case, taking into account performance against pre-established objective Company performance metrics.

 

   

At least 75 percent of target incentives and 55 percent of target total direct compensation is deferred and subject to clawback. 50 percent of any earned short-term incentive award is deferred for one year following the end of the annual performance period, and 100 percent of any long-term incentive award is earned and paid over a total period of five years.

 

   

Long-term incentives use multiple performance measures. 2015 long-term incentives are 100 percent in the form of performance share units that will be earned over a three-year performance period based on achieving total shareholder return (which is targeted above median) and balanced by credit default swap spread as a risk adjustment metric, in each case measured relative to AIG’s peers. The relative total shareholder return metric is weighted 75 percent and the relative credit default swap spread metric is weighted 25 percent.

 

   

Share ownership guidelines and holding requirements. Executive officers must retain 50 percent of the after-tax shares they receive as compensation until they achieve a specified ownership level of AIG Common Stock, further fostering an ownership culture focused on long-term performance.

Risk and Compensation Plans

AIG remains committed to continually evaluating and enhancing our risk management control environment, risk management processes and enterprise risk management functions, including through enhancements to its risk governance framework. AIG’s compensation practices are essential parts of the company’s approach to risk management, and the Committee regularly monitors AIG’s compensation programs to ensure they align with sound risk management principles. Since 2009, the Committee’s charter has expressly included the Committee’s duty to meet periodically to discuss and review, in consultation with the Chief Risk Officer, the relationship between AIG’s risk management policies and practices and the incentive compensation arrangements applicable to senior executives.

In July 2015, the Committee conducted its annual review with AIG’s Chief Risk Officer of AIG’s compensation plans to ensure that they appropriately balance risk and reward. As recommended by AIG’s Chief Risk Officer, the Committee continued to focus its review on incentive-based compensation plans, which totaled 96 active plans with approximately 79,800 participants as of June 2015. (Some employees are eligible to participate in more than one plan.)

AIG’s Enterprise Risk Management (ERM) conducted its annual risk assessment to evaluate AIG’s active incentive plans and to assign a risk rating of low, medium or high to each plan. For plans which had been

 

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reviewed in 2014 and rated low risk, ERM reviewed a sample of such plans in 2015. In assigning the risk rating, AIG risk officers considered, among other things, whether the plan features include capped payouts or deferrals and/or clawbacks, whether the plan design or administration leads to outsized risk taking, and whether payments are based on pre-established performance goals including risk-adjusted metrics. As of July 2015, no plans were categorized as high risk. As part of this risk review, and as discussed with the Committee, ERM concluded that AIG’s compensation policies and practices are not reasonably likely to have a material adverse effect on AIG.

Compensation Discussion and Analysis

The Compensation Discussion and Analysis that follows discusses the principles the Committee has been using to guide its compensation decisions for senior executives. The Committee has reviewed and discussed the Compensation Discussion and Analysis with management. The Cook firm has also reviewed and discussed the Compensation Discussion and Analysis on behalf of the Committee with management and outside counsel. 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 2015 Annual Report on Form 10-K.

 

Compensation and Management Resources Committee

American International Group, Inc.

W. Don Cornwell, Chair

George L. Miles, Jr.

Linda A. Mills

Suzanne Nora Johnson

Ronald A. Rittenmeyer

 

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COMPENSATION DISCUSSION AND ANALYSIS

 


 

2015 Pay-for-Performance Highlights

Our compensation philosophy centers on creating a culture of performance management and pay for performance to motivate all AIG employees to achieve sustainable value through a strategic focus on our core businesses and achieving the right balance between growth, profitability and risk.

Compensation Structure

Guided by our compensation philosophy, our executive compensation program focuses on providing an appropriate balance of fixed and variable pay, driving achievement of AIG’s short- and long-term business strategies and aligning the economic interests of our executives with the long-term interests of AIG and our shareholders:

 

•  Balanced Structure: Total compensation consists of market-competitive base salary, 25 to 35 percent target short-term incentive opportunity and at least 40 percent target long-term incentive opportunity.

 

•  Emphasis on Long-Term Incentives: At least 75 percent of each executive’s total target compensation is “at risk” and based on performance, and the majority of his or her incentive pay opportunity is based on performance over a three-year period and paid over a five-year period.

 

•  Deferred Payouts: At least 75 percent of target incentives and 55 percent of target total direct compensation is deferred and subject to our clawback policy.

 

•  Direct Link to AIG Performance: Long-term incentives are in the form of performance share units (PSUs) that, for 2015, are earned over a three-year period based on achieving Total Shareholder Return (TSR) (weighted 75 percent), which is targeted above median, and balanced by credit default swap (CDS) spread (weighted 25 percent), as a risk adjustment metric, in each case measured relative to AIG’s peers.

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Leadership

In December 2015, we announced the formation of a new Executive Leadership Team, designed to execute AIG’s strategic priorities and streamline decision-making. The Executive Leadership Team consists of our President and Chief Executive Officer, Peter D. Hancock, and nine senior executives who report to Mr. Hancock. It replaced the previous Operating Committee.

Paying for Performance

Our short-term and long-term incentive programs are designed to provide appropriate upside opportunity and downside risk and reinforce alignment with shareholder interests. The Compensation and Management Resources Committee evaluates and adjusts the programs annually based on strategic priorities, stakeholder feedback and market considerations.

Under our short-term incentive program, each participant has a target short-term incentive amount. For our Executive Leadership Team, short-term incentive awards are based solely on objective Company measures, as the members are collectively accountable for, and should be rewarded based on, the performance of the Company as a whole.

 



 

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Our 2015 annual short-term incentive goals and achievements(a) were:

Business Profitability

 

   

Achieved Normalized Insurance Company Pre-Tax Operating Income (Normalized Insurance Company PTOI) of $8.3 billion, below target of $9.1 billion (weighted 30%)

AIG Profitability

 

   

Achieved Normalized Return on Equity (excluding deferred tax assets) (Normalized AIG ROE) of 6.8%, below target of 7.9% (weighted 30%)

Expense Management

 

   

Achieved Normalized Gross General Operating Expenses (Normalized AIG GOE) of $11.63 billion, underperforming against target of $11.58 billion (weighted 20%)

Risk-Adjusted Growth

 

   

Achieved Normalized Production Risk-Adjusted Profitability for Property Casualty and Personal Insurance operating segments (Normalized Production RAP) of $1.26 billion, above target of $1.13 billion (weighted 10%)

 

   

Achieved Normalized Value of New Business for Retirement, Life, Institutional Markets and Mortgage Guaranty operating segments (Normalized VoNB) of $1.52 billion, exceeding target of $1.42 billion (weighted 10%)

 

(a) Each of these goals represents a non-GAAP measure. For how these measures are calculated, see Appendix B.

These 2015 achievements resulted in a Company performance score of 11 percent below target, or 89 percent.

To maintain continuity with our general program, which uses both a Company score and individual score that are multiplied together and are calibrated accordingly, the objective Company score against target is multiplied by two in order to determine the earned short-term incentive for Executive Leadership Team members. The effect is to appropriately reflect objective Company performance (whether positive or negative) for the Executive Leadership Team and results in a payout range of 0 to 150 percent of target.

Accordingly, in early 2016, each named executive earned a 2015 short-term incentive equal to 78 percent of his or her target amount (representing a reduction equal to two times the Company score for 2015 of 11 percent below target). Payment of 50 percent of these earned awards is deferred until March 2017. For 2014, members of our leadership team earned a short-term incentive of 122 percent of target (representing an increase equal to two times the Company score for 2014 of 11 percent above target). The second half of these earned awards was paid in March 2016.

Our long-term incentive program similarly links pay to sustained performance in the form of PSU awards that are earned between 0 and 150 percent based on achievement of performance metrics over a three-year period. The three-year performance period for our 2013 long-term incentive awards ended on December 31, 2015, and PSUs were earned at 147 percent based on our 82nd percentile relative TSR performance and 73rd percentile relative growth in tangible book value per share (excluding AOCI). Earned PSUs vest in three equal, annual installments, resulting in a five-year time horizon to vest in the full award.

 



 

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Compensation Philosophy

We structure our compensation program and make enterprise-wide compensation decisions consistent with our compensation philosophy. Our compensation philosophy centers around the following objectives:

 

   

Attracting and retaining the strongest employees for AIG’s various business needs by providing competitive and consistent compensation opportunities.

 

   

Creating a culture of performance management and pay for performance by providing total direct compensation opportunities that reward the performance of AIG and individual employees.

 

   

Managing total direct compensation to provide a market-competitive, performance-driven structure through a four-part program that takes into account base salary, annual incentives, long-term incentives and benefits and perquisites.

 

   

Motivating all AIG employees to achieve sustainable increases in AIG’s “intrinsic value,” which represents a balance of profitability, growth and risk, to drive long-term value creation for shareholders.

 

   

Aligning the long-term economic interests of key employees with those of shareholders by ensuring that a meaningful component of each key employee’s compensation is represented by AIG securities.

 

   

Avoiding incentives that encourage employees to take unnecessary or excessive risks that could threaten the value of AIG by appropriately balancing risk and reward as well as rewarding both annual and long-term performance.

 

   

Maintaining strong corporate governance practices by meeting evolving standards of compensation governance and complying with regulations applicable to employee compensation.

 

 

Compensation Best Practices

 

   

What we do:

 

ü      Pay for performance

 

ü      Comprehensive clawback policy

 

ü      Share ownership guidelines and holding requirements

 

ü      No-hedging policy

 

ü      Double-trigger change-in-control benefits

 

ü      Annual risk assessment of compensation plans

 

ü      Independent compensation consultant

  

What we don’t do:

 

×       No golden parachute tax gross-ups

 

×       No excessive pension payments, perquisites or other benefits

 

×       No equity grants below 100% of fair market value

 

×       No dividends or dividend equivalents paid on unearned performance awards

 

×       No repricing of underwater stock options or stock appreciation rights

 

Compensation Structure—Direct Compensation Components

Our 2015 compensation structure continues to consist of market-competitive base salary, 25 to 35 percent target short-term incentive opportunity and at least 40 percent target long-term incentive opportunity. An executive’s total direct compensation target is determined based on his or her position, skills and experience and demonstrated performance, as well as market practice, and is then allocated in accordance with the compensation structure. Consistent with our compensation philosophy, we believe this structure provides an appropriate balance of fixed and variable pay, drives achievement of AIG’s short- and long-term business strategies and aligns the economic interests of our executives with the long-term interests of AIG and our shareholders.

In March 2015, the Committee established annual base salaries (effective as of January 1, 2015), short-term incentive opportunities and long-term incentive opportunities, including the grant of PSUs, for our named executives.

 

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The 2015 target total direct compensation opportunity for each of our named executives is set forth in the following table.

 

Named Executive Officer

   Annual
Base Salary
     Target
Short-Term
Incentive
     Target
Long-Term
Incentive
     Total  

Peter D. Hancock,

    President and Chief Executive Officer

   $ 1,600,000       $ 3,200,000       $ 8,200,000       $ 13,000,000   

David L. Herzog,

    Chief Financial Officer

   $ 1,000,000       $ 2,000,000       $ 4,000,000       $ 7,000,000   

William N. Dooley,

    Executive Vice President

   $ 1,000,000       $ 2,000,000       $ 4,000,000       $ 7,000,000   

Philip Fasano,

    Executive Vice President—Chief Information Officer

   $ 1,000,000       $ 1,400,000       $ 1,600,000       $ 4,000,000   

Kevin T. Hogan,

    Executive Vice President—Consumer

   $ 1,000,000       $ 1,900,000       $ 3,600,000       $ 6,500,000   

Former Executive Officer

           

John Q. Doyle*

   $ 1,000,000       $ 2,250,000       $ 4,250,000       $ 7,500,000   

 

* Mr. Doyle ceased to be an executive officer in December 2015.

Base Salary. Annual base salary is paid in cash and is the sole fixed component of an executive’s total direct compensation. An executive’s base salary is established based on his or her experience, performance and salaries for comparable positions at competitors, but will not exceed 25 percent of the executive’s target total direct compensation opportunity. This allocation is intended to fairly compensate the executive for the responsibilities of his or her position, achieve an appropriate balance of fixed and variable pay and provide the executive with sufficient liquidity to discourage excessive risk-taking.

Short-Term Incentive.

Our short-term incentive, which represents approximately 30 percent of an executive’s target direct compensation opportunity, is designed to reward annual performance and drive near-term business strategies. It consists of an annual cash award with individual target amounts that reflect business unit or corporate function responsibilities and experience. The funding of our short-term incentive program is based on the same pre-established performance metrics that produce the objective Company score used for award determinations, which are discussed below under “—Objective Company Score.” Short-term incentive funding covers all participants other than Executive Leadership Team members (and those executives who served on AIG’s Operating Committee prior to its replacement by the Executive Leadership Team in December 2015), for whom funding is determined on an individual basis based on the same pre-established performance metrics.

As applied to our named executives, earned 2015 awards could range from 0 to 150 percent of target, and one-half of any amount earned is deferred for one year and subject to clawback. The Committee has discretion to determine the final award amount.

 

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Objective Company Score. The objective Company score is based on a single set of Company performance metrics that applies to all participants and ranges from 0 to 125 percent of target. The five Company performance metrics measure either profitability, expense management or risk-adjusted growth. The profitability performance metrics are Normalized Insurance Company PTOI and Normalized AIG ROE, the expense management performance metric is Normalized AIG GOE, and the risk-adjusted growth performance metrics are Normalized Production RAP and Normalized VoNB. We use normalized metrics for our short-term incentive in order to tie compensation directly to results participants achieve during the performance year (which, given the nature of our businesses, could otherwise be overwhelmed by prior year reserve development and/or catastrophe events, for example). We use other market-based metrics, measured relative to peers, for our long-term incentive to capture the full range of our financial performance over the medium to long term. The reasons for selecting each metric and the weightings are summarized below.

 

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2015 Performance. In the first quarter of 2016, the Committee reviewed performance compared to the pre-established Company performance metrics and normalization principles. The reported performance results were verified by AIG’s internal audit function and financial planning & analysis group. The Committee also retained the discretion to adjust the performance criteria and results, which it did not exercise for 2015. The objective Company score was 11 percent below target (or 89 percent), as follows, and applies to all participants in our short-term incentive program:

 

Performance Metric
($ in millions)

   Threshold
(50%)
    Target
(100%)
    Maximum
(125%)
    Actual     %
Achieved
    Weighting     %
Achieved
(Weighted)
 

Business Profitability

              

  Normalized Insurance Company PTOI

   $ 6,826      $ 9,101      $ 10,239      $ 8,303        82     30     25%   

AIG Profitability

              

  Normalized AIG ROE

     5.93     7.90     8.89     6.80     73     30     22%   

Expense Management

              

  Normalized AIG GOE

   $ 11,838      $ 11,582      $ 11,343      $ 11,627        91     20     18%   

Risk-Adjusted Growth

              

  Normalized
Production RAP

   $ 849      $ 1,132      $ 1,274      $ 1,263        123     10     12%   

  Normalized VoNB*

   $ 1,061      $ 1,415      $ 1,592      $ 1,519        115     10     12%   

Company Score:

  

    89%   
               (11% below target)   

 

 

* In accordance with the normalization principles approved by the Committee, the threshold, target and maximum for the Normalized VoNB metric was adjusted consistent with the adjustment to index the fixed annuity sales budget for market interest rates.

 

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Determination of Earned Short-Term Incentive Awards.

Short-term incentive awards for the Executive Leadership Team (Mr. Hancock and nine key senior executives) are based solely on the above objective Company measures. Such an approach reflects the view that these individuals are collectively accountable for, and should be rewarded based on, the performance of the Company as a whole. (Short-term incentive awards for those executives who served on AIG’s Operating Committee prior to its replacement by the Executive Leadership Team in December 2015 follow the same approach as Executive Leadership Team awards.)

To maintain continuity with our general program, which uses both a Company score and individual score that are multiplied together and are calibrated accordingly (for a maximum opportunity of up to 187.5 percent of target), two times the Company performance against target is used to determine the earned short-term incentive for Executive Leadership Team members. For example, if performance is 10 percent above target, awards for these individuals would be 120 percent of target; conversely, if performance is 10 percent below target, awards for these individuals would be 80 percent of target. The effect is to appropriately reflect objective Company performance (whether positive or negative) for Executive Leadership Team members and results in a payout range of 0 to 150 percent of target (compared to 0 to 187.5 percent of target for other participants).

In accordance with this structure, the Committee determined (and, for Mr. Hancock, the Board ratified) the following earned short-term incentive amounts for our named executives based on a payout of 78 percent of target, with 50 percent of each earned award deferred until March 2017.

 

Named Executive Officer

   Individual Target
Amount
  

Calculated Performance

   Earned Award
Amount

Peter D. Hancock

   $3,200,000    22% below target (78%)    $2,496,000

David L. Herzog

   $2,000,000    22% below target (78%)    $1,560,000

William N. Dooley

   $2,000,000    22% below target (78%)    $1,560,000

Philip Fasano

   $1,400,000    22% below target (78%)    $1,092,000

Kevin T. Hogan

   $1,900,000    22% below target (78%)    $1,482,000

Former Executive Officer

        

John Q. Doyle

   $2,250,000    22% below target (78%)    $1,755,000

Structural Enhancements for 2016. In response to shareholder feedback and to further align pay with Company performance by increasing both the potential upside opportunity and the potential downside risk of our short-term incentive program, for 2016 the Committee has determined to use three times the Company score to determine the earned short-term incentive for Executive Leadership Team members. The result will be a payout range of 0 to 175 percent of target for Executive Leadership Team members, which we believe improves comparability with the practices of our peers.

 

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Long-Term Incentive. Our long-term incentive comprises the largest percentage of an executive’s target compensation opportunity, representing at least 40 percent of his or her target total direct compensation opportunity. We believe that providing a significant portion of executives’ compensation in equity, based on performance metrics over a three-year period and subject to an additional vesting period, will drive long-term value creation for our shareholders and appropriately account for the time horizon of risks. Since 2013, our long-term incentive program has consisted entirely of PSU awards that are earned between 0 and 150 percent based on achievement of performance metrics over a three-year period. Earned PSUs vest in three equal, annual installments, resulting in a five-year time horizon to vest in the full award. The following table illustrates our outstanding long-term PSU awards.

 

               
   

2013

  2014   2015   2016   2017   2018   2019   2020
2013 Long-Term Incentive Awards  

Performance Period: 2013–2015

Metrics comprise relative TSR (weighted

50%) and relative growth in tangible book

value per share (excluding AOCI)*

(weighted 50%)

 

1/3 of

Earned PSUs Vest

in January

 

1/3 of

Earned PSUs Vest in January

 

1/3 of

Earned PSUs Vest in January

 
 

2014 Long-Term

Incentive Awards

 

Performance Period: 2014–2016

Metrics comprise relative TSR (weighted

75%) and relative change in CDS spread (weighted 25%)

 

1/3 of

Earned PSUs Vest in January

 

1/3 of

Earned PSUs Vest in January

 

1/3 of

Earned PSUs Vest in January

 
 

2015

Long-Term Incentive

Awards

 

Performance Period: 2015–2017

Metrics comprise relative TSR (weighted 75%) and relative final CDS spread (weighted 25%)

 

1/3 of

Earned PSUs Vest in January

 

1/3 of

Earned PSUs Vest in January

 

1/3 of

Earned PSUs Vest in January

 

 

* TBVPS is a non-GAAP financial measure. See Appendix B for an explanation of how this measure is calculated for AIG from our audited financial statements.

Grant of 2015 Long-Term Incentive Awards

To determine PSU grants, the Committee approves (and, for Mr. Hancock, the Board ratifies) the target dollar amount of an executive’s long-term incentive award, which is then converted to a number of PSUs based on the average closing price of AIG Common Stock over the calendar month preceding the reference date rounded down to the nearest whole unit. In general, the reference date refers to the grant date in the case of annual awards, the date of the offer of employment to a new hire or the effective date of a recipient’s promotion. For 2015, earned PSUs range from 0 to 150 percent of the target grant based primarily on achieving relative TSR, in order to align with our business strategy and evaluate long-term performance relative to peers. To protect against excessive risk-taking, the TSR metric is balanced by the inclusion of CDS spread as a risk adjustment metric (measured based on relative final CDS spread on five-year senior unsecured debt for 2015 awards). Earned PSUs vest one-third in January of each of 2018, 2019 and 2020 and are settled in AIG Common Stock.

The table below summarizes the two performance metrics used for the 2015 to 2017 performance period. Relative TSR is weighted 75 percent, and relative final CDS spread is weighted 25 percent. Actual performance below threshold will result in a 0 percent payout for that metric. The primary performance goal, relative TSR, is targeted above median to incentivize outperformance. As a risk-adjustment metric, relative final CDS spread is instead structured as a “corridor” between the 20th to 80th percentiles to incentivize achievement of Relative TSR with a risk profile consistent with or better than our peers (and to take into account liquidity differences between the equity and CDS markets).

 

Performance Metric

   Weighting    Threshold    Target    Maximum

Relative TSR

   75%    25th percentile    55th percentile    75th percentile

Relative Final CDS Spread

   25%    5th percentile    20-80th  percentile    95th percentile
     

 

  

 

  

 

Payout

      50%    100%    150%

 

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For the 2015 to 2017 performance period, TSR is measured relative to the following 26 peers. Final CDS spread is also measured against these peers, excluding Ameriprise Financial, Inc. and China Pacific Insurance (Group) Co., LTD. because there is no active CDS trading market with respect to the five-year senior unsecured debt of those companies.

 

Peers

     

ACE Limited

AEGON, N.V.

Aflac Incorporated

Allianz Group

Ameriprise Financial, Inc.

Assicurazioni Generali S.p.A.

Aviva plc

AXA Group

Berkshire Hathaway Inc.

  

China Pacific Insurance (Group) Co., LTD.

CNA Financial Corporation

Hartford Financial Services Group Inc.

Lincoln National Corporation

Manulife Financial Corporation

MetLife, Inc.

Munich Re Group

Principal Financial Group, Inc.

  

Prudential Financial, Inc.

Prudential plc

Swiss Re Group

The Allstate Corporation

The Chubb Corporation

The Travelers Companies, Inc.

Tokyo Marine Holdings, Inc.

Voya Financial, Inc.

Zurich Financial Services AG

The peer group above includes public companies against which AIG benchmarks financial performance and competes for market share and talent. For each company in the peer group, TSR will be measured by (1) the sum of (a) the company’s adjusted share price at the end of the performance period minus the company’s adjusted share price at the beginning of the performance period (in each case, as reported by Bloomberg, adjusted for stock dividend distributions and stock splits and using a 30-day period prior to quarter close for the beginning and end of the performance period) plus (b) non-stock dividends declared during the performance period and reinvested in the company’s shares on the ex-dividend date, divided by (2) the company’s adjusted share price at the beginning of the performance period (as reported by Bloomberg, adjusted for stock dividend distributions and stock splits and using a 30-day period prior to quarter close for the beginning of the performance period).

For each company in the peer group with daily trading of CDS on its five-year senior unsecured debt, final CDS spread is determined based on the 30-day average of the five-year CDS spread measured at the end of the three-year performance period, as reported by Markit Group Limited.

Results will be certified by the Committee in the first quarter of 2018, and one-third of any earned PSUs will vest in each of January 2018, 2019 and 2020. Once earned, vested PSUs are settled in AIG Common Stock.

For 2015 long-term incentive awards, dividend equivalent rights in the form of additional PSUs accrue commencing with the first dividend record date of AIG Common Stock following the PSU grant date, are subject to the same vesting and performance conditions as the related PSUs and are paid when such related earned shares (if any) are delivered. The number of additional PSUs earned at any such time will be equal to (i) the cash dividend amount per share of AIG Common Stock times (ii) the number of PSUs covered by the award (and, unless otherwise determined by AIG, any dividend equivalent units previously credited under the award) that have not been previously settled through the delivery of shares (or cash) prior to such date, divided by the fair market value of a share of AIG Common Stock on the applicable dividend record date.

Adjudication of 2013 Long-Term Incentive Awards

The three-year performance period for our 2013 long-term incentive awards ended on December 31, 2015, and the Committee assessed performance in March 2016. The metrics for 2013 long-term incentive awards comprised relative TSR and relative growth in tangible book value per share (excluding AOCI) (TBVPS), in each case measured relative to a peer group. The following table shows the results from the 2013 to 2015 performance period as certified by the Committee:

 

Performance Metric

   Threshold    Target    Maximum    Actual    %
Achieved*
   Weighting    %
Achieved
(Weighted)

Relative TSR

   25th
percentile
   55th
percentile
   75th
percentile
   82nd
percentile
   150%    50%    75%

Relative Growth in TBVPS

   25th
percentile
   55th
percentile
   75th
percentile
   73rd
percentile
   144%    50%    72%
  

 

  

 

  

 

           

 

Payout

   50%    100%    150%             147%

 

 

* Capped at 150% where achievement exceeded maximum.

 

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One-third of the earned PSUs will be settled in shares of AIG Common Stock in April 2016. The remaining two-thirds of earned PSUs will vest one-third each in January 2017 and 2018 and be settled in AIG Common Stock.

Structural Enhancements for 2016. In response to shareholder feedback, for 2016 the Committee has determined that our long-term awards will be based 100 percent on relative TSR against a refined group of 18 peers and targeted at the 50th percentile of the peer group. To protect against excessive risk-taking, the TSR metric is balanced by using relative option adjusted spreads (OAS) as a gating metric. (Given the decreased liquidity in the CDS market, the Committee considers OAS a more reliable measure of relative creditworthiness.) OAS acts only as a gating metric such that, if our relative OAS is below the 20th percentile of the peer group, the payout level resulting from the relative TSR score is reduced by half.

Compensation Structure—Indirect Compensation Components

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

Retirement Benefits. AIG provides a number of retirement benefits to eligible employees, including both defined contribution plans (such as 401(k) plans) and traditional pension plans (called defined benefit plans). These plans can be either tax-qualified or non-qualified.

AIG’s only active defined contribution plan for the named executives is a 401(k) plan, which is tax-qualified. The plan was amended effective January 1, 2012 to provide all participants with a match of 100 percent of the first 6 percent of their eligible compensation contributed up to the Internal Revenue Service (IRS) compensation limit ($265,000 for 2015). Accordingly, for the named executives in 2015, AIG matched a percentage of their contributions to the 401(k) plan up to $15,900. Effective January 1, 2016, AIG also provides a contribution of 3 percent of eligible compensation to all employees eligible to participate in the 401(k) plan, in addition to the 6 percent matching contribution, subject to IRS limits. In addition, some named executives have balances under legacy nonqualified defined contribution plans. These plans are described in greater detail in “2015 Compensation—Post-Employment Compensation—Nonqualified Deferred Compensation.”

AIG’s defined benefit plans include the AIG Retirement Plan (the Qualified Retirement Plan), the AIG Non-Qualified Retirement Income Plan (the Non-Qualified Retirement Plan) and the Supplemental Executive Retirement Plan (the SERP). Each of these plans provides for a yearly benefit based on years of service and average final salary and, for the Qualified Retirement Plan and the Non-Qualified Retirement Plan, also based on pay credits and interest credits. Effective January 1, 2016, benefit accruals under the Qualified Retirement Plan, the Non-Qualified Retirement Plan and the SERP were frozen. As a result, the Qualified Retirement Plan, the Non-Qualified Retirement Plan and the SERP were closed to new participants, and current participants no longer earn additional benefits. These plans and their benefits are described in greater detail in “2015 Compensation—Post-Employment Compensation—Pension Benefits.”

Perquisites and Other Compensation. To facilitate the performance of their management responsibilities, AIG provides some employees, including the named executives, with aircraft usage (including by an executive’s spouse when traveling with the executive on business travel), automobile allowances, use of company pool cars and drivers or parking, annual health exams, legal services, financial, estate and tax planning and other benefits categorized as “perquisites” or “other” compensation under the SEC rules.

Termination Benefits and Policies. AIG provides severance benefits to its executives in order to offer competitive total compensation packages, ensure executives’ ongoing retention when considering potential transactions that may create uncertainty as to their future employment with AIG and enable AIG to obtain a release of employment-related claims.

In 2012, the Committee established the 2012 ESP, which replaced AIG’s prior Executive Severance Plan established in March 2008. The 2012 ESP extends to AIG executives in grade level 27 or above, including the 2015 named executives, and other executives who participated in the prior plan. For purposes of the 2012 ESP, a participant’s grade level is the highest level at which he or she was employed at any time in the 12 months immediately prior to the qualifying termination.

The 2012 ESP provides for severance payments and benefits upon a termination by AIG without “Cause” or if a qualifying executive terminates for “Good Reason,” including, for qualifying executives, after a “Change in Control.” In the event of a qualifying termination, a participant is generally eligible to receive severance in an amount equal to the product of a multiplier times the sum of salary and three-year-average annual incentives. The

 

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multiplier is either 1 or 1.5 depending on the executive’s grade level and increases to 1.5 or 2 for qualifying terminations within two years following a Change in Control. However, in any event, executives in grade level 27 or above who participated in the prior plan, which includes Messrs. Hancock, Herzog, Dooley and Doyle, may not receive less than the severance they would have received under the prior plan.

Historic Compensation Components

Stock Salary. From 2009 to 2012, AIG maintained a program of regular bi-weekly or semi-monthly grants of vested stock or units generally referred to as “Stock Salary.” In large part, Stock Salary took the place of what would otherwise have been annual and long-term cash, stock and performance-based incentive programs while AIG was subject to the TARP Standards. Grants of Stock Salary remained subject to transfer or payment restrictions over a multi-year period, and Messrs. Hancock, Herzog, Dooley and Doyle held vested Stock Salary awards that were settled upon lapse of the payment restrictions in 2015. These awards are described in greater detail in “2015 Compensation—Post-Employment Compensation—Nonqualified Deferred Compensation.” No Stock Salary remained outstanding as of December 31, 2015.

TARP RSUs. While AIG was subject to the TARP Standards for Compensation and Corporate Governance, named executives eligible for incentives could receive such pay only in the form of TARP RSUs. In order to qualify as TARP RSUs under the applicable regulation, the award was generally required to have at least a two-year vesting period and become payable only in 25 percent increments in proportion to AIG’s repayment of its TARP obligations. Because AIG fully repaid its TARP obligations as of December 14, 2012, 100 percent of the TARP RSUs that had not vested became payable on the scheduled vesting date for such awards. All outstanding TARP RSUs held by Messrs. Hancock, Herzog and Doyle vested and were paid in 2015. The shares underlying TARP RSUs that vested in 2015 are included in “2015 Compensation—Holdings of and Vesting of Previously Awarded Equity—Vesting of Stock-Based Awards During 2015.”

Transition Arrangements for Named Executives

Pursuant to his August 14, 2013 offer letter and in consideration of compensation foregone upon rejoining AIG, Mr. Hogan was granted a one-time bonus payable in three installments, subject to Mr. Hogan’s continued employment through the payment date. The second installment, in the amount of $1,150,000, was paid in April 2015, and the third installment, in the amount of $800,000, will be paid in April 2016. Each installment is subject to recoupment if Mr. Hogan resigns without “Good Reason” or is terminated by AIG for “Cause” in the 12 months following payment of such installment. In connection with the offer letter, Mr. Hogan entered into a non-solicitation and non-disclosure agreement, pursuant to which he agreed to perpetual non-disparagement and confidentiality covenants and to a non-solicitation covenant that applies during his employment and for a period of one year following his termination.

Pursuant to his August 27, 2014 offer letter and in consideration of compensation foregone from his former employer, Mr. Fasano was granted a one-time bonus of $3,400,000 paid in March 2015. In addition, Mr. Fasano was granted a transition award in consideration of retirement benefits foregone from his former employer, payable in five installments of $1,000,000, $1,000,000, $1,000,000, $1,000,000 and $4,000,000 in each of January 2015, 2016, 2017, 2018 and 2019, respectively, provided that Mr. Fasano has not resigned his employment other than for “Good Reason” or been terminated by AIG for “Cause” prior to the respective payment dates. In connection with the offer letter, Mr. Fasano entered into a non-solicitation and non-disclosure agreement, pursuant to which he agreed to perpetual non-disparagement and confidentiality covenants and to a non-solicitation covenant that applies during his employment and for a period of one year following his termination.

Process for Compensation Decisions

Role of the Committee. The Committee determines and approves 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 also approves the compensation of 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 other key employees and oversees AIG’s management development and succession planning programs. Attendance at Committee meetings generally includes members of the executive team as appropriate, including representatives from internal legal and human resources, outside counsel, and the Committee’s independent consultant.

 

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Consultants. To provide independent advice, the Committee has used the services of Frederic W. Cook & Co. (the Cook firm) 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 views of how the program and proposals compare to market practices in financial services and general industry and to “best practices.” 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, including the 2015 executive compensation structure. The Cook firm also participated in the Committee meeting in which the compensation risk assessment discussed under “—Report of the Compensation and Management Resources Committee—Risk and Compensation Plans” was conducted and previously advised that the process was thorough and well designed. In compliance with SEC and NYSE rules, in February 2015 and February 2016, the Committee reviewed various items related to the Cook firm’s relationship to AIG, the members of the Committee and AIG’s executive officers. The Committee confirmed that neither the Cook firm nor any of its affiliates provides any other services to AIG or its management except with respect to director compensation, and that the Cook firm had no business or personal relationship with any member of the Committee or executive officer that raised a conflict of interest with respect to the Cook firm’s work for the AIG Board. The Committee also received information on the fees paid to the Cook firm by AIG as a percentage of the Cook firm’s total revenue and the Cook firm’s ownership of any AIG Common Stock. Considering this information, the Committee determined that the Cook firm is independent and that its work has not raised any conflict of interest.

In 2015, the Committee also considered materials prepared by Johnson Associates related to market compensation levels. Johnson Associates was engaged by AIG to assist with this work. In particular, Johnson Associates prepared reports presenting market comparisons of total compensation levels for existing employees, new hires and promotions with respect to positions within the Committee’s purview. The Committee performed a review of Johnson Associates’ services similar to the review of the Cook firm described above. The Committee noted that the Cook firm reviewed the reports prepared by Johnson Associates prior to consideration by the Committee and determined that this appropriately addressed any conflict of interest raised by Johnson Associates’ work or business relationship with AIG.

Consideration of Shareholder Feedback. The Committee values feedback from AIG’s shareholders, including the feedback received through our say-on-pay advisory vote. Since 2010, AIG has held an annual say-on-pay advisory vote. In the most recent advisory vote, more than 98 percent of the votes cast by shareholders were in favor of the 2014 compensation of our named executives as disclosed in our 2015 Proxy Statement. The Committee believes this level of approval indicates our shareholders’ strong support of our compensation philosophy and goals and the structure of our executive compensation program.

Consideration of Competitive Compensation Levels. In 2015, the Committee considered information from data disclosed in surveys, market practices and levels disclosed in proxy statements and employment contracts from a number of peer companies (Broad Data), as well as Johnson Associates’ benchmarks, which reflect proprietary data, third-party references and market impressions and judgment. The companies used in the Broad Data set were: Aetna, Inc., AFLAC, The Allstate Corporation, American Express Company, Ameriprise Financial, Inc., Bank of America Corporation, Bank of New York Mellon, BlackRock, Inc., Capital One Financial Corp., CIGNA Corporation, Citigroup Inc., Chubb Group, Hartford Financial Services, Invesco Ltd., JP Morgan Chase & Co., Lincoln National Corporation, Marsh & McLennan Companies, Inc., MetLife Inc., Principal Financial Group, Inc., Prudential Financial Inc., T. Rowe Price Group, Inc., The Travelers Companies Inc., U.S. Bancorp and Wells Fargo & Company.

Other Considerations

Clawback Policy. In 2013, the Committee adopted and implemented a comprehensive Clawback Policy to encourage sound risk management and individual accountability. The Clawback Policy covers all executive officers and any other employee as determined by the Committee and applies to covered compensation for such executive officers and employees. Covered compensation generally includes any bonus, equity or equity-based award or other incentive compensation granted to an executive officer or employee while he or she is subject to the policy, which includes our 2013, 2014 and 2015 incentive awards. In the event that the Committee determines that a triggering event under the Clawback Policy has occurred, the Committee may require an executive officer or other covered employee to forfeit and/or repay all or any portion of any unpaid covered compensation or covered compensation paid in the 12 months (or such longer period of time as required by any applicable statute or government regulation) preceding the event. Triggering events generally include a material financial

 

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restatement; the award or receipt of covered compensation based on materially inaccurate financial statements or performance metrics that are materially inaccurately determined; a failure of risk management, including in a supervisory role, or material violation of AIG’s risk policies; and an action or omission that results in material financial or reputational harm to AIG.

Share Ownership Guidelines and Holding Requirements. AIG’s share ownership guidelines establish levels of ownership of AIG Common Stock at five times salary for the Chief Executive Officer and three times salary for other executive officers, which included the other named executives during 2015. Until the guidelines are met, such employees are required to retain 50 percent of the shares of AIG Common Stock received upon the exercise, vesting or payment of certain equity-based awards granted by AIG. Shares held for purposes of the guidelines may include stock owned outright by the officer or his or her spouse and earned but unvested share-based awards. Executive officers are required to comply with the guidelines until six months after they cease to be executive officers.

No-Hedging Policy. AIG’s Code of Conduct and Insider Trading Policy prohibit employees from engaging in hedging transactions with respect to any of AIG’s securities, including by trading in any derivative security relating to AIG’s securities.

Deductibility of Executive Compensation. Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code), generally limits the tax deductibility of compensation in excess of $1 million per year paid by a public company to its chief executive officer and three other most highly compensated executive officers (other than the chief financial officer), subject to certain exceptions, with an exception for qualifying “performance-based compensation” (as defined under applicable tax regulations). At AIG’s 2013 Annual Meeting, our shareholders approved the AIG 2013 Omnibus Incentive Plan, which is designed to allow for the issuance of awards that satisfy the “performance-based compensation” exception under Section 162(m), and the Committee intends that short-term and long-term incentives awarded to covered employees for 2015 qualify for this exception.

Accordingly, separate from determining 2015 short- and long-term incentive opportunities, in the first quarter of 2015, the Committee established performance criteria and set one percent of Normalized Insurance Company PTOI, as defined in Appendix B, as the Section 162(m) compliant maximum for 2015 short- and long-term incentives awarded to each individual covered employee, including the named executives. This limit does not serve as a basis for the Committee’s compensation decisions for our named executives, but rather provides for the maximum amount of tax deductible 2015 short- and long-term incentive compensation that the Committee can award to the covered employee, with the Committee retaining the discretion to pay less than the maximum. Once the maximum amount is established, the qualifying performance-based compensation for each covered employee is delivered through the 2015 short-term incentive and long-term incentive programs. If the total amount earned under these programs is less than the maximum deductible amount, the Committee will pay only the amount earned.

The Committee retains the ability to pay compensation that exceeds $1 million and does not constitute qualifying performance-based compensation when it determines that such payments are in the best interests of AIG and our shareholders. The Committee believes that retaining the flexibility to attract, retain and motivate our employees with a compensation program that supports long-term value creation, even though some compensation awards may not be deductible, is in the best interests of our shareholders.

Non-GAAP Financial Measures

Certain of the operating performance measurements used by AIG management are “non-GAAP financial measures” under SEC rules and regulations. See Appendix B to this Proxy Statement for an explanation of how these measures are calculated from our audited financial statements.

Conclusion

Our 2015 compensation program reflects our continued commitment to comprehensive pay-for-performance standards throughout AIG. We believe our compensation program properly motivates our employees and appropriately rewards them for their efforts to balance profit, growth and risk, and create value for our shareholders.

 

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2015 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 the three other most highly paid executive officers, who each served through the end of 2015, as well as an additional individual who served as an executive officer during part of 2015.

2015 Summary Compensation Table

 

Name and
Principal Position
  Year     Salary(1)     Bonus     Stock
Awards(2)
    Non-Equity
Incentive Plan
Compensation(3)
    Change in
Pension
Value(4)
    All Other
Compensation(5)
    Total  

Peter D. Hancock

    2015      $ 1,661,538      $ 0      $ 8,231,460      $ 2,496,000      $ 59,759      $ 49,218      $ 12,497,975   

Chief Executive Officer

    2014      $ 1,426,923      $ 0      $ 7,011,108      $ 3,497,334      $ 73,751      $ 55,312      $ 12,064,428   
    2013      $ 1,471,154      $ 0      $ 4,562,843      $ 3,500,000      $ 52,252      $ 61,941      $ 9,648,190   

David L. Herzog

    2015      $ 1,038,462      $ 0      $ 4,015,335      $ 1,560,000      $ 28,172      $ 41,405      $ 6,683,374   

Executive Vice President

    2014      $ 1,000,000      $ 0      $ 3,935,432      $ 2,440,000      $ 271,673      $ 48,000      $ 7,695,105   

and Chief Financial Officer

    2013      $ 988,346      $ 0      $ 3,687,129      $ 2,260,000      $ 0      $ 36,737      $ 6,972,212   

William N. Dooley

    2015      $ 1,038,462      $ 0      $ 4,015,335      $ 1,560,000      $ 906,942      $ 70,824      $ 7,591,563   

Executive Vice President

    2014      $ 1,000,000      $ 0      $ 3,935,432      $ 2,440,000      $ 1,388,757      $ 67,996      $ 8,832,185   
    2013      $ 987,308      $ 0      $ 3,687,129      $ 2,400,000      $ 0      $ 43,666      $ 7,118,103   

Philip Fasano

    2015      $ 1,038,462      $ 4,400,000 (6)    $ 1,606,091      $ 1,092,000      $ 10,665      $ 250,471      $ 8,397,689   

Executive Vice President—

               

Chief Information Officer

               

Kevin T. Hogan

    2015      $ 1,038,462      $ 1,150,000 (7)    $ 3,613,812      $ 1,482,000      $ 12,995      $ 620,888      $ 7,918,157   

Executive Vice President—

    2014      $ 903,846      $ 1,300,000 (7)    $ 3,517,171      $ 2,058,750      $ 338,113      $ 895,534      $ 9,013,414   

Consumer

               

Former Executive Officer

               

John Q. Doyle

    2015      $ 1,038,462      $ 0      $ 4,266,309      $ 1,755,000      $ 126,289      $ 46,316      $ 7,232,376   

Former Executive Vice

    2014      $ 925,769      $ 0      $ 4,142,265      $ 2,356,125      $ 776,676      $ 42,355      $ 8,243,190   

President

               

Footnotes to 2015 Summary Compensation Table

 

(1) Amounts for 2015 reflect an additional pay period for all U.S. salaried employees due to our bi-weekly payroll calendar.

 

(2) 2015 Amounts. The amounts represent the grant date fair value of PSUs granted for the 2015–2017 performance period under the 2015 AIG Long-Term Incentive (2015 LTI) award based on target performance determined in accordance with FASB ASC Topic 718. At the maximum level of performance, the grant date fair value would be: Hancock—$12,993,187; Herzog—$6,338,110; Dooley—$6,338,110; Fasano—$2,535,176; Hogan—$5,704,344; and Doyle—$6,734,291. All amounts are subject to clawback under the AIG Clawback Policy.

2014 Amounts. The amounts represent the grant date fair value of PSUs granted for the 2014–2016 performance period under the 2014 AIG Long-Term Incentive (2014 LTI) award based on target performance determined in accordance with FASB ASC Topic 718. At the maximum level of performance, the grant date fair value would be: Hancock—$10,351,704; Herzog—$5,882,089; Dooley—$5,882,089; Hogan—$5,288,877; and Doyle—$6,241,865. All amounts are subject to clawback under the AIG Clawback Policy.

2013 Amounts. The amounts represent the grant date fair value of PSUs granted for the 2013–2015 performance period under the 2013 AIG Long-Term Incentive (2013 LTI) award based on target performance determined in accordance with FASB ASC Topic 718. At the maximum level of performance, the grant date fair value would be: Hancock—$7,341,478; Herzog—$5,932,483; and Dooley—$5,932,483. All amounts are subject to clawback under the AIG Clawback Policy. In the first quarter of 2016, the Committee certified the results for the 2013–2015 performance period and determined the actual earned 2013 LTI awards for each named executive. See “—Compensation Discussion and Analysis—Adjudication of 2013 Long-Term Incentive Awards” for further information.

Calculation. The amount shown for the awards granted by AIG was calculated using the assumptions described in Note 19 to the Consolidated Financial Statements included in AIG’s 2015 Annual Report on Form 10-K (for awards granted in 2015), Note 21 to the Consolidated Financial Statements included in AIG’s 2014 Annual Report on Form 10-K (for awards granted in 2014) and Note 20 to the Consolidated Financial Statements included in AIG’s 2013 Annual Report on Form 10-K (for awards granted in 2013).

 

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(3) 2015 Amounts. The amounts represent the full amount of the awards earned under the AIG Annual Short-Term Incentive Plan for 2015 performance. 50 percent of the award was paid in March 2016 and payment of the remaining 50 percent of the award is deferred until March 2017. 100 percent of the award was fully vested at the time of the first payment, and all amounts are subject to clawback under the AIG Clawback Policy.

2014 Amounts. The amounts represent the full amount of the awards earned under the AIG Annual Short-Term Incentive Plan for 2014 performance. 50 percent of the award was paid in March 2015 and the remaining 50 percent of the award was paid in March 2016. 100 percent of the award was fully vested at the time of the first payment, and all amounts are subject to clawback under the AIG Clawback Policy.

2013 Amounts. The amounts represent the full amount of the awards earned under the AIG 2013 Short-Term Incentive Plan for 2013 performance. 50 percent of the award was paid in March 2014 and the remaining 50 percent of the award was paid in March 2015. 100 percent of the award was fully vested at the time of the first payment. All amounts are subject to clawback under the AIG Clawback Policy.

 

(4) 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 AIG’s defined benefit (pension) plans, including the Qualified Retirement Plan, the Non-Qualified Retirement Plan and the SERP and/or the American General Corporation Supplemental Executive Retirement Plan, as applicable. These plans are described in “—Post-Employment Compensation—Pension Benefits.”

For 2013, Mr. Herzog had a negative change in pension value of $24,779 and Mr. Dooley had a negative change in pension value of $11,782 because, although each of them actually accrued additional pension benefits for 2013, there was an increase in the discount rate in 2013 that resulted in a decrease in the present values, which more than offset the additional benefit accrued in 2013.

While AIG was subject to the Troubled Asset Relief Program (TARP) restrictions on executive compensation, there was a freeze on future benefit accruals with regard to the benefits provided under the Non-Qualified Retirement Plan and the SERP. Benefit accruals in these plans ceased on October 22, 2009 for Mr. Herzog and on December 11, 2009 for Messrs. Dooley and Doyle. Because the TARP restrictions ceased to apply to AIG as of December 14, 2012, the freeze on benefit accruals in the Non-Qualified Retirement Plan and the SERP ended and benefit accruals commenced again under these plans after this date. In addition, benefit accruals commenced after December 14, 2012 for Mr. Hancock under the Non-Qualified Retirement Plan, as he had not accrued any benefits under this plan prior to the TARP restrictions. We are not permitted to restore service for benefit accruals for the length of time during which these executives were subject to the freeze. Mr. Fasano began to participate in the Qualified and Non-Qualified Retirement Plans on November 1, 2015, after he completed one year of service with AIG. Mr. Hogan had accrued pension benefits under the Qualified and Non-Qualified Retirement Plans from his previous tenure at AIG and in accordance with the terms of these plans, benefit accruals commenced under the Qualified and Non-Qualified Retirement Plans when he rejoined AIG on October 14, 2013.

 

(5) 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 in 2015.

Perquisites

 

Name

   Personal Use of
Company Pool Cars(a)
     Financial,
Tax and Legal
Planning(b)
     Relocation
Expenses(c)
     Other(d)      Total  

Peter D. Hancock

   $ 17,966       $ 0               $ 14,782       $ 32,748   

David L. Herzog

   $ 24,935       $ 0               $ 0       $ 24,935   

William N. Dooley

   $ 30,117       $ 17,737               $ 6,500       $ 54,354   

Philip Fasano

   $ 4,489       $ 0       $ 112,911       $ 145       $ 117,545   

Kevin T. Hogan

   $ 18,969       $ 7,400               $ 1,040       $ 27,409   

Former Executive Officer

                                  

John Q. Doyle

   $ 23,346       $ 0               $ 6,500       $ 29,846   

 

 

  (a) Includes the incremental costs of driver overtime compensation, fuel and maintenance attributable to personal use of company pool cars.

 

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  (b) Incremental costs related to financial, tax and legal planning represent AIG’s direct expenditures. For Mr. Hogan, represents reimbursement of tax preparation services related to his prior international assignment that ended in 2014.

 

  (c) For Mr. Fasano, represents temporary living expenses related to his relocation, including utilities and rent.

 

  (d) Includes personal travel, meals and entertainment for certain named executives and spouses and, for certain named executives, the cost of an annual medical examination paid for by the company.

Other Benefits. This column also includes life insurance premiums paid for the benefit of the named executives. All named executives are covered under the AIG Basic Group Life Insurance Plan. For group life insurance, the 2015 company-paid costs were: Hancock—$570; Herzog—$570; Dooley—$570; Fasano—$570; Hogan—$570; and Doyle—$570.

This column also includes matching contributions by AIG under its 401(k) plan. These matching contributions include the following amounts in 2015: Hancock—$15,900; Herzog—$15,900; Dooley—$15,900; Fasano—$15,900; Hogan—$15,900; and Doyle—$15,900. See “—Post-Employment Compensation—Nonqualified Deferred Compensation” for additional details.

For Mr. Fasano, this column also includes $116,456 representing the reimbursement of taxes owed on his temporary living expenses described above. For Mr. Hogan, for 2015 this column also includes $577,009 representing tax equalization payments related to his prior international assignment described above.

AIG maintains a policy of directors and officers liability insurance for the directors and officers of AIG and its subsidiaries. The premium for this policy for the year ended September 22, 2015 was approximately $20 million and for the year ending September 22, 2016 was approximately $16 million.

 

(6) Represents a one-time payment of $3,400,000 paid in March 2015 in consideration of compensation foregone by Mr. Fasano from his former employer and the first installment of Mr. Fasano’s transition award in the amount of $1,000,000 received in January 2015. Each payment was made pursuant to Mr. Fasano’s offer letter. See “—Compensation Discussion and Analysis—Transition Arrangements for Named Executives” for further information.

 

(7) Represents the first and second installments of Mr. Hogan’s transition award paid in April 2014 and April 2015, respectively. Each payment was made pursuant to Mr. Hogan’s offer letter. See “—Compensation Discussion and Analysis—Transition Arrangements for Named Executives” for further information.

 

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2015 Grants of Plan-Based Awards

Total 2015 Grants. The following table details all equity and non-equity plan-based awards granted to each of the named executives in 2015.

2015 Grants of Plan-Based Awards

 

Name

  Grant
Date
    Board
Action
Date
    Estimated Possible
Payouts Under Non-Equity
Plan Awards(1)
    Estimated Possible
Payouts Under Equity
Incentive Plan Awards
(Performance Share Units)(2)
    All
Other
Stock
Awards
(# of
AIG
Shares)
    Grant Date
Fair Value
of Equity
Awards
($)(3)
 
      Threshold     Target     Maximum     Threshold     Target     Maximum      

Peter D. Hancock

                   

2015 STI

    03/11/15        $ 0      $ 3,200,000      $ 4,800,000                                      

2015 LTI

    03/18/15        03/11/15                             76,765        153,529        230,294             $ 8,231,460   

David L. Herzog

                   

2015 STI

    02/19/15        $ 0      $ 2,000,000      $ 3,000,000                                      

2015 LTI

    03/18/15                               37,446        74,892        112,338             $ 4,015,335   

William N. Dooley

                   

2015 STI

    02/19/15        $ 0      $ 2,000,000      $ 3,000,000                                      

2015 LTI

    03/18/15                               37,446        74,892        112,338             $ 4,015,335   

Philip Fasano

                   

2015 STI

    02/19/15        $ 0      $ 1,400,000      $ 2,100,000                                      

2015 LTI

    03/18/15                               14,978        29,956        44,934             $ 1,606,091   

Kevin T. Hogan

                   

2015 STI

    02/19/15        $ 0      $ 1,900,000      $ 2,850,000                                      

2015 LTI

    03/18/15                               33,702        67,403        101,105        $ 3,613,812   

Former Executive Officer

                                                           

John Q. Doyle

                   

2015 STI

    02/19/15        $ 0      $ 2,250,000      $ 3,375,000                                      

2015 LTI

    03/18/15                               39,787        79,573        119,360             $ 4,266,309   

 

 

(1) Amounts shown reflect the range of possible cash payouts under the AIG Annual Short-Term Incentive Plan for 2015 performance. Actual amounts earned, as determined by the Committee in the first quarter of 2016, are reflected in the 2015 Summary Compensation Table under Non-Equity Incentive Plan Compensation. For more information on the 2015 short-term incentive awards, including the applicable performance metrics, please see “—Compensation Discussion and Analysis—Compensation Structure—Direct Compensation Components—Short-Term Incentive.”

 

(2) Amounts shown reflect the potential range of PSUs that may be earned under the 2015 LTI awards. Actual amounts earned are based on achieving relative TSR and relative final credit default swap spread over the 2015–2017 performance period. Results will be certified by the Committee in the first quarter of 2018. For more information on the 2015 LTI awards, including the applicable performance metrics, please see “—Compensation Discussion and Analysis—Compensation Structure—Direct Compensation Components—Long-Term Incentive.” Holders of PSUs earned under the 2015 LTI awards are also entitled to dividend equivalent rights in the form of additional PSUs beginning with the first dividend record date following the PSU grant date, which are subject to the same vesting and performance conditions as the related PSUs and are paid when such related earned shares (if any) are delivered.

 

(3) Amounts shown represent the grant date fair value of the PSU awards for the 2015–2017 performance period determined in accordance with FASB ASC Topic 718 using the assumptions presented in Note 19 to the Consolidated Financial Statements in AIG’s 2015 Annual Report on Form 10-K.

HOLDINGS OF AND VESTING OF PREVIOUSLY AWARDED EQUITY

Outstanding Equity Awards at December 31, 2015

Equity-based awards held at the end of 2015 by each named executive were issued under the incentive plans and arrangements described below. Shares of AIG Common Stock deliverable under AIG’s time-vested equity and option awards will be delivered under the 2013 Omnibus Incentive Plan, 2010 Stock Incentive Plan, 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 are grants historically made by Starr International Company, Inc. (SICO) under a series of two-year Deferred Compensation Profit Participation Plans (the SICO Plans).

 

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The following table sets forth outstanding equity-based awards held by each named executive as of December 31, 2015.

Outstanding Equity Awards at December 31, 2015

 

              Stock Awards  
    Option Awards(1)             Unvested (No Longer
Subject to Performance
Conditions)
    Equity Incentive Plan
Awards (Unearned
and Unvested)
 

Name

  Year
Granted(1)
    Number
Exercisable
    Exercise
Price
    Expiration
Date
         Plan(2)(3)   Number     Market
Value(2)(3)
    Number     Market
Value(2)
 

Peter D. Hancock

                                  2015 LTI         232,905      $ 14,433,123   
              2014 LTI         208,812      $ 12,940,080   
              2013 LTI     190,334      $ 11,794,998       
                   

 

 

   

 

 

 
              Total         441,717      $ 27,373,203   
 

David L. Herzog

    2007        1,749      $ 1,140.99        12/13/2017          2015 LTI         113,612      $ 7,040,536   
    2006        1,499      $ 1,420.00        12/11/2016          2014 LTI         122,824      $ 7,611,403   
              2013 LTI     153,804      $ 9,531,234      
              SICO Plans     729      $ 45,176       
               

 

 

   

 

 

   

 

 

   

 

 

 
              Total     154,533      $ 9,576,410       236,436      $ 14,651,939   
 

William N. Dooley

    2007        2,499      $ 1,140.99        12/13/2017          2015 LTI         113,612      $ 7,040,536   
    2006        2,499      $ 1,420.00        12/11/2016          2014 LTI         122,824      $ 7,611,403   
              2013 LTI     153,804      $ 9,531,234      
              SICO Plans     6,957      $ 431,125       
               

 

 

   

 

 

   

 

 

   

 

 

 
              Total     160,761      $ 9,962,359        236,436      $ 14,651,939   
 

Philip Fasano

                                  2015 LTI         45,443      $ 2,816,103   
              2014 LTI         116,278      $ 7,205,748   
                 

 

 

   

 

 

 
              Total         161,721      $ 10,021,851   
 

Kevin T. Hogan

                                  2015 LTI         102,250      $ 6,336,433   
              2014 LTI         108,747      $ 6,739,052   
              2013 LTI     98,966      $ 6,132,923       
                   

 

 

   

 

 

 
              Total         210,997      $ 13,075,485   
 

Former Executive Officer

                                                    

John Q. Doyle

    2007        999      $ 1,140.99        12/13/2017          2015 LTI         120,712      $ 7,480,523   
    2006        749      $ 1,420.00        12/11/2016          2014 LTI         127,658      $ 7,910,966   
              2013 LTI     128,332      $ 7,952,734      
              SICO Plans     1,245      $ 77,153       
               

 

 

   

 

 

   

 

 

   

 

 

 
              Total     129,577      $ 8,029,887       248,370      $ 15,391,489   

 

 

(1) None of the named executives has received options since 2008. All previously granted options had four-year pro-rata vesting schedules. All outstanding options were exercisable and have an exercise price equal to the closing sale price of AIG Common Stock on the NYSE on the date of grant.

 

(2) All 2015 LTI awards and 2014 LTI awards are shown at maximum payout and all 2013 LTI awards are shown at actual amounts earned, in each case using the closing sale price of AIG Common Stock on the NYSE on December 31, 2015 of $61.97 per share. Actual amounts earned for the 2013 LTI awards were determined by the Committee in the first quarter of 2016. See “—Compensation Discussion and Analysis—Adjudication of 2013 Long-Term Incentive Awards” for further information. 2015 LTI award amounts also include additional PSUs accrued in respect of dividend equivalent rights, which are subject to the same vesting and performance conditions as the related PSUs and are paid when such related earned shares (if any) are delivered. Whether the 2015 or 2014 LTI awards (and, for the 2015 LTI awards, related dividend equivalents) will be earned at the level shown, or a different level, or at all depends on AIG performance against plan metrics over a three-year performance period. Once earned, all 2015 LTI awards (including related dividend equivalents) to named executives will vest one-third on the first day of January in each of 2018, 2019 and 2020, and all 2014 LTI awards to named executives will vest one-third on the first day of January in each of 2017, 2018 and 2019. One-third of the earned 2013 LTI awards vested on January 1, 2016 and the remaining two-thirds will vest one-third on the first day of January in each of 2017 and 2018.

 

(3)

Prior to 2005, key employees participated in the SICO Plans. The original SICO plan came into being in 1975. Participation in the SICO Plans by any person, and the extent of such participation, was at the sole discretion of SICO’s Board of Directors. SICO is responsible for issuing cash or AIG Common Stock under the SICO

 

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  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 had not yet reached age 65, he was contingently allocated additional shares equal to 20 percent of the shares initially allocated. The contingent allocations are included in this table.

Market value is based on the closing sale price of AIG Common Stock on the NYSE on December 31, 2015 of $61.97 per share.

Vesting of Stock-Based Awards During 2015

The following table sets forth the amounts realized in accordance with SEC rules by each named executive as a result of the vesting of stock-based awards in 2015. There were no options exercised in 2015 by any of the named executives.

2015 Vesting of Stock-Based Awards

 

     Stock-Based Awards
Vested in 2015
 

Name                                           

   Number of
Shares
Acquired on
Vesting
     Value
Realized on
Vesting
 

Peter D. Hancock(1)

     14,306       $ 860,220   

David L. Herzog(2)

     15,322       $ 921,312   

William N. Dooley

               

Philip Fasano

               

Kevin T. Hogan

               

Former Executive Officer

             

John Q. Doyle(3)

     17,883       $ 1,075,305   

 

(1) Represents 14,306 shares underlying vested TARP RSUs granted on December 17, 2012 that were settled in cash (based on the value of the underlying shares of AIG Common Stock on the vesting date, December 17, 2015).

 

(2) Represents 15,322 shares underlying vested TARP RSUs granted on December 17, 2012 that were settled in cash (based on the value of the underlying shares of AIG Common Stock on the vesting date, December 17, 2015).

 

(3) Represents 17,883 shares underlying vested TARP RSUs granted on December 17, 2012 that were settled in cash (based on the value of the underlying shares of AIG Common Stock on the vesting date, December 17, 2015).

POST-EMPLOYMENT COMPENSATION

Pension Benefits

AIG maintains tax-qualified and nonqualified defined benefit (pension) plans providing retirement benefits for employees. Participants in the tax-qualified pension plan vest in and receive their benefits based on length of service. Participants in the non-qualified pension plans vest in and receive these benefits based on their age and length of service. Employees of AIG and its subsidiaries who are paid on a U.S. dollar payroll and are citizens of the United States, or non-citizens working in the United States, are covered under the Qualified Retirement Plan. Participants whose formula benefit is restricted from being fully paid from the Qualified Retirement Plan due to

 

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IRS limits on compensation and benefits, including the named executives, are eligible to participate in the Non-Qualified Retirement Plan. Of the named executives, only Mr. Dooley participates and has a benefit under the SERP, and Mr. Herzog has a benefit under the American General Corporation Supplemental Executive Retirement Plan (AGC Retirement Plan).

Effective January 1, 2016, benefit accruals under the Qualified Retirement Plan, the Non-Qualified Retirement Plan and the SERP were frozen. As a result, the Qualified Retirement Plan, the Non-Qualified Retirement Plan and the SERP were closed to new participants, and current participants can no longer accrue additional benefits after December 31, 2015. However, interest credits continue to accrue on existing cash balance accounts, and participants also continue to earn service credits for purposes of vesting and early retirement eligibility subsidies as they continue to work for AIG. In addition, Mr. Herzog’s benefit under the AGC Retirement Plan vested, and his age 65 accrued benefit was frozen, following the acquisition of the American General Corporation on August 29, 2001. His benefit under the AGC Retirement Plan is for service accrued to December 31, 2002.

While AIG was subject to the TARP restrictions on executive compensation, benefit accruals in the Non-Qualified Retirement Plan ceased on October 22, 2009 for Mr. Herzog and on December 11, 2009 for Messrs. Dooley and Doyle. Benefit accruals in the SERP ceased on December 11, 2009 for Mr. Dooley. Because the TARP restrictions ceased to apply as of December 14, 2012, the freeze on benefit accruals in the Non-Qualified Retirement Plan and SERP ended and benefit accruals commenced again under these plans after this date. In addition, benefit accruals commenced for Mr. Hancock under the Non-Qualified Retirement Plan, as he had not accrued any benefits under this plan prior to the TARP restrictions. We are not permitted to restore service for benefit accruals for the length of time during which these executives were subject to the freeze. Mr. Hogan was employed by AIG from September 4, 1984 to November 5, 2008 and accrued pension benefits under the Qualified Retirement Plan and the Non-Qualified Retirement Plan during this employment. Mr. Hogan did not receive a distribution from the Qualified Retirement Plan or the Non-Qualified Retirement Plan at the time of his resignation in 2008. Pursuant to the terms of these plans, prior service is recognized for vesting and eligibility to participate. Therefore, upon rejoining AIG in 2013, benefit accruals commenced immediately under the Qualified Retirement Plan and the Non-Qualified Retirement Plan for Mr. Hogan. Mr. Fasano was hired on October 20, 2014 and benefit accruals under the Qualified Retirement Plan and the Non-Qualified Retirement Plan commenced on November 1, 2015, after he completed one year of service with AIG.

The benefit formula under the Qualified Retirement Plan and the Non-Qualified Retirement Plan was converted effective April 1, 2012 from a final average pay formula to a cash balance formula comprised of pay credits, calculated based on 6 percent of a plan participant’s annual pensionable compensation (subject to IRS limitations, on qualified plans ($265,000 in 2015) and annual interest credits (3.04 percent in 2015)).

The definition of pensionable compensation under the cash balance formula is different from the definition used in the final average pay formula. Effective April 1, 2012, pensionable compensation under the cash balance formula includes base salary, commissions, overtime and annual short-term incentive awards. The Qualified Retirement Plan was subject to IRS compensation limits and the Non-Qualified Retirement Plan was subject to an annual compensation limit of $1,050,000 in 2015.

The final average pay formula and definition of pensionable compensation did not change under the Qualified Retirement Plan or the Non-Qualified Retirement Plan for employees whose age plus credited service as of March 31, 2012 equaled 65 or greater and who had at least five years of credited service in the Qualified Retirement Plan as of that date. Messrs. Dooley and Doyle meet these requirements. For purposes of the Qualified Retirement Plan, Non-Qualified Retirement Plan and the SERP, each final average pay formula has been based on the average pensionable compensation of a participant during those three consecutive years in the last ten 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. However, as a result of the freeze to benefit accruals effective January 1, 2016 to the Qualified Retirement Plan, the Non-Qualified Retirement Plan and the SERP, each final average pay formula is based on the average pensionable compensation of a participant during those three consecutive years in the last ten years of credited service through December 31, 2015. These participants will receive a benefit under the Qualified Retirement Plan and the Non-Qualified Retirement Plan calculated using either the final average pay formula or the cash balance formula, whichever produces the greater benefit. The Non-Qualified Retirement Plan provides a benefit equal to the portion of the benefit that is not permitted to be paid from the Qualified Retirement Plan due to IRS limits on compensation and benefits. The Qualified Retirement Plan and Non-Qualified Retirement Plan final average pay formula ranges from 0.925 percent to 1.425 percent times average final salary for each year of credited service

 

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accrued since April 1, 1985 up to 44 years and 1.25 percent to 1.75 percent times average final pay 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.

Participants in the Qualified Retirement Plan are vested after three years of service and participants in the Non-Qualified Retirement Plan are vested once they attain age 60 with five or more years of service or age 55 with 10 or more years of service.

Participants in the Qualified Retirement Plan can elect to receive their benefit in the form of an annuity or as a lump sum distribution. For Non-Qualified Retirement Plan participants, the benefit they accrued through March 31, 2012 can be paid only in the form of an annuity, and the benefit accrued on and after April 1, 2012 through December 31, 2015 can be paid only in a lump sum.

The SERP continues to provide participants annuity options under its final average pay formula. The SERP’s final average pay formula provides a benefit equal to 2.4 percent times average final pay for each year of credited service up to 25 years through December 31, 2015, reduced by the monthly benefits payable from the Non-Qualified Retirement Plan, the Qualified Retirement Plan, Social Security and any predecessor plan or foreign deferred compensation plan sponsored by AIG.

Early retirement benefits. Each of the domestic pension plans provides for reduced early retirement benefits. These benefits are available to all vested participants in the Qualified Retirement Plan. The Non-Qualified Retirement Plan provides reduced early retirement benefits to participants who have reached age 55 with ten or more years of service or to participants who have reached age 60 with five or more years of service. The early retirement reduction factors in the Non-Qualified Retirement Plan are based upon age as of the retirement date and years of credited service excluding the TARP-related freeze period. The SERP provides reduced early retirement benefits to participants beginning at age 60 with five or more years of service, or to participants who have reached age 55 with ten or more years of credited service, 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, 4 or 5 percent (depending on age and years of credited service at retirement excluding the TARP-related freeze period) for each year that retirement precedes age 65. Participants in the Qualified Retirement Plan and the Non-Qualified Retirement Plan under the final average pay formula 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 except that there is no exclusion of service for the TARP-related freeze period under the Qualified Retirement Plan. Participants in the Qualified Retirement Plan, Non-Qualified Retirement Plan and the SERP will continue to receive service credit on and after the January 1, 2016 freeze date in determining age and length of service for early retirement subsidies and vesting purposes. Participants in the Qualified Retirement Plan with at least three years of service to AIG have a vested reduced retirement benefit pursuant to which, in the case of termination of employment prior to reaching age 65, such participants may elect to receive a reduced early retirement benefit commencing at any date between their date of termination and age 65. Participants in the Qualified Retirement Plan may choose to receive a lump sum payment or an annuity option upon normal or early retirement. Participants in the Non-Qualified Retirement Plan must receive the benefit accrued through March 31, 2012 in the form of an annuity and the benefit accrued on and after April 1, 2012 through December 31, 2015 in a lump sum. The SERP participants can elect an annuity option only and may not choose to receive the benefit in a lump sum.

Death and disability benefits. Each of the domestic pension plans also provides for death and disability benefits. The death benefit payable to a participant’s designated beneficiary under the Qualified Retirement Plan and the Non-Qualified Retirement Plan will generally equal the participant’s lump sum benefit or cash balance account. In the case of death, the SERP provides a participant who has at least five years of service to AIG with a survivor annuity equal to 40 percent of the participant’s accumulated benefit, which may be reduced based on the age of the surviving spouse.

Under the Qualified Retirement Plan and the Non-Qualified Retirement Plan, prior to the January 1, 2016 freeze date, participants who became disabled and received payments under AIG’s long-term disability plan, and whose benefit was determined under the final average pay formula, continued to accrue credited service, and participants whose benefit was determined under the cash balance formula continued to receive interest and pay credits to their cash balance account, for a maximum of three additional years. On and after the January 1, 2016

 

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freeze date, participants who receive payments under AIG’s long-term disability plan continue to receive service credit in determining age and length of service for early retirement subsidies and vesting purposes, and participants whose benefit is determined under the cash balance formula continue to receive interest credits to their cash balance account, for a maximum of three additional years. 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 Non-Qualified Retirement Plan and the SERP is reduced by amounts payable under the Qualified Retirement Plan, and participants in both the Non-Qualified Retirement Plan and the SERP may receive the formula benefit from the SERP only to the extent that it exceeds the benefit payable from the Non-Qualified Retirement Plan and the Qualified Retirement Plan.

2015 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 the benefits shown for the named executives 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. As of year-end 2015, Messrs. Dooley and Herzog were eligible for early retirement benefits under the Non-Qualified Retirement Plan, but Messrs. Hancock, Doyle, Fasano and Hogan were not yet eligible for early retirement benefits under that plan. Mr. Dooley was eligible for early retirement benefits under the SERP. Mr. Dooley elected to commence his early retirement benefits under the Qualified Retirement Plan effective January 1, 2016. In addition, he elected to commence his Non-Qualified Retirement Plan and SERP benefits with commencement of these benefits delayed six months as required under Section 409A of the Code.

AIG has not granted extra years of credited service under the defined benefit plans described above to any named executive, other than credit for prior service by Mr. Herzog to American General Corporation (as required by Code regulations applicable to plans assumed in acquisitions).

2015 Pension Benefits

 

Name                                                         

  

Plan Name

   Years of
Credited
Service(1)
     Present
Value of
Accumulated
Benefit(2)
     Payments
During 2015
 

Peter D. Hancock

  

Qualified Retirement Plan

     5.333       $ 104,864       $ 0   
  

Non-Qualified Retirement Plan

     3.000       $ 134,737       $ 0   
        

 

 

    
  

Total

      $ 239,601       $ 0   

David L. Herzog

  

Qualified Retirement Plan

     15.917       $ 389,467       $ 0   
  

Non-Qualified Retirement Plan

     12.750       $ 656,908       $ 0   
  

AGC Retirement Plan

     2.917       $ 171,544       $ 0   
        

 

 

    
  

Total

      $ 1,217,919       $ 0   

William N. Dooley

  

Qualified Retirement Plan

     30.750       $ 1,172,360       $ 0   
  

Non-Qualified Retirement Plan

     27.750       $ 3,646,771       $ 0   
  

SERP

     25.000       $ 1,901,461       $ 0   
        

 

 

    
  

Total

      $ 6,720,592       $ 0   

Philip Fasano

  

Qualified Retirement Plan

     0.167       $ 4,386       $ 0   
  

Non-Qualified Retirement Plan

     0.167       $ 6,279       $ 0   
        

 

 

    
  

Total

      $ 10,665       $ 0   

Kevin T. Hogan

  

Qualified Retirement Plan

     25.917       $ 566,845       $ 0   
  

Non-Qualified Retirement Plan

     25.917       $ 711,303       $ 0   
        

 

 

    
  

Total

      $ 1,278,148       $ 0   

Former Executive Officer

                         

John Q. Doyle

  

Qualified Retirement Plan

     29.083       $ 733,508       $ 0   
  

Non-Qualified Retirement Plan

     26.083       $ 2,061,463       $ 0   
        

 

 

    

 

 

 
  

Total

      $ 2,794,971       $ 0   

 

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(1) The named executives had the following years of service with AIG as of December 31, 2015: Mr. Hancock—5.916; Mr. Herzog—14.417; Mr. Dooley—37.5; Mr. Fasano—1.25; Mr. Hogan—26.5; and Mr. Doyle—29.666.

Mr. Hancock. Mr. Hancock had fewer years of credited service than actual service under the Qualified Retirement Plan because at the time he was hired, employees were required to wait a year after commencing employment with AIG before becoming participants in this plan and received credit for service retroactive to six months of employment. Mr. Hancock became a participant in the Qualified Retirement Plan effective March 1, 2011 after he completed one year of service with AIG with service credited retroactive to September 1, 2010. Mr. Hancock began accruing credited service under the Non-Qualified Retirement Plan on January 1, 2013, the first of the month following December 14, 2012, the end of AIG’s TARP restrictions period. He participates in the Qualified Retirement and Non-Qualified Retirement Plans under the cash balance formula. He began to accrue pay credits under the Non-Qualified Retirement Plan cash balance formula following December 14, 2012, the end of AIG’s TARP restrictions period.

Mr. Herzog. Mr. Herzog participates in the Qualified Retirement and Non-Qualified Retirement Plans under the cash balance formula. Under both of these plans, Mr. Herzog received credit for his service retroactive to his date of hire at American General Corporation, which was acquired by AIG in August 2001. Under the Qualified Retirement Plan, Mr. Herzog had more years of credited service than actual service because that plan provided credit for years of employment with American General Corporation before its acquisition by AIG.

Under the Non-Qualified Retirement Plan, Mr. Herzog’s credited service is less than his credited service under the Qualified Retirement Plan due to the freeze on service accrual in the Non-Qualified Retirement Plan. Mr. Herzog began to accrue pay credits under the Non-Qualified Retirement Plan cash balance formula following December 14, 2012, the end of AIG’s TARP restrictions period, and resumed accruing credited service under the Non-Qualified Retirement Plan on January 1, 2013.

Mr. Herzog’s benefit under the AGC Retirement Plan was frozen at December 31, 2002.

Mr. Dooley. Mr. Dooley had fewer years of credited service than actual service under the Qualified Retirement Plan and Non-Qualified Retirement Plan, because he did not enter the plans immediately upon eligibility. Mr. Dooley had fewer years of credited service than actual service under the SERP because credited service is capped at 25 years under this plan. Mr. Dooley’s credited service under the Non-Qualified Retirement Plan is less than his credited service under the Qualified Retirement Plan due to the freeze on service accrual in the Non-Qualified Retirement Plan. He participates in the Qualified Retirement Plan and the Non-Qualified Retirement Plan calculated using either the final average pay formula or the cash balance formula, whichever produces the greater benefit. He resumed accruing credited service under the final average pay formula for both the Non-Qualified Retirement Plan and SERP on January 1, 2013, the first month following the December 14, 2012 end of AIG’s TARP restrictions period.

Mr. Fasano. Mr. Fasano had fewer years of credited service than actual service under the Qualified Retirement Plan and the Non-Qualified Retirement Plan because at the time he was hired, employees were required to wait a year after commencing employment with AIG before becoming participants in these plans. Mr. Fasano became a participant in the Qualified Retirement Plan and the Non-Qualified Retirement Plan effective November 1, 2015 after he completed one year of service with AIG. He participates in the Qualified Retirement and Non-Qualified Retirement Plans under the cash balance formula.

Mr. Hogan. Mr. Hogan had fewer years of credited service than actual service under the Qualified Retirement Plan and the Non-Qualified Retirement Plan because at the time he was hired, employees were required to wait a year after commencing employment with AIG before becoming participants in these plans and received credit for service retroactive to six months of employment. Mr. Hogan was employed by AIG from September 4, 1984 to November 5, 2008 and accrued pension benefits under the Qualified Retirement Plan and the Non-Qualified Retirement Plan during this employment. Mr. Hogan did not receive a distribution from the Qualified Retirement Plan or the Non-Qualified Retirement Plan at the time of his initial resignation. Upon his rehire on October 14, 2013, benefit accruals commenced immediately under the Qualified and Non-Qualified Retirement Plans calculated under the cash balance formula, and prior service, pursuant to the terms of these Plans, was recognized for vesting and eligibility purposes. Mr. Hogan’s credited service under the Non-Qualified Retirement Plan is equal to his credited service under the Qualified Retirement Plan because he was not an employee during the time period in which the freeze on service accrual in the Non-Qualified Retirement Plan was applicable.

Mr. Doyle. Mr. Doyle had fewer years of credited service than actual service under the Qualified Retirement Plan because at the time he was hired, employees were required to wait a year after commencing

 

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employment with AIG before becoming participants in this plan and received credit for service retroactive to six months of employment. Mr. Doyle’s credited service under the Non-Qualified Retirement Plan is less than his credited service under the Qualified Retirement Plan due to the freeze on service accrual in the Non-Qualified Retirement Plan. He participates in the Qualified Retirement Plan and the Non-Qualified Retirement Plan calculated using either the final average pay formula or the cash balance formula, whichever produces the greater benefit. He resumed accruing credited service under the final average pay formula for the Non-Qualified Retirement Plan on January 1, 2013, the first month following the December 14, 2012 end of AIG’s TARP restrictions period.

 

(2) The actuarial present values of the accumulated benefits are based on service and earnings as of December 31, 2015 (the pension plan measurement date for purposes of AIG’s financial statement reporting). The actuarial present values of the accumulated benefits under the Qualified Retirement Plan, the Non-Qualified Retirement Plan and the SERP are calculated based on payment of a life annuity beginning at age 65, or current age if older, consistent with the assumptions described in Note 20 to the Consolidated Financial Statements included in AIG’s 2015 Annual Report on Form 10-K. As described in that Note, the discount rate assumption is 4.32 percent for the Qualified Retirement Plan. The discount rate assumption is 4.27 percent for the Non-Qualified Retirement Plan, 4.34 percent for the SERP and 4.09 percent for the AGC Retirement Plan. The mortality assumptions are based on the RP-2014 annuitant white collar mortality table projected using the AIG improvement scale.

As a result of the TARP restrictions on executive compensation, benefit accruals in the Non-Qualified Retirement Plan ceased on October 22, 2009 for Mr. Herzog and on December 11, 2009 for Messrs. Dooley and Doyle; and benefit accruals in the SERP ceased on December 11, 2009 for Mr. Dooley. Messrs. Hancock, Herzog, Fasano, Hogan and Doyle do not participate in the SERP. The TARP-related freeze on benefit accruals in the Non-Qualified Retirement Plan and SERP ended on December 14, 2012. Messrs. Fasano and Hogan were not employed by AIG during the TARP-related freeze period, and Mr. Hancock did not begin accruing pay credits under the Non-Qualified Retirement Plan until December 14, 2012. We are not permitted to restore service for benefit accruals for the length of time during which these executives were subject to the TARP-related freeze.

The Non-Qualified Retirement Plan and SERP benefits for these participants, if eligible, are equal to the lesser of the frozen Non-Qualified Retirement Plan and SERP benefit (excluding service and earnings during the period in which benefit accruals were frozen due to the TARP restrictions) or the Non-Qualified Retirement Plan and SERP benefit without taking into account the TARP-related freeze on service accrual. Vesting is determined in the Non-Qualified Retirement Plan and the SERP based on age and years of service as of the executive’s actual retirement date. Early retirement reduction factors are based on age at the executive’s actual retirement date and years of credited service excluding credited service during the period in which benefit accruals were frozen due to the TARP restrictions. Participants will continue to receive service credit on and after the January 1, 2016 freeze date in determining age and length of service for both vesting and early retirement subsidies.

Mr. Herzog. Mr. Herzog’s AGC Retirement Plan benefit was frozen as of December 31, 2002 following AIG’s acquisition of American General Corporation.

Nonqualified Deferred Compensation

In 2008, AIG paid out the entire account balances of most participants and terminated future participation in a number of its nonqualified deferred compensation plans, including the Supplemental Incentive Savings Plan (SISP), which allowed employees to contribute to deferred compensation accounts above the 401(k) annual limit, and the Executive Deferred Compensation Plan (EDCP), in which designated key employees were eligible to participate. However, for certain current and former employees on December 31, 2008, including participating named executives, payments of account balances were not accelerated. Mr. Dooley participated in the SISP and Mr. Herzog participated in the EDCP. In addition, Mr. Herzog participated in the American General Supplemental Thrift Plan (AG Supplemental Thrift Plan) as a result of his employment by American General Corporation prior to its acquisition by AIG.

Supplemental Incentive Savings Plan. Participants in the SISP were able to defer cash compensation up to a maximum of $11,500 per year. Amounts deferred under the SISP were credited with earnings based on the returns of a number of mutual funds. In 2015, based on the performance of these funds, Mr. Dooley experienced a return of approximately 0.1 percent. Mr. Dooley elected to commence his early retirement benefits effective January 1, 2016, and since he had previously elected a lump sum payment of his SISP account balance upon

 

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termination of employment, he will receive this lump sum payment credited with earnings or losses based upon performance of the funds, after a six month delay required under Section 409A of the Code. All funds available for selection under the SISP were also available for selection under AIG’s 401(k) plan. Amounts deferred during each year, and earnings thereon, will be distributed in accordance with each participant’s prior decision to receive installments over a period of five or ten years or in a lump sum payment following termination of employment after reaching age 60. Participants whose employment terminates before reaching age 60 must receive their account balances in a lump sum payment.

Executive Deferred Compensation Plan. Participants in the EDCP were able to defer cash compensation up to a maximum of $300,000 per year. Amounts deferred under the EDCP were credited with earnings based on the returns of a small number of mutual funds. In 2015, based on the performance of these funds, Mr. Herzog experienced a return of approximately 0.1 percent. Amounts deferred during each year, and earnings thereon, will be distributed in accordance with participants’ prior decision to receive installments over a period of five or ten years or in a lump sum payment following termination of employment after reaching age 60. Participants whose employment terminates before reaching age 60 must receive their account balances in a lump sum payment.

Stock Salary. Stock Salary took the form of regular, bi-weekly or semi-monthly grants of immediately vested stock or units. The amount of stock or units awarded on each grant date was based on the dollar value of the Stock Salary earned over the period since the preceding grant date. Each grant of Stock Salary was subject to transfer or payment restrictions for a multi-year period.

Stock Salary awards, as well as balances under the other plans in which the named executives participated, are detailed in the following table.

2015 Nonqualified Deferred Compensation

 

Name

   Executive
Contributions
     AIG
Contributions
     Aggregate
Earnings(1)(2)
     Distributions           Aggregate
Balance at
Year-End
2015
 

Peter D. Hancock

                 

2012 Stock Salary(1)

   $ 0       $ 0       $ 201,832       $ 0            $ 0   

David L. Herzog

                 

EDCP

   $ 0       $ 0       $ 546       $ 0            $ 593,823   

AG Supplemental Thrift Plan

   $ 0       $ 0       $ 928       $ 0            $ 22,428 (3) 

2012 Stock Salary(1)

   $ 0       $ 0       $ 183,787       $ 0            $ 0   
                 

 

 

 

Total

                    $ 616,251   

William N. Dooley

                 

SISP

   $ 0       $ 0       $ 41       $ 0            $ 31,827   

2012 Stock Salary(1)

   $ 0       $ 0       $ 215,270       $ 0            $ 0   
                 

 

 

 

Total

                    $ 31,827   
                 

Philip Fasano

   $ 0       $ 0       $ 0       $ 0          $ 0   
                 

Kevin T. Hogan

   $ 0       $ 0       $ 0       $ 0            $ 0   

Former Executive Officer

                                       

John Q. Doyle

                 

2012 Stock Salary(1)

   $ 0       $ 0       $ 118,301       $ 0            $ 0   

 

(1) From 2009 to 2012, AIG maintained a program of regular bi-weekly or semi-monthly grants of vested stock or units generally referred to as “Stock Salary” that remained subject to transfer or payment restrictions over a multi-year period. Stock Salary for Messrs. Hancock, Herzog, Dooley and Doyle was subject to transfer restrictions from one to three years from the date of grant. 2012 Stock Salary represents the remaining third tranche that was subject to restrictions until the applicable delivery date in 2015. As reflected in the Balance column above, there was no Stock Salary outstanding as of December 31, 2015.

2012 Stock Salary was granted in restricted shares of AIG Common Stock or units based on AIG Common Stock. Holders of unit-based Stock Salary, including all of the recipient named executives, were entitled to certain dividend equivalents under the terms of their awards. For 2012 Stock Salary, RSUs outstanding on a dividend record date entitled the holder to a cash dividend equivalent equal to the dividend per share, multiplied by the number of RSUs outstanding on the dividend record date. Dividend equivalent amounts resulting from 2015 dividend payments are included in the Aggregate Earnings (Loss) column for 2012 Stock Salary amounts.

 

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All of the 2012 Stock Salary for Messrs. Hancock, Herzog and Dooley was previously reported in the 2012 Summary Compensation Table. Amounts in previous Summary Compensation Tables represent the fair market value at the grant date. All such previously reported awards were delivered as of December 31, 2015.

 

(2) For the third tranche of 2012 Stock Salary, represents the earnings or loss accrued from December 31, 2014 through the applicable delivery date. For 2012 Stock Salary, amounts in this column also include dividend equivalents with respect to 2015 dividend payments.

 

(3) Represents Mr. Herzog’s balances under the AG Supplemental Thrift Plan and contributions made to this plan prior to AIG’s acquisition of American General Corporation. Mr. Herzog may receive a lump sum distribution from this plan when he terminates employment with AIG and elects a distribution from AIG’s 401(k) plan. This plan provides a return based on Prime plus 1 percent, which resulted in a rate of return of approximately 4.3 percent in 2015.

POTENTIAL PAYMENTS ON TERMINATION

Executive Severance Plan. As previously discussed, AIG maintains the 2012 ESP for AIG executives in grade level 27 or above, including the named executives, and executives who participated in AIG’s prior executive severance plan (Prior Participants).

Severance benefits. The 2012 ESP provides for severance payments and benefits upon a termination by AIG without “Cause” or by a qualifying executive (including Messrs. Hancock, Herzog, Fasano, Hogan and Doyle) for “Good Reason,” including, for qualifying executives, after a “Change in Control.” In the event of a qualifying termination, subject to the participant’s execution of a release of claims and agreement to abide by certain restrictive covenants, a participant is generally eligible to receive:

 

   

For terminations on and after April 1 of the termination year, a pro-rata annual short-term incentive for the year of termination based on the participant’s target amount and actual company (and/or, if applicable, business unit or function) performance, paid at the same time as such short-term incentives are regularly paid to similarly situated active employees; and

 

   

Severance in an amount equal to the product of a multiplier times the sum of salary and average short-term incentive paid for the preceding three completed calendar years. The multiplier is either 1 or 1.5 depending on the executive’s grade level and increases to 1.5 or 2 for qualifying terminations within two years following a Change in Control. Each of Messrs. Hancock, Herzog, Fasano, Hogan and Doyle is eligible for the higher multipliers.

However, in any event, Prior Participants in grade level 27 or above, which includes Messrs. Hancock, Herzog and Doyle, may not receive less than the severance they would have received under the prior plan. Severance generally will be paid in a lump sum. Participants are entitled to continued health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), a $40,000 payment that may be applied towards such coverage and one year of additional age and service under AIG’s non-qualified pension plans and AIG Medical Plan solely for purposes of determining vesting and eligibility, not benefit accruals. The one year of additional age and service is also used for the purpose of determining eligibility to enroll in retiree medical coverage.

Restrictive covenants. Pursuant to the release of claims that each participant must execute to receive benefits under the 2012 ESP, each participant is generally prohibited from:

 

   

Engaging in, being employed by, rendering services to or acquiring financial interests in businesses that are competitive with AIG for a period of six months after termination;

 

   

Interfering with AIG’s business relationships with customers, suppliers or consultants for a period of six months after termination;

 

   

Soliciting or hiring AIG employees for a period of one year after termination; and

 

   

Disclosing AIG’s confidential information at any time following termination.

Definitions. Under the 2012 ESP:

 

   

“Cause” generally means

 

   

the participant’s conviction, whether following trial or by plea of guilty or nolo contendere (or similar plea), in a criminal proceeding (A) on a misdemeanor charge involving fraud, false statements or

 

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misleading omissions, wrongful taking, embezzlement, bribery, forgery, counterfeiting or extortion, (B) on a felony charge or (C) on an equivalent charge to those in clauses (A) and (B) in jurisdictions which do not use those designations;

 

   

the participant’s engagement in any conduct which constitutes an employment disqualification under applicable law (including statutory disqualification as defined under the Exchange Act);

 

   

the participant’s violation of any securities or commodities laws, any rules or regulations issued pursuant to such laws, or the rules and regulations of any securities or commodities exchange or association of which AIG or any of its subsidiaries or affiliates is a member; or

 

   

the participant’s material violation of AIG’s codes of conduct or any other AIG policy as in effect from time to time.

 

   

“Change in Control” generally means

 

   

individuals who, on the effective date of the 2012 ESP, constitute the Board of Directors of AIG (or subsequent directors whose election or nomination was approved by a vote of at least two-thirds of such directors, including by approval of the proxy statement in which such person is named as a nominee for director) cease for any reason to constitute at least a majority of the Board;

 

   

any person is or becomes a beneficial owner of 50 percent or more of AIG’s voting securities (for this purpose, person is as defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act);

 

   

consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving AIG that results in any person becoming the beneficial owner of 50 percent or more of the total voting power of the outstanding voting securities eligible to elect directors of the entity resulting from such transaction;

 

   

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

 

   

AIG’s stockholders approve a plan of complete liquidation or dissolution of AIG.

 

   

“Good Reason” generally means a reduction of more than 20 percent in the participant’s annual target direct compensation.

Treatment of 2013 LTI, 2014 LTI and 2015 LTI Awards. 2013 LTI awards, 2014 LTI awards and 2015 LTI awards were issued under the 2013 Long Term Incentive Plan, which provides for accelerated vesting of outstanding PSUs in certain termination scenarios. In the case of a participant’s involuntary termination without Cause (defined in the same manner as in the 2012 ESP as set forth above), retirement or disability, or if the participant experiences a qualifying resignation after the first year of a performance period (e.g., on or after January 1, 2016 for the 2015–2017 performance period), the participant’s earned PSUs will vest based on actual performance for the whole performance period and be delivered on the normal settlement schedule. Retirement requires attainment of age 60 with five years of service or attainment of age 55 with ten years of service, and a qualifying resignation requires attainment of both (1) age 50 with at least five years of service and (2) age plus years of service equal to at least 60. In the case of a participant’s death during or prior to adjudication for a performance period or involuntary termination without Cause within 24 months following a Change in Control (defined in the same manner as in the 2012 ESP as set forth above) during a performance period, an amount equal to the participant’s target amount of PSUs (unless the Committee determines to use actual performance through the date of the Change in Control) will vest and be delivered to the participant by the later of the end of the calendar year or two and a half months following death or termination.

Quantification of Termination Payments and Benefits. The following table sets forth the compensation and benefits that would have been provided to each of the named executives if he had been terminated on December 31, 2015 under the circumstances indicated (including following a change in control).

 

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Termination Payments and Benefits for the Named Executive Officers as of December 31, 2015

 

Name

  Annual
Short-Term
Incentive(1)
    Severance(2)     Medical and
Life Insurance(3)
    Pension
Plan
Credit(4)
    Unvested
Options(5)
    Unvested
Stock
Awards(6)
    Total  

Peter D. Hancock

             

By AIG for “Cause”

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0   

By AIG w/o “Cause”

  $ 2,496,000      $ 8,531,556      $ 40,000      $ 0      $ 0      $ 30,043,800      $ 41,111,356   

By Executive w/o Good Reason

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 20,421,718      $ 20,421,718   

By Executive with Good Reason

  $ 2,496,000      $ 8,531,556      $ 40,000      $ 0      $ 0      $ 20,421,718      $ 31,489,274   

Qualifying Termination following a change in control(7)

  $ 2,496,000      $ 9,998,222      $ 40,000      $ 0      $ 0      $ 30,043,800      $ 42,578,022   

Death

  $ 3,200,000      $ 0      $ 0      $ 5,817      $ 0      $ 26,272,615      $ 29,478,432   

Disability(8)

  $ 2,496,000      $ 0      $ 0      $ 0      $ 0      $ 30,043,800      $ 32,539,800   

Retirement

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0   

David L. Herzog

             

By AIG for “Cause”

  $ 0      $ 0      $ 0      $ 39,181      $ 0      $ 0      $ 39,181   

By AIG w/o “Cause”

  $ 1,560,000      $ 5,847,333      $ 40,000      $ 39,181      $ 0      $ 19,344,369      $ 26,830,883   

By Executive w/o Good Reason

  $ 0      $ 0      $ 0      $ 39,181      $ 0      $ 14,650,700      $ 14,689,881   

By Executive with Good Reason

  $ 1,560,000      $ 5,847,333      $ 40,000      $ 39,181      $ 0      $ 14,650,700      $ 22,137,214   

Qualifying Termination following a change in control(7)

  $ 1,560,000      $ 6,466,667      $ 40,000      $ 39,181      $ 0      $ 19,344,369      $ 27,450,217   

Death

  $ 2,000,000      $ 0      $ 0      $ 0      $ 0      $ 16,296,995      $ 18,296,995   

Disability(8)

  $ 1,560,000      $ 0      $ 0      $ 0      $ 0      $ 19,344,369      $ 20,904,369   

Retirement

  $ 1,560,000      $ 0      $ 0      $ 39,181      $ 0      $ 19,344,369      $ 20,943,550   

William N. Dooley

             

Retirement(9)

  $ 1,560,000      $ 0      $ 0      $ 404,538      $ 0      $ 19,730,318      $ 21,694,856   

Philip Fasano

             

By AIG for “Cause”

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0   

By AIG w/o “Cause”

  $ 1,092,000      $ 10,600,000      $ 40,000      $ 0      $ 0      $ 6,681,234      $ 18,413,234   

By Executive w/o Good Reason

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0   

By Executive with Good Reason

  $ 1,092,000      $ 10,600,000      $ 40,000      $ 0      $ 0      $ 0      $ 11,732,000   

Qualifying Termination following a change in control(7)

  $ 1,092,000      $ 11,800,000      $ 40,000      $ 0      $ 0      $ 6,681,234      $ 19,613,234   

Death

  $ 1,400,000      $ 0      $ 0      $ 0      $ 0      $ 6,681,234      $ 8,081,234   

Disability(8)

  $ 1,092,000      $ 0      $ 0      $ 0      $ 0      $ 6,681,234      $ 7,773,234   

Retirement

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0   

Kevin T. Hogan

             

By AIG for “Cause”

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 0      $ 0   

By AIG w/o “Cause”

  $ 1,482,000      $ 5,044,063      $ 40,000      $ 0      $ 0      $ 14,849,933      $ 21,415,996   

By Executive w/o Good Reason

  $ 0      $ 0      $ 0      $ 0      $ 0      $ 10,625,624      $ 10,625,624   

By Executive with Good Reason

  $ 1,482,000      $ 5,044,063      $ 40,000      $ 0      $ 0      $ 10,625,624      $ 17,191,687   

Qualifying Termination following a change in control(7)

  $ 1,482,000      $ 6,458,750      $ 40,000      $ 0      $ 0      $ 14,849,933      $ 22,830,683   

Death

  $ 1,900,000      $ 0      $ 0      $ 0      $ 0      $ 12,889,078      $ 14,789,078   

Disability(8)

  $ 1,482,000      $ 0      $ 0      $ 0      $ 0