DEF 14A 1 d297295ddef14a.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.       )

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  Preliminary Proxy Statement

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  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)

 

 

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LOGO

 

 

May 19, 2017

Dear AIG Shareholder,

The AIG Board is committed to creating long-term value for investors through sound oversight of strategy, financial and operational performance, and risk management. We appointed Brian Duperreault as our new CEO effective May 14, 2017. We believe Brian is the right person to lead AIG at this important time and look forward to building on the progress we have made. The Board values our ongoing dialogue with shareholders and has made that a priority.

We invite you to join us at the 2017 Annual Meeting of Shareholders, which will be held on Wednesday, June 28, 2017, at 11:00 a.m., at 175 Water Street, New York, NY. Even if you will be attending the meeting, we encourage you to use this 2017 Proxy Statement as an informational resource and to vote in advance of the meeting. Every vote matters.

Thank you for being an AIG shareholder.

Sincerely,

 

LOGO

 

Douglas M. Steenland
Non-Executive Chairman of the Board


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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 JUNE 28, 2017

May 19, 2017

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 June 28, 2017, at 11:00 a.m., for the following purposes:

 

  1.

To elect the thirteen 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 amend and restate AIG’s Amended and Restated Certificate of Incorporation to restrict certain transfers of AIG Common Stock in order to protect AIG’s tax attributes;

 

  4.

To act upon a proposal to ratify the amendment to extend the expiration of the American International Group, Inc. Tax Asset Protection Plan;

 

  5.

To act upon a proposal to ratify the selection of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2017; and

 

  6.

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

Shareholders of record at the close of business on May 8, 2017 will be entitled to vote at the meeting.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on June 28, 2017. The Proxy Statement and 2016 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

ROSE MARIE E. GLAZER

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 May 8, 2017. 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

May 19, 2017

 

TIME AND DATE    11:00 a.m. on Wednesday, June 28, 2017.
PLACE    175 Water Street, New York, New York 10038.
MAILING DATE    This Proxy Statement, 2016 Annual Report and proxy card or voting instructions were either made available to you over the internet or mailed to you on or about May 19, 2017.
ITEMS OF BUSINESS   

•     To elect the thirteen 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 amend and restate AIG’s Amended and Restated Certificate of Incorporation to restrict certain transfers of AIG Common Stock in order to protect AIG’s tax attributes;

  

•     To act upon a proposal to ratify the amendment to extend the expiration of the American International Group, Inc. Tax Asset Protection Plan;

  

•     To act upon a proposal to ratify the selection of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2017; and

  

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

RECORD DATE    You can vote if you were a shareholder of record at the close of business on May 8, 2017.
INSPECTION OF LIST OF SHAREHOLDERS OF RECORD    A list of the shareholders of record as of May 8, 2017 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

     1  

VOTING INSTRUCTIONS AND INFORMATION

     6  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

     11  

PROPOSAL 1—ELECTION OF
DIRECTORS

     12  

CORPORATE GOVERNANCE

     20  

Governance

     20  

Report of the Nominating and Corporate Governance Committee

     24  

Committees

     26  

Compensation of Directors

     30  

Compensation and Management Resources Committee Interlocks and Insider Participation

     31  

OWNERSHIP OF CERTAIN SECURITIES

     32  

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     34  

RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

     34  

OUR EXECUTIVE OFFICERS

     36  

EXECUTIVE COMPENSATION

     37  

Report of the Compensation and Management Resources Committee

     37  

Compensation Discussion and Analysis

     39  

2016 Compensation

     52  

Holdings of and Vesting of Previously Awarded Equity

     57  

Post-Employment Compensation

     59  

Potential Payments on Termination

     66  

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

     72  

BACKGROUND TO PROPOSALS 3 AND 4

     73  

PROPOSAL 3—APPROVAL OF AMENDMENT AND RESTATEMENT OF AIG’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

     75  

PROPOSAL 4—RATIFICATION OF AMENDMENT NO. 2 TO THE TAX ASSET PROTECTION PLAN

     79  

REPORT OF AUDIT COMMITTEE AND RATIFICATION OF SELECTION OF ACCOUNTANTS

     82  

Report of the Audit Committee

     82  

PROPOSAL 5—RATIFICATION OF SELECTION OF PRICEWATERHOUSECOOPERS LLP

     84  

Fees Paid to PricewaterhouseCoopers LLP

     85  

EQUITY COMPENSATION PLAN INFORMATION

     86  

OTHER MATTERS

     87  

Other Matters to be Presented at the 2017 Annual Meeting of Shareholders

     87  

Shareholder Proposals for the 2018 Annual Meeting

     87  

Communications with the Board of Directors

     87  

Electronic Delivery of Proxy Materials

     87  

Important Notice Regarding Delivery of Shareholder Documents

     88  

Incorporation by Reference

     88  

CORPORATE GOVERNANCE GUIDELINES

     A-1  

NON-GAAP FINANCIAL MEASURES

     B-1  

PROPOSED AMENDMENT TO AMERICAN INTERNATIONAL GROUP, INC.’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION (AMENDING ARTICLE THIRTEEN) RELATING TO PROPOSAL 3

     C-1  

AMERICAN INTERNATIONAL GROUP, INC. TAX ASSET PROTECTION PLAN

     D-1  

AMENDMENT NO. 1 TO THE AMERICAN INTERNATIONAL GROUP, INC. TAX ASSET PROTECTION PLAN

     E-1  

AMENDMENT NO. 2 TO THE AMERICAN INTERNATIONAL GROUP, INC. TAX ASSET PROTECTION PLAN

     F-1  
 

 

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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 May 19, 2017. For information on the details of the voting process and how to attend the Annual Meeting, please see “Voting Instructions and Information” on page 6.

Voting Matters and Vote Recommendation

 

Proposals

  

Board Vote

Recommendation

  

For More Information, see:

1.

 

Election of 13 Directors

   FOR EACH DIRECTOR NOMINEE    Proposal 1—Election of Directors, page 12

2.

  Advisory vote on executive compensation    FOR    Proposal 2—Non-Binding Advisory Vote to Approve Executive Compensation, page 71

3.

  Approval of amendment and restatement of AIG’s Amended and Restated Certificate of Incorporation to restrict certain transfers of AIG Common Stock in order to protect AIG’s tax attributes    FOR    Proposal 3—Approval of Amendment and Restatement of AIG’s Amended and Restated Certificate of Incorporation, page 74

4.

  Ratification of the amendment to extend the expiration of the American International Group, Inc. Tax Asset Protection Plan    FOR    Proposal 4—Ratification of Amendment No. 2 to the Tax Asset Protection Plan, page 78

5.

  Ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2017    FOR    Proposal 5—Ratification of Selection of PricewaterhouseCoopers LLP, page 83

 

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PROPOSAL 1—ELECTION OF DIRECTORS

The following table provides summary information about each of our thirteen 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 the 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

    69       2011     Former Chairman and CEO of Granite Broadcasting Corporation     Avon Products, Inc.; Pfizer Inc.  

CMRC (Chair)

NCGC

Brian Duperreault

    70       2017     President and CEO, AIG     Johnson Controls International plc  

Peter R. Fisher

    60       2014     Senior Fellow at the Center for Business, Government and Society, and Senior Lecturer, at the Tuck School of Business at Dartmouth College; Former Head of Fixed Income Portfolio Management of BlackRock, Inc.     KCG Holdings, Inc.  

Regulatory

RCC

John H. Fitzpatrick

    60       2011     Chairman of White Oak Global Advisors LLC; 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      

Audit

RCC (Chair)

William G. Jurgensen

    65       2013     Former CEO of Nationwide Insurance     Lamb Weston Holdings, Inc.  

Audit (Chair)

RCC

Christopher S. Lynch

    59       2009     Independent Consultant and Former National Partner in Charge of Financial Services of KPMG LLP     Federal Home Loan Mortgage Corporation  

NCGC

RCC

Tech

Samuel J. Merksamer (2)

    36       2016     Former Managing Director of Icahn Capital LP     Cheniere Energy Inc.; Hertz Global Holdings, Inc.(3); Navistar International Corporation; Transocean Ltd.  

NCGC

RCC

Regulatory

Henry S. Miller

    71       2010     Chairman of Marblegate Asset Management, LLC; Former Chairman and Managing Director of Miller Buckfire & Co., LLC     The Interpublic Group of Companies, Inc.  

Regulatory

RCC

Linda A. Mills

    67       2015     Former Corporate Vice President of Operations of Northrop Grumman Corporation; Former Corporate Vice President and President of Information Systems/Information Technology     Navient Corporation  

Audit

CMRC

Tech

Suzanne Nora Johnson

    59       2008     Former Vice Chairman of The Goldman Sachs Group, Inc.     Intuit Inc.; Pfizer Inc.; Visa Inc.  

CMRC

NCGC (Chair)

Tech

Ronald A. Rittenmeyer

    69       2010     Chairman and CEO, Millennium Health, LLC; Former Chairman, CEO and President of Electronic Data Systems Corporation     Quintiles IMS Holdings, Inc.; Tenet Healthcare Corporation  

Audit

CMRC

Tech (Chair)

Douglas M. Steenland

    65       2009     Former President and CEO of Northwest Airlines Corporation     Hilton Worldwide Holdings Inc.; Performance Food Group Company; Travelport Limited   (4)

Theresa M. Stone

    73       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      

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) Mr. Merksamer was initially nominated in accordance with a Nomination Agreement as described further in “Proposal 1—Election of Directors.”
(3) Mr. Merksamer will not be standing for re-election as a director of Hertz Global Holdings, Inc. at its annual meeting of shareholders in May 2017.
(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, corporate governance developments and shareholder feedback to ensure continued effectiveness.

 

    

     AIG has a highly engaged Board with balanced tenure and substantial and diverse expertise necessary to evaluate and oversee strategy and performance.

    

     Independent Chairman is required in AIG’s By-laws.

    

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

    

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

    

     All directors are independent (except CEO).

    

     Former AIG CEOs cannot serve on the Board.

    

     The Board, through the Nominating and Corporate Governance Committee, conducts annual evaluations of the Board and individual directors, and all Board Committees conduct annual self-evaluations.

    

     No director attending less than 75% of meetings for two consecutive years will be re-nominated.

    

     Directors generally may not stand for election after reaching age 75.

    

     All directors may contribute to the agenda for Board meetings.

    

     The Board Committee structure is organized around key strategic issues and designed to facilitate dialogue and efficiency.

    

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

    

     The Board provides strong risk management oversight including through the Risk and Capital Committee, Audit Committee and other Board Committees.

    

     AIG has an extensive shareholder engagement program with director participation.

    

     AIG’s By-laws include a proxy access right for shareholders.

 

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

Compensation Philosophy and Structure

 

Our compensation philosophy centers on creating a culture of 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.

 

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 objectives and strategies. The 2016 compensation structure for our named executives consisted of market-competitive base salary not to exceed 25 percent of total target compensation, approximately 25 to 35 percent target short-term incentive opportunity and at least 40 percent target long-term incentive opportunity that was entirely performance-based. At least 75 percent of each executive’s target total direct compensation is based on performance and subject to clawback.

 

2016 Pay Decisions

 

Short-Term Incentive. Our 2016 short-term incentive awards for our Executive Leadership Team consisted of a cash award based on Company-wide performance measured across multiple pre-established goals that included the effect of the net

   LOGO

adverse prior year development we reported in our financial results for 2016. After taking into account the operation of the program, considering other Company-wide accomplishments in 2016 (including expense reductions and capital returns to shareholders that exceeded strategic targets, the completion or announcement of over ten transactions that will generate over $10 billion in liquidity and the growth and improved profitability of Consumer Insurance), and discussion with Mr. Peter D. Hancock, our former President and Chief Executive Officer, the Compensation and Management Resources Committee determined that Mr. Hancock would not receive a short-term incentive award for 2016 and that other members of the Executive Leadership Team would receive an award equal to 40 percent of target.

Long-Term Incentive. The largest component of pay for members of our Executive Leadership Team for 2016 is in the form of performance share units based on achieving total shareholder return measured relative to AIG’s peers over a three-year period (from 2016—2018), balanced by using option adjusted spread relative to peers, which is a risk-adjustment metric, as a gating mechanism. Earned awards are paid over a five-year period (until January 2021).

In the first quarter of 2017, the Committee assessed performance for our 2014 long-term incentive awards after the three-year performance period (from 2014—2016) ended. The metrics for 2014 long-term incentive awards comprised relative total shareholder return (requiring 55th percentile performance to achieve target and weighted 75 percent) and relative change in CDS spread (designed to balance risk-taking and weighted 25 percent). Awards were earned at 102 percent of target, are settled in shares over time through January 2019 and are subject to AIG’s share ownership requirements and clawback policy.

The earned 2016 short-term incentive and 2014-2016 long-term incentive for each named executive officer who served through the end of 2016 (each, a 2016 named executive) is summarized in the table below.

 

2016 Earned Performance-Based Compensation (% of Target)

Named Executive Officer

  

 

Short-Term Incentive
(Cash)

  

 

2014-2016 Long-Term Incentive
(Equity, Paid Over Time)

Peter D. Hancock

  

0%

  

102%

Siddhartha Sankaran

  

40%

  

102%

Douglas A. Dachille

  

40%

  

Not a Participant (Joined AIG in 2015)

Kevin T. Hogan

  

40%

  

102%

Robert S. Schimek

  

40%

  

102%

 

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PROPOSALS 3 AND 4—PRESERVATION OF LONG-TERM BENEFITS OF AIG’s TAX ATTRIBUTES

The following are key elements of our proposals to preserve long-term benefits of AIG’s tax attributes. Please read the full description of these proposals, which include certain defined terms, before you vote.

 

 

•  At December 31, 2016, AIG had a U.S. federal net operating loss carryforward of approximately $34.6 billion and $4.9 billion in foreign tax credits.

 

•  AIG’s ability to utilize these tax attributes to offset future taxable income may be significantly limited if AIG experiences an “ownership change” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the Code).

 

•  The Protective Amendment to AIG’s Amended and Restated Certificate of Incorporation and the Tax Asset Protection Plan (the Plan) are designed to prevent and deter certain transfers of AIG securities that would result in an ownership change under the Code.

 

•  The Board is recommending that AIG’s shareholders approve the extension of the Protective Amendment for another three years from the date of the 2017 Annual Meeting and ratify Amendment No. 2 to the Plan, which the Board adopted to extend the expiration date of the Plan to December 14, 2019.

Summary

AIG has significant deferred tax assets, which AIG may be able to use to offset future taxable income. At December 31, 2016, AIG had a U.S. federal net operating loss carryforward of approximately $34.6 billion and $4.9 billion in foreign tax credits (collectively, Tax Attributes). If AIG were to experience an “ownership change” as defined under Section 382 of the Code, it is possible that a significant portion of the Tax Attributes would expire before AIG would be able to use them to offset future taxable income.

In order to preserve the benefits of the Tax Attributes, AIG’s Board of Directors first proposed Article Thirteen to AIG’s Amended and Restated Certificate of Incorporation and adopted the Plan in 2011, which were approved and ratified, respectively, by AIG’s shareholders at that year’s Annual Meeting of Shareholders. In light of the continuing significance of the Tax Attributes, in 2014, the Board extended the term of the Plan for three years and recommended for shareholders to continue Article Thirteen for another three-year period. AIG’s shareholders once again ratified and approved the Board’s actions at the 2014 Annual Meeting of Shareholders. The Tax Attributes continue to have significant value to AIG, and after careful consideration, the Board of Directors believes the most effective way to continue to preserve the benefits of the Tax Attributes for long-term shareholder value is to (i) amend AIG’s Amended and Restated Certificate of Incorporation to adopt a “Protective Amendment” that is a successor to, and is substantively the same as, current Article Thirteen of AIG’s Amended and Restated Certificate of Incorporation, except that the Protective Amendment would expire on the third anniversary of the date of the 2017 Annual Meeting (current Article Thirteen expired by its terms at the close of business on May 12, 2017) and (ii) amend the Plan to extend the expiration date by approximately three years to December 14, 2019. These measures serve as important tools to help prevent an ownership change that could substantially reduce or eliminate the significant long-term potential benefits of the Tax Attributes. Accordingly, the Board of Directors recommends that shareholders amend AIG’s Amended and Restated Certificate of Incorporation to adopt the Protective Amendment and ratify Amendment No. 2 to the Plan.

PROPOSAL 5—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 2017.

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 June 28, 2017, or at any adjournment thereof (Annual Meeting or 2017 Annual Meeting of Shareholders).

When and where is our Annual Meeting?

We will hold our Annual Meeting on Wednesday, June 28, 2017 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 May 19, 2017, we sent shareholders of record at the close of business on May 8, 2017, 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, 2016 (2016 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 2016 Annual Report, which will be sent on or about May 19, 2017.

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 May 8, 2017. On that date, 922,116,787 shares of AIG Common Stock (exclusive of shares held by AIG and certain subsidiaries) were outstanding, held by 26,498 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 May 8, 2017, 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?

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

 

  1. To elect the thirteen 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 amend and restate AIG’s Amended and Restated Certificate of Incorporation to restrict certain transfers of AIG Common Stock in order to protect AIG’s tax attributes;

 

  4. To act upon a proposal to ratify the amendment to extend the expiration of the American International Group, Inc. Tax Asset Protection Plan; and

 

  5. To act upon a proposal to ratify the selection of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2017.

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 amend and restate AIG’s Amended and Restated Certificate of Incorporation to restrict certain transfers of AIG Common Stock in order to protect AIG’s tax attributes.

 

  4. “FOR” the proposal to ratify the amendment to extend the expiration of the American International Group, Inc. Tax Asset Protection Plan.

 

  5. “FOR” the proposal to ratify the selection of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2017.

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 June 27, 2017. 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 June 27, 2017.

 

   

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 June 28, 2017.

 

   

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.

 

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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 June 27, 2017; or

 

   

Executing and mailing a later-dated proxy card that is received prior to 10:00 a.m., Eastern Daylight Time, on June 28, 2017; or

 

   

Voting in person at the Annual Meeting.

For a Proxy Submitted by Mail

 

   

Subsequently executing and mailing another proxy card bearing a later date that is received prior to 10:00 a.m., Eastern Daylight Time, on June 28, 2017; 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 June 28, 2017; 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 amendment and restatement of AIG’s Amended and Restated Certificate of Incorporation to restrict certain transfers of AIG Common Stock in order to protect AIG’s tax attributes; FOR the ratification of the amendment to extend the expiration of the American International Group, Inc. Tax Asset Protection Plan; FOR the ratification of the appointment of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2017; and otherwise in accordance with the judgment of the persons voting the proxy on any other matter properly brought before the Annual Meeting.

If I hold my shares in “street name” and do not provide voting instructions, can my broker still vote my shares?

Under the rules of the New York Stock Exchange (NYSE), brokers that have not received voting instructions from their customers ten days prior to the Annual Meeting date may vote their customers’ shares in the brokers’ discretion on the proposals regarding the amendment and restatement of AIG’s Amended and Restated Certificate of Incorporation to restrict certain transfers of AIG Common Stock in order to protect AIG’s tax attributes and the ratification of the appointment of independent auditors because these are considered “discretionary” under NYSE rules. If your broker is an affiliate of AIG, NYSE policy specifies that, in the absence of your specific voting instructions, your shares may only be voted in the same proportion as all other shares are voted with respect to that proposal.

Under NYSE rules, each other proposal—the election of directors, the non-binding advisory vote on executive compensation and the ratification of Amendment No. 2 to the American International Group, Inc. Tax Asset Protection Plan—is a “non-discretionary” item, which means that member brokers who have not received instructions from the beneficial owners of AIG Common Stock do not have discretion to vote the shares of AIG Common Stock held by those beneficial owners on any of those proposals.

How are votes counted and considered?

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

 

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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. The results of the vote on this resolution will not be binding on AIG’s Board of Directors, will not overrule any decisions the Board has made and will not create any duty for the Board to take any action in response to the outcome of the vote. However, AIG’s Compensation and Management Resources Committee values the feedback received from this advisory vote and may, in its sole discretion, take into account the outcome of the vote in analyzing and evaluating future compensation opportunities.

Proposal 3—Amendment and Restatement of AIG’s Amended and Restated Certificate of Incorporation to Restrict Certain Transfers of AIG Common Stock in order to Protect AIG’s Tax Attributes. Approval of the amendment and restatement requires a “for” vote of a majority of the outstanding shares of AIG Common Stock.

Proposal 4—Ratification of the Amendment to Extend the Expiration of the American International Group, Inc. Tax Asset Protection Plan. Ratification of the amendment to extend the expiration of the American International Group, Inc. Tax Asset Protection Plan 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 amendment.

Proposal 5—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 Amended and Restated Certificate of Incorporation nor AIG’s By-laws require that the shareholders ratify the selection of PricewaterhouseCoopers LLP as its independent registered public accounting firm. AIG’s Board is requesting shareholder ratification as a matter of good corporate practice. If the shareholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers LLP, but may still retain PricewaterhouseCoopers LLP. Even if the selection is ratified, the Audit Committee in its discretion may change the appointment at any time during the year if it determines that such change would be in the best interests of AIG and its shareholders.

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, the ratification of the amendment to extend the expiration of the American International Group, Inc. Tax Asset Protection Plan 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. With respect to the proposal to amend and restate AIG’s Amended and Restated Certificate of Incorporation to restrict certain transfers of AIG Common Stock in order to protect AIG’s tax attributes, an abstention, broker non-vote or withheld vote will have the effect of a vote “against” such proposal.

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 2016 Annual Report, which includes AIG’s Annual Report on Form 10-K for the year ended December 31, 2016 (AIG’s 2016 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 2016 Annual Report and AIG’s

 

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2016 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;

 

   

actual and anticipated sales of businesses or asset divestitures or monetizations;

 

   

restructuring of business operations, including anticipated restructuring charges and annual cost savings;

   

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 organizational and business changes;

 

   

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

 

   

segments’ revenues and combined ratios; and

 

   

management retention plans.

 

 

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 Legacy 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 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations (MD&A) in AIG’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017;

 

   

Part I, Item 1A. Risk Factors in AIG’s 2016 Annual Report on Form 10-K; and

 

   

Part II, Item 7. MD&A in AIG’s 2016 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 sixteen directors. All directors serve a one-year term. We are asking our shareholders to elect thirteen directors at the Annual Meeting, to hold office until the next annual election and until their successors are duly elected and qualified or their earlier resignation. Messrs. George L. Miles, Jr. and Robert S. Miller are retiring from the Board this year after reaching the age of 75, which is the general director retirement age guideline under our Corporate Governance Guidelines. Following discussions with Mr. Paulson, the Nominating and Corporate Governance Committee determined not to nominate him for re-election as a director this year due to his other time commitments. As previously announced, Mr. Brian Duperreault was appointed President and Chief Executive Officer and as a director effective May 14, 2017. Mr. Peter D. Hancock resigned as President and Chief Executive Officer and as a director effective at that time, and is not standing for re-election to the Board.

It is the intention of the persons named in the accompanying form of proxy to vote for the election of the nominees listed below. All of the nominees are currently members of AIG’s Board of Directors. It is not expected that any of the nominees will become unavailable for election as a director, but if any should 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.

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 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.

Mr. Merksamer was recommended for nomination in 2016 as a director pursuant to that certain Nomination Agreement (the Nomination Agreement), dated February 11, 2016, by and between AIG and each of High River Limited Partnership, Icahn Partners Master Fund LP, Icahn Partners LP and Carl C. Icahn (collectively, the Icahn Parties). The Board of Directors has decided to re-nominate Mr. Merksamer to the Board and therefore, under the Nomination Agreement, AIG is obligated to use commercially reasonable efforts to cause his re-election. As long as Mr. Merksamer serves on AIG’s Board, the Nomination Agreement requires the Icahn Parties to adhere to certain standstill obligations and to vote the shares of AIG Common Stock they beneficially own for each of the thirteen director nominees. See AIG’s Current Report on Form 8-K filed on February 11, 2016 for further information regarding the Nomination Agreement, including a copy of the Nomination Agreement.

 

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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:

 

 

    Experience in business transformations and strategic restructurings

    

    Insurance and reinsurance

 

    Experience managing large, complex, international institutions

    

    Financial services, the banking industry and asset management

 

    Risk oversight and management expertise

    

     Operations

 

    Corporate governance expertise

    

    Information technology and cyber security

 

    High level of financial literacy and accounting expertise

    

    Regulatory markets, government, academia and research

 

    Global consumer, commercial and industrial backgrounds

    

    Public company accounting

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 69

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 a member of the Audit, Compensation, Regulatory and Compliance, and Science and Technology Committees. 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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BRIAN DUPERREAULT

 

Director since 2017

  

President and CEO, AIG

 

Age 70

Mr. Duperreault was appointed as AIG’s President, Chief Executive Officer and a member of the Board effective May 14, 2017. Mr. Duperreault was previously the Chief Executive Officer of Hamilton Insurance Group, Ltd. (Hamilton), a Bermuda-based holding company of property and casualty insurance and reinsurance operations in Bermuda, the U.S. and the UK, from December 2013 to May 2017, and served as Chairman of Hamilton from February 2016 to May 2017. He served as President and Chief Executive Officer of Marsh & McLennan Companies, Inc. from February 2008 until his retirement in December 2012. Before joining Marsh, he served as non-executive Chairman of ACE Limited from 2006 through the end of 2007 and as Chief Executive Officer from October 1994 to May 2004. Prior to joining ACE, Mr. Duperreault served in various senior executive positions with AIG and its affiliates from 1973 to 1994. Mr. Duperreault is a director of Johnson Controls International plc, where he is a member of the Corporate Governance Committee, and was a director of Tyco International plc from 2004 to 2016, when it merged with Johnson Controls International plc. In light of Mr. Duperreault’s deep experience in the insurance industry, his history with AIG and his management of large, complex, international institutions, AIG’s Board has concluded that Mr. Duperreault should be elected to the Board.

 

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PETER R. FISHER

 

Director since 2014

  

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

 

Age 60

Mr. Fisher is a Senior Fellow at the Center for Business, Government and Society, and also a Senior Lecturer, at the Tuck School of Business at Dartmouth College, positions he has held since July 2013. Mr. Fisher is also a director of KCG Holdings, Inc., where he is Chair of the Nominating and Corporate Governance Committee and serves on the Compensation Committee. 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 was a Senior Director of the BlackRock Investment Institute from March 2013 through July 2016, serving in such capacity as an independent consultant from January 2014 through July 2016. 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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JOHN H. FITZPATRICK

 

Director since 2011

  

Chairman of White Oak Global Advisors LLC; 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 60

Mr. Fitzpatrick has been Chairman of White Oak Global Advisors LLC, 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. 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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WILLIAM G. JURGENSEN

 

Director since 2013

  

Former Chief Executive Officer of Nationwide Insurance

 

Age 65

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 Lamb Weston Holdings, Inc. since 2016, where he serves as Lead Director and Chair of the Audit Committee. Mr. Jurgensen was a director of ConAgra Foods, Inc. from 2002 to 2016, where he served on the Audit, Human Resources and 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 59

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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SAMUEL J. MERKSAMER

 

Director since 2016

  

Former Managing Director of Icahn Capital LP

 

Age 36

Mr. Merksamer is a former Managing Director of Icahn Capital LP, a subsidiary of Icahn Enterprises L.P., a diversified holding company engaged in multiple business segments, where he was employed from 2008 to 2016. 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 and Transocean Ltd., where he serves on the Finance and Health, Safety and Environment Committees. Mr. Merksamer will not be standing for re-election as a director of Hertz Global Holdings, Inc. at its annual meeting of shareholders in May 2017. 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; Talisman Energy Inc. from 2013 to 2015; and Transocean Partners LLC from 2014 to 2016. In light of Mr. Merksamer’s extensive public company experience and, in accordance with the Nomination Agreement with the Icahn Parties, AIG’s Board has concluded that Mr. Merksamer should be re-elected to the Board.

 

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HENRY S. MILLER

 

Director since 2010

  

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

 

Age 71

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 Audit Committee and previously served on 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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LINDA A. MILLS

 

Director since 2015

  

Former Corporate Vice President of Operations of Northrop Grumman Corporation

 

Age 67

Ms. Mills is the former Corporate Vice President of Operations for Northrop Grumman Corporation, with responsibility for operations, including risk management, engineering and 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 and Personnel Committee and serves on the Finance & Operations Committee and the Executive Committee. In light of Ms. Mills’ in-depth experience with large complex, often international, 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 59

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 Chair of the Compensation and Organizational Development Committee and serves on the Nominating and Governance Committee, Pfizer Inc., where she is Chair of the Audit Committee, serves on the Regulatory and Compliance, Science and Technology and Executive Committees, and previously served on the Compensation Committee, and Visa Inc., where she is Chair 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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RONALD A. RITTENMEYER

 

Director since 2010

  

Chairman and Chief Executive Officer, Millennium Health, LLC; Former Chairman, Chief Executive Officer and President, Electronic Data Systems Corporation

 

Age 69

Mr. Rittenmeyer has served as Chairman and Chief Executive Officer of Millennium Health, LLC, a health solutions company, since April 2016. 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 Quintiles IMS Holdings, Inc., where he is Chairman of the Leadership Development and Compensation Committee and serves on the Audit Committee, and Tenet Healthcare Corporation, where he is Lead Director, Chairman of the Executive and Human Resources Committees and serves on the Health Information Technology and Audit 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 65

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 a member of the Audit and Nominating and Corporate Governance Committees. In the past five years, Mr. Steenland has also served as a director of 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, 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 73

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, corporate governance developments and shareholder feedback to ensure continued effectiveness.

 

    

     AIG has a highly engaged Board with balanced tenure and substantial and diverse expertise necessary to evaluate and oversee strategy and performance.

    

     Independent Chairman is required in AIG’s By-laws.

    

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

    

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

    

     All directors are independent (except CEO).

    

     Former AIG CEOs cannot serve on the Board.

    

     The Board, through the Nominating and Corporate Governance Committee, conducts annual evaluations of the Board and individual directors, and all Board Committees conduct annual self-evaluations.

    

     No director attending less than 75% of meetings for two consecutive years will be re-nominated.

    

     Directors generally may not stand for election after reaching age 75.

    

     All directors may contribute to the agenda for Board meetings.

    

     The Board Committee structure is organized around key strategic issues and designed to facilitate dialogue and efficiency.

    

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

    

     The Board provides strong risk management oversight including through the Risk and Capital Committee, Audit Committee and other Board Committees.

    

     AIG has extensive shareholder engagement program with director participation.

    

     AIG’s By-laws include a proxy access right for shareholders.

 

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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 twelve non-management director nominees—Mss. Nora Johnson, Mills and Stone and Messrs. Cornwell, Fisher, Fitzpatrick, Jurgensen, Lynch, Merksamer, Henry S. Miller, Rittenmeyer and Steenland—are independent under NYSE listing standards and the AIG Director Independence Standards. Mr. Duperreault is the only director nominee who holds an AIG management position and, therefore, is not an independent director. Messrs. Miles and Robert S. Miller, who are retiring from the Board, and Mr. Paulson, whom the Committee determined not to nominate for re-election to the Board, were also determined by the Board, on the recommendation of the 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. Jurgensen, Lynch, Paulson and Rittenmeyer 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 internship in 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 $1,191,091 and $159,518 in 2016 and 2017, 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.

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;

   

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

 

   

Participating in engagement with shareholders.

 

 

Director Tenure and Board Refreshment. Board composition, supplemented by a thoughtful approach to refreshment, is a priority for AIG. The Board believes that it is desirable to maintain a mix of longer-tenured,

 

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experienced directors and newer directors with fresh perspectives. Since 2013, we have added six new independent directors, and in 2016, Messrs. Merksamer and Paulson—who were each identified by a shareholder of AIG—were elected to the Board.

The average tenure of the independent director nominees 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 and Attendance

There were twelve meetings of the Board during 2016. The non-management directors meet in executive session, without any management directors present, in conjunction with each regularly scheduled Board meeting. Mr. Steenland, as Non-Executive Chairman of the Board, presided at the executive sessions. For 2015 and 2016, 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.

All directors standing for election at the 2016 Annual Meeting attended the 2016 Annual Meeting, and all directors standing for election at the 2017 Annual Meeting are expected to attend the 2017 Annual Meeting.

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, executive compensation, corporate social responsibility, business 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, ongoing dialogue with shareholders and other stakeholders, including through AIG’s Investor Relations department. As part of this process, the independent Chairman and the Chief

 

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Executive Officer periodically participate in meetings with shareholders to discuss and obtain feedback on matters including our corporate governance practices, executive compensation program and strategy. Since our 2016 Annual Meeting, we engaged on these topics with shareholders representing more than 35 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 strategy, corporate governance practices and executive compensation program.

These efforts are incremental to outreach conducted by our Chief Executive Officer and other members of senior management as they regularly meet with shareholders and participate in investor conferences in the United States and abroad. Investor presentations are made available in the Investors—Webcasts and Presentations section of AIG’s corporate website at www.aig.com.

Shareholder feedback is communicated directly to our directors and helps inform Board discussions on a range of key areas. Going forward, as we continue to execute against our strategy, robust, substantive shareholder engagement will remain a priority for our Board and management team.

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. AIG’s By-laws permit 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 such proxy access is an additional mechanism for Board accountability and for ensuring that Board nominees are supported by AIG’s long-term shareholders.

Under the 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 2018 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 2018 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 2016, the Nominating and Corporate Governance Committee held five 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 thirteen nominees under “Proposal 1—Election of Directors” that are standing for election at the 2017 Annual Meeting of Shareholders. In making its determinations, the Committee considered 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. In connection with the hiring of Mr. Duperreault as President and Chief Executive Officer and his appointment as a director, the Committee considered and approved the transactions described under “Relationships and Related Party Transactions—Transactions with Hamilton Insurance Group, Two Sigma Insurance Quantified and Attune Holdings.” The Committee was aware of Mr. Duperreault as a result of his relationship with Hamilton and his former employment with AIG.

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 twelve non-management director nominees is independent within the meaning of the NYSE listing standards and the AIG Director Independence Standards. Mr. Duperreault is the only director nominee who holds an AIG management position and, therefore, is not an independent director. Messrs. Miles and Robert S. Miller, who are retiring from the Board, and Mr. Paulson, whom the Committee determined not to nominate for re-election to the Board, were also determined by the Board, on the recommendation of the Committee, to be independent within the meaning of the NYSE listing standards and the AIG Director Independence Standards.

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.

 

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Conclusion

During 2016, 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

Christopher S. Lynch

Samuel J. Merksamer

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 2016. Mr. Duperreault 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   M

Samuel J. Merksamer

          M   M   M    

George L. Miles, Jr.*

      M   M           M

Henry S. Miller

              M   M    

Robert S. Miller*

          M           M

Linda A. Mills

  M   M               M

Suzanne Nora Johnson

      M   C           M

John A. Paulson*

                       

Ronald A. Rittenmeyer

  M   M               C

Douglas M. Steenland

  **   **   **   **   **   **

Theresa M. Stone

  M           C        

Number of meetings in 2016

  11   8   5   3   16   4

M = Member

C = Chair

 

*

Messrs. Miles, Robert S. Miller and Paulson are not standing for re-election as directors at the 2017 Annual Meeting.

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

Audit Committee

The Audit Committee, which held eleven meetings during 2016, 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.

 

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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 related financial management expertise, each as defined by NYSE listing standards, and that the Chair and a majority 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 2016, 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 2016 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 overseeing 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. (FW Cook) as a consultant and has used the services of FW Cook since 2005. The Compensation and Management Resources Committee directly engaged FW Cook 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 FW Cook regularly attends Committee meetings and provides information on compensation trends along with specific views on AIG’s compensation programs.

FW Cook has provided advice to the Nominating and Corporate Governance Committee on AIG director compensation and market practices with respect to director compensation. FW Cook 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 FW Cook nor any of its affiliates provided any other services to AIG. For services related to board and executive officer compensation, FW Cook was paid $339,895 in 2016.

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 five meetings in 2016. 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

 

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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.

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 2018 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, AIG’s By-laws 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 “—Governance—Shareholder Engagement—Proxy Access”).

Regulatory, Compliance and Public Policy Committee

The Regulatory, Compliance and Public Policy Committee held three meetings in 2016. 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 sixteen meetings in 2016. 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 four meetings in 2016. The Technology Committee assists the Board in its oversight of AIG’s information technology projects and initiatives by, among other things, reviewing the financial,

 

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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 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

The following table describes the compensation structure for AIG’s non-management directors in 2016.

Compensation Structure for Non-Management Directors

 

Base Annual Retainer

  

Cash Retainer

   $ 150,000  

Deferred Stock Units (DSUs) Award

   $ 130,000  

Annual Independent Chairman Cash Retainer

   $ 260,000  

Annual Committee Chair Retainers

  

Audit Committee

   $ 40,000  

Risk and Capital Committee

   $ 40,000  

Compensation and Management Resources Committee

   $ 30,000  

Other Committees

   $ 20,000  

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, our former President and Chief Executive Officer, did not receive any compensation for service as a director.

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

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 2016.

2016 Non-Management Director Compensation

 

Non-Management Members of the Board in 2016

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

W. Don Cornwell

   $ 180,000      $ 129,995      $ 10,000      $ 319,995  

Peter R. Fisher

   $ 150,000      $ 129,995      $ 0      $ 279,995  

John H. Fitzpatrick

   $ 190,000      $ 129,995      $ 0      $ 319,995  

William G. Jurgensen

   $ 190,000      $ 129,995      $ 0      $ 319,995  

Christopher S. Lynch

   $ 150,000      $ 129,995      $ 0      $ 279,995  

Samuel J. Merksamer

   $ 95,192      $ 129,995      $ 0      $ 225,187  

George L. Miles, Jr.

   $ 150,000      $ 129,995      $ 10,000      $ 289,995  

Henry S. Miller

   $ 150,000      $ 129,995      $ 10,000      $ 289,995  

Robert S. Miller

   $ 150,000      $ 129,995      $ 10,000      $ 289,995  

Linda A. Mills

   $ 150,000      $ 129,995      $ 10,000      $ 289,995  

Suzanne Nora Johnson

   $ 170,000      $ 129,995      $ 10,000      $ 309,995  

John A. Paulson

   $ 95,192      $ 129,995      $ 0      $ 225,187  

Ronald A. Rittenmeyer

   $ 170,000      $ 129,995      $ 0      $ 299,995  

Douglas M. Steenland

   $ 410,000      $ 129,995      $ 0      $ 539,995  

Theresa M. Stone

   $ 170,000      $ 129,995      $ 10,000      $ 309,995  

 

 

(1) This column represents annual retainer fees and Committee Chair retainer fees. For Messrs. Merksamer and Paulson, the amounts include prorated annual retainer fees for their service as directors from the date of the 2016 Annual Meeting.

 

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(2) This column represents the grant date fair value of DSUs granted in 2016 to directors, based on the closing sale price of AIG Common Stock on the date of grant.

 

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

The following table sets forth information with respect to the option and stock awards outstanding at December 31, 2016 for the non-management directors of AIG.

Stock and Option Awards Outstanding at December 31, 2016

 

Non-Management Members of the Board in 2016

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

W. Don Cornwell

     0        0        13,159  

Peter R. Fisher

     0        0        6,570  

John H. Fitzpatrick

     0        0        12,044  

William G. Jurgensen

     0        0        8,629  

Christopher S. Lynch

     0        0        13,307  

Samuel J. Merksamer

     0        0        2,349  

George L. Miles, Jr.

     0        90        13,570  

Henry S. Miller

     0        0        13,307  

Robert S. Miller

     0        0        13,307  

Linda A. Mills

     0        0        4,070  

Suzanne Nora Johnson

     0        0        16,531  

John A. Paulson

     0        0        3,368  

Ronald A. Rittenmeyer

     0        0        13,307  

Douglas M. Steenland

     0        0        13,307  

Theresa M. Stone

     0        0        18,997  

 

 

(1) There are no outstanding option awards.

 

(2) No deferred stock was awarded in 2016. 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 2016 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 2016, 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

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 March 15, 2017.

 

     Shares of Common Stock
Beneficially Owned
 

Name and Address

       Number             Percent      

BlackRock, Inc.

    

55 East 52nd Street

    

New York, NY 10055

     64,426,821 (1)      6.7

Capital Research Global Investors

    

333 South Hope Street

    

Los Angeles, CA 90071

     77,926,159 (2)      8.1

The Vanguard Group

    

100 Vanguard Blvd.

    

Malvern, PA 19355

     62,619,185 (3)      6.5

 

 

(1) Based on a Schedule 13G/A filed on January 19, 2017 by BlackRock, Inc. reporting beneficial ownership as of December 31, 2016. 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 filed on February 13, 2017 by Capital Research Global Investors reporting beneficial ownership as of December 31, 2016. Item 4 to this Schedule 13G provides details as to the voting and investment power of Capital Research Global Investors 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. This information may not be accurate or complete and AIG takes no responsibility therefor and makes no representation as to its accuracy or completeness as of the date hereof or any subsequent date.

 

(3) Based on a Schedule 13G/A filed on February 9, 2017 by The Vanguard Group reporting beneficial ownership as of December 31, 2016. 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 directors, by the current and former executive officers named in the 2016 Summary Compensation Table in “Executive Compensation—2016 Compensation” and by the current directors and current executive officers as a group. Other than as noted below, 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
March 15, 2017
 
     Amount and Nature
of Beneficial
Ownership(1)(2)
    Percent
of
Class
 

W. Don Cornwell

     15,723       (4

Douglas A. Dachille

     0       (4

Brian Duperreault

     0       (4

Peter R. Fisher

     15,602       (4

John H. Fitzpatrick

     12,102       (4

Peter D. Hancock

     136,821       0.01

David L. Herzog

     322       (4

Kevin T. Hogan

     44,910       (4

William G. Jurgensen

     23,671       (4

Christopher S. Lynch

     16,541       (4

Seraina Macia (formerly Maag)

     0       (4

Samuel J. Merksamer

     2,360       (4

George L. Miles, Jr.

     13,725       (4

Henry S. Miller

     13,371       (4

Robert S. Miller

     13,371       (4

Linda A. Mills

     4,089       (4

Suzanne Nora Johnson

     16,610       (4

John A. Paulson

     4,552,552 (3)      0.48

Ronald A. Rittenmeyer

     13,371       (4

Siddhartha Sankaran

     71,010       (4

Robert S. Schimek

     99,586 (5)      0.01

Brian T. Schreiber

     8,550       (4

Douglas M. Steenland

     13,371       (4

Theresa M. Stone

     19,742       (4

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

     5,007,367       0.52

 

 

(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: Schimek—499 shares and all current directors and current executive officers of AIG as a group—499 shares; (ii) shares receivable upon the exercise of warrants which may be exercised within 60 days as follows: Hancock—17,694 shares, Herzog—298 shares, Hogan—134 shares, Schimek—9,647 shares, Schreiber—8,550 shares and all current directors and current executive officers of AIG as a group—10,312 shares; (iii) 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—13,223 shares, Fisher—6,602 shares, Fitzpatrick—12,102 shares, Jurgensen—8,671 shares, Lynch—13,371 shares, Merksamer—2,360 shares, Miles—13,635 shares, Henry S. Miller—13,371 shares, Robert S. Miller—13,371 shares, Mills—4,089 shares, Nora Johnson—16,610 shares, Paulson—3,959 shares, Rittenmeyer—13,371 shares, Steenland—13,371 shares, and Stone—19,742 shares and (iv) 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.

 

(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.

 

(5) Mr. Schimek has pledged 53,239 shares.

 

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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 the only filing deficiencies under Section 16(a) by its directors, officers and greater than ten percent holders during 2016 were (i) an amendment to the original Form 3 filed by Kevin T. Hogan in 2013 (the amendment corrected the number of shares of AIG Common Stock held directly and indirectly by Mr. Hogan at the time he became an officer) and (ii) a late report by a Director, John A. Paulson, reporting the grant of DSUs.

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 founded by Douglas A. Dachille, who became AIG’s Executive Vice President and Chief Investment Officer following the acquisition. In November 2016, AIG and Mr. Dachille amended the terms of the AIG restricted stock units granted as part of the acquisition consideration to the members of First Principles, including Mr. Dachille, to correct the original documentation by adding dividend equivalent rights. The dividend equivalent rights were added to provide equivalence to the ownership of AIG Common Stock. As a result of the amendment, Mr. Dachille received approximately $94,102, representing rights that would have been earned and previously settled, 2,135 fully-vested restricted stock units, representing rights that would have been earned previously and required to be deferred, and ongoing dividend equivalent rights in respect of 99,049 outstanding restricted stock units. The Nominating and Corporate Governance Committee ratified the grant to Mr. Dachille in accordance with AIG’s Related-Party Transactions Approval Policy.

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 2016 base salary and short-term incentive award was approximately $676,720 in the aggregate, and his 2016 target long-term incentive award was approximately $400,000. 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.

Transactions with Hamilton Insurance Group, Two Sigma Insurance Quantified and Attune Holdings

On May 14, 2017, AIG entered into a waiver agreement with Hamilton (the Hamilton Waiver Agreement) pursuant to which AIG paid Hamilton $20 million in exchange for Hamilton’s release of Mr. Duperreault from restrictive covenants that would prevent or restrict Mr. Duperreault from being employed by AIG or serving on the Board. Pursuant to the Hamilton Waiver Agreement, AIG will make an additional payment of $20 million contingent upon the completion of Mr. Duperreault’s second year as Chief Executive Officer of AIG, which would continue to be payable in the event Mr. Duperreault is no longer employed as AIG’s Chief Executive Officer at such time due to his death or disability. In addition, Hamilton has advised AIG that, in connection with Mr. Duperreault’s appointment as AIG’s President and Chief Executive Officer effective May 14, 2017, Hamilton has cancelled or agreed to repurchase all of Mr. Duperreault’s equity and equity-related interests in Hamilton and its affiliates. As noted above, Mr. Duperreault was a founding member of Hamilton, served as Chief Executive Officer of Hamilton from 2013 to 2017 and as Chairman from 2016 to 2017 and, as of May 12, 2017, held shares and warrants representing approximately 1.6 percent of Hamilton’s outstanding common stock. In addition, Attune and certain affiliates of Hamilton and Two Sigma Insurance Quantified, LP (Two Sigma) entered into a waiver and agreement (the Attune Waiver Agreement) waiving their respective rights to enforce certain employee non-solicitation restrictions relating to Attune, a joint venture in which affiliates of AIG, Hamilton and Two Sigma are equal parties. Attune was formed in September 2016 by affiliates of AIG, Hamilton and Two Sigma as a technology-enabled platform to serve the U.S. small to medium sized enterprise commercial insurance market. Affiliates of AIG made a $10 million capital contribution to Attune. In addition to having had an indirect ownership interest in Attune by virtue of his interests in Hamilton, Mr. Duperreault has served as Chairman of Attune since its formation in September 2016.

 

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Also on May 14, 2017, AIG entered into a memorandum of understanding (the MOU) with Hamilton and Two Sigma. The MOU provides that, subject to the negotiation of mutually agreeable terms and conditions, AIG and Hamilton will enter into a stock purchase agreement pursuant to which AIG will acquire all of the outstanding shares of Hamilton U.S. Holdings, Inc. (HUSA), a wholly owned subsidiary of Hamilton, for a purchase price equal to HUSA’s book value at closing plus $30 million. HUSA’s book value plus the $30 million premium is currently estimated by Hamilton to total approximately $110 million. Pursuant to the terms of the MOU, AIG delivered a deposit to Hamilton of $30 million, which is non-refundable and will be applied towards the ultimate purchase price for the acquisition. Hamilton will retain its one-third ownership of Attune in the transaction. In addition, AIG will offer Hamilton the opportunity to participate in at least $150 million of reinsurance premium per year for six years (the Reinsurance Strategic Partnership), which minimum amount will increase by seven percent per year following the first year. If Hamilton elects to participate in AIG’s reinsurance panel, all pricing and other terms and conditions offered to Hamilton will be on arms’-length, market terms, and Hamilton’s involvement in AIG’s reinsurance panel will be subject to the requirements of AIG’s risk management framework. Ms. Macia, a former executive officer of AIG, is Chief Executive Officer of HUSA and, as of May 12, 2017, held shares representing less than 1 percent of Hamilton’s outstanding common stock.

The MOU also calls for AIG and Two Sigma to negotiate in good faith the terms of a development contract pursuant to which Two Sigma and AIG will develop a next generation insurance platform for AIG’s use. Pursuant to the terms of the MOU, AIG delivered a non-refundable, good faith initial installment to Two Sigma of $37.5 million, which amount will be used towards the development of the platform while the relationship is being finalized and will be applied towards the eventual compensation to be paid to Two Sigma under any definitive development contract ultimately agreed to. The ultimate cost for the development of the platform is currently estimated to be approximately $250 million over a five-year period.

On May 14, 2017, affiliates of AIG, Hamilton and Two Sigma agreed to expand the scope of Attune’s target market for small to medium enterprise businesses to include companies with annual revenues of up to $35 million.

AIG’s Nominating and Corporate Governance Committee approved the Hamilton Waiver Agreement, the Attune Waiver Agreement, the MOU, the Reinsurance Strategic Partnership and the expansion of the scope of Attune’s target market in accordance with AIG’s Related-Party Transactions Approval Policy.

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 (or, in certain circumstances where it is impractical or undesirable to seek the approval of the full Committee, by its Chair, acting on behalf of the full Committee). In determining to approve a related-party transaction, the Nominating and Corporate Governance Committee or its Chair, as applicable, 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, as applicable, 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
 

Brian Duperreault

   President and Chief Executive Officer      70        2017  

Douglas A. Dachille

   Executive Vice President and Chief Investment Officer      53        2015  

Donnalee A. DeMaio

   Executive Vice President and Chief Auditor      58        2017  

Martha Gallo

   Executive Vice President and Chief Information Officer      59        2015  

Kevin T. Hogan

   Executive Vice President—Consumer      54        2013  

Jeffrey J. Hurd

   Executive Vice President and Chief Operating Officer      50        2010  

Alessandrea C. Quane

   Executive Vice President and Chief Risk Officer      47        2016  

Siddhartha Sankaran

   Executive Vice President and Chief Financial Officer      39        2010  

Robert S. Schimek

   Executive Vice President—Commercial      52        2015  

Peter Y. Solmssen

   Executive Vice President and General Counsel      62        2016  

All of AIG’s executive officers are elected to one-year terms, but serve at the pleasure of the Board of Directors. Except for Mss. DeMaio and Gallo and Messrs. Dachille, Duperreault, Hogan and Solmssen, 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.

For information on Mr. Duperreault’s experience, please see “Proposal 1—Election of Directors.”

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.

Donnalee A. DeMaio joined AIG as Executive Vice President and Chief Auditor in April 2017. Prior to joining AIG, from December 2012, Ms. DeMaio served as President and Chief Executive Officer of United Guaranty Corporation, a former AIG subsidiary sold to Arch Capital Group in December 2016, and continued at Arch Capital following the sale. She joined United Guaranty in May 2012 as Chief Operating Officer. Before joining United Guaranty, Ms. DeMaio was named President and Chief Executive Officer of MetLife Bank in 2005, and joined MetLife Bank in 2002 as Chief Financial Officer. Prior to joining MetLife Bank, Ms. DeMaio was a partner with PricewaterhouseCoopers, focusing on financial services clients.

Martha Gallo is Executive Vice President and Chief Information Officer. She 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.

Peter Y. Solmssen joined AIG as Executive Vice President and General Counsel in October 2016. From October 2007 to December 2013, Mr. Solmssen was General Counsel and Member of the Managing Board at Siemens AG where, in addition to his service as General Counsel, he was responsible for the company’s business in North and South America. From 1998 to 2007, Mr. Solmssen held a number of senior positions at General Electric Company, including Vice President and General Counsel of GE Plastics and Executive Vice President and General Counsel of GE Healthcare. Previously, he was a Partner at Morgan, Lewis & Bockius and Ballard, Spahr, Andrews & Ingersoll.

 

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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 senior executives under its purview, oversees AIG’s compensation and benefits programs for other employees and makes recommendations to the Board with respect to these programs where appropriate. The Compensation and Management Resources Committee also 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 objectives and 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, 2016 short-term incentive awards can range from 0 to 175 percent of target and 2016 long-term incentive awards can range from 0 to 150 percent of target, in each case, taking into account performance against pre-established goals for Company performance.

 

   

Long-term incentives use multiple performance measures. 2016 long-term incentives are in the form of performance share units that will be earned over a three-year performance period based on achieving total shareholder return measured relative to AIG’s peers (which is targeted at median). To protect against excessive risk-taking, the total shareholder return metric is balanced by using relative option adjusted spreads (OAS) as a gating metric. OAS acts only as a gating metric such that, if our relative OAS percentile is below the 20th percentile of the peer group, the payout level resulting from the relative total shareholder return score is reduced by half.

 

   

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.

 

   

Robust Recovery Policy. At least 75 percent of each executive’s target total direct compensation is subject to our clawback policy, which applies while awards are outstanding and to covered incentive compensation paid in the year preceding the triggering event.

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 2016, 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 102 active plans with approximately 76,350 participants as of June 2016. (Some employees are eligible to participate in more than one plan.)

 

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AIG’s Enterprise Risk Management (ERM) conducted its annual risk assessment to evaluate AIG’s active incentive plans. Since 2014, AIG risk officers have assigned a risk rating of low, medium or high to each active incentive plan. 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. For the 2016 annual risk review, ERM reviewed a sample of plans previously rated low risk and medium risk plans (there were no high risk plans). Also as part of its 2016 risk review, ERM reviewed 2015 incentive payouts to identify any significant variability in payouts that may be indicative of plan features that encourage excessive risk-taking or fraudulent behavior. As of July 2016, 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 do not encourage excessive risk-taking and 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. FW Cook 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 2016 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

 


 

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 objectives and strategies and aligning the economic interests of our executives with the long-term interests of AIG and our shareholders:

 

•   Balanced Structure: Total direct compensation consists of market-competitive base salary, approximately 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 target total direct 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.

 

•   Direct Link to AIG Performance: 100 percent of long-term incentives are in the form of performance share units (PSUs) that, for 2016, are earned over a three-year period based on achieving total shareholder return (TSR) measured relative to AIG’s peers, and balanced by using option adjusted spread (OAS) relative to peers.

 

•   Robust Recovery Policy: At least 75 percent of each executive’s target total direct compensation is subject to our clawback policy, which applies while awards are outstanding and to covered compensation paid in the year preceding the triggering event.

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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.

Consistent with this philosophy, 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.

 

 

Compensation Best Practices

 

   

What we do:

 

   Pay for performance

 

   Comprehensive clawback policy

 

   Share ownership guidelines and holding requirements

 

   No-hedging policy

 

   Double-trigger change-in-control benefits

 

   Annual risk assessment of compensation plans

 

   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 unvested long-term incentive awards

 

×     No repricing of underwater stock options or stock appreciation rights

 

Compensation Structure—Direct Compensation Components

The 2016 compensation structure for our 2016 named executives continues to consist of market-competitive base salary, approximately 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 objectives and strategies and aligns the economic interests of our executives with the long-term interests of AIG and our shareholders.

In the first quarter of 2016, the Committee established annual base salaries (effective as of January 1, 2016), short-term incentive opportunities and long-term incentive opportunities, including the grant of PSUs, for our named executives.

 

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The 2016 target total direct compensation opportunity for each of our 2016 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  

Siddhartha Sankaran,

    Chief Financial Officer

   $ 1,000,000      $ 1,700,000      $ 3,300,000      $ 6,000,000  

Douglas A. Dachille,

    Executive Vice President—Chief Investment Officer

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

Kevin T. Hogan,

    Executive Vice President—Consumer

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

Robert S. Schimek,

    Executive Vice President—Commercial

   $ 1,000,000      $ 1,750,000      $ 3,500,000      $ 6,250,000  

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 total direct compensation opportunity, is designed to reward annual performance and drive near-term business objectives and strategies. It consists of an annual cash award with individual target amounts that reflect business unit or corporate function responsibilities and experience and that is earned based on pre-established goals for Company performance that produce an objective Company score. As applied to our named executives, earned 2016 awards could range from 0 to 175 percent of target and are subject to clawback. The Committee has discretion to determine the final award amount.

 

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Company Score. The Company score is based on a single set of performance metrics that applies to all participants and ranges from 0 to 125 percent of target. The five performance metrics measure either profitability, expense management or risk-adjusted growth. The profitability performance metrics are Normalized Insurance Company Pre-Tax Operating Income (Normalized Insurance Company PTOI) and Normalized Return on Equity, excluding accumulated other comprehensive income and deferred tax assets (Normalized AIG ROE); the expense management performance metric is Normalized Gross General Operating Expenses (Normalized AIG GOE); and the risk-adjusted growth performance metrics are Normalized Production Risk-Adjusted Profitability (Normalized Production RAP) and Normalized Value of New Business (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 business, could otherwise be overwhelmed by 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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2016 Performance. In the first quarter of 2017, the Committee reviewed performance compared to the pre-established Company performance metrics and normalization principles. Unlike the normalization principles that applied in prior years, in the first quarter of 2016, management recommended that 2016 Normalized Insurance Company PTOI and Normalized AIG ROE include the effect of any net adverse prior year reserve development. Primarily as a result of the net adverse prior year reserve development we reported in our financial results for 2016, the Company score was 60 percent below target (or 40 percent), as follows.

 

 

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* Certain of our operating performance metrics are non-GAAP financial measures. See Appendix B for an explanation of how these measures are calculated for AIG from our audited financial statements.

 

** The Committee updated the threshold, target and maximum for Normalized Insurance Company PTOI and Normalized Production RAP to reflect the final budget numbers. In addition, in accordance with the normalization principles approved by the Committee, the Normalized VoNB metric was adjusted consistent with the adjustment to index the fixed annuity sales budget for market interest rates.

Determination of Earned Short-Term Incentive Awards. Short-term incentive awards for the Executive Leadership Team (comprising our Chief Executive Officer and certain key senior executives) are generally based solely on the Company score. This 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.

To maintain continuity with our general program, which uses both a Company score and individual score that are multiplied together and are calibrated accordingly, a multiple of three times the Company score is used in order 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 130 percent of target; conversely, if performance is 10 percent below target, awards for these individuals would be 70 percent of target.

Based on the Company score of 40 percent, the multiplier resulted in a 0 percent payout for Executive Leadership Team members. The Committee does not believe that this result reflected the accomplishments achieved by AIG with respect to 2016, including, but not limited to, expense reductions and capital returns to shareholders that exceeded strategic targets, the completion or announcement of over ten transactions that will generate over $10 billion in liquidity and the growth and improved profitability of Consumer Insurance. After discussions with Mr. Hancock, the Committee determined not to apply the multiplier to the members of the Executive Leadership Team other than him.

 

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In accordance with this approach, the Committee determined (and, for Mr. Hancock, the Board ratified) the following earned short-term incentive amounts for our named executives:

 

Named Executive Officer

   Individual Target
Amount*
  

Calculated Performance

   Earned Award
Amount

Peter D. Hancock

   $3,200,000    0%    $0

Siddhartha Sankaran

   $1,700,000    40%    $680,000

Douglas A. Dachille

   $2,000,000    40%    $800,000

Kevin T. Hogan

   $1,900,000    40%    $760,000

Robert S. Schimek

   $1,750,000    40%    $700,000

Separated during 2016

        

David L. Herzog

   $500,000    40%    $200,000

Seraina Macia (formerly Maag)

   $425,000    40%    $170,000

Brian T. Schreiber

   $437,500    40%    $175,000

 

* Prorated for executive officers who separated in 2016 based on the number of full months employed during 2016.

The Committee determined that, beginning with 2016 short-term incentives, the short-term incentive would be paid in full in the first quarter following the performance year. The Committee concluded that our prior practice of deferring a vested portion of short-term incentives was not consistent with prevailing market practice and did not meaningfully contribute to risk-balancing, especially since the full short-term incentive amount remains subject to our clawback policy.

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, 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   2021

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 average accumulated other comprehensive income) (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

 
   

2016

Long-Term Incentive

Awards

  Performance Period: 2016—2018 Metrics comprise relative TSR (100%). If relative OAS percentile is below 20th percentile of peers, payout reduced by half.  

1/3 of

Earned PSUs Vest in January

 

1/3 of

Earned PSUs Vest in January

 

1/3 of

Earned PSUs Vest

in January

Grant of 2016 Long-Term Incentive Awards

To determine PSU grants, the Committee approves (and, for our Chief Executive Officer, 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 2016, earned PSUs range from 0 to 150 percent of the target grant based on achieving relative

 

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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 using relative OAS as a gating metric. OAS is a measurement of the spread of a fixed income security’s return and the risk-free rate of return, which is adjusted to take into account embedded options. Relative OAS acts as a measure of our relative creditworthiness and serves only as a gating metric such that, if our relative OAS percentile is below the 20th percentile of our peer group, the payout level resulting from the relative TSR score is reduced by half. The Committee determined that relative OAS is now a more reliable and effective risk-adjustment metric than relative credit default swap spread (CDS), which is the risk-adjusted metric used for our long-term incentive awards granted in 2014 and 2015, given the decreased liquidity in the CDS market. Earned PSUs vest one-third in January of each of 2019, 2020 and 2021 and are settled in AIG Common Stock.

The table below summarizes the performance metrics used for the 2016 to 2018 performance period. Earned awards are based 100 percent on relative TSR, which is targeted at median. Actual performance below threshold will result in a 0 percent payout. Relative OAS acts as a gating metric to protect against excessive risk-taking, and will reduce the payout level (if any) resulting from the relative TSR score in half if our relative OAS percentile is below the 20th percentile of the peer group.

 

Metric

   Weighting    Threshold    Target    Maximum

Relative TSR

   100%    25th percentile    50th percentile    75th percentile

Relative OAS

      Acts as a gating metric:

If OAS percentile is less than 20th percentile of

peer group, the payout level is reduced by half.

     

 

  

 

  

 

Payout:

      50%    100%    150%

For the 2016 to 2018 performance period, TSR is measured relative to the following 18 peers. Relative OAS is also measured against these peers, excluding Allianz Group, AXA Group, Prudential plc, Tokio Marine Holdings, Inc. and Zurich Financial Services AG because these companies do not have USD-denominated senior unsecured debt outstanding.

 

Peers

     

AEGON, N.V.

Allianz Group

AXA Group

Chubb Limited

CNA Financial Corporation

Hartford Financial Services
Group Inc.

  

Lincoln National Corporation

Manulife Financial Corporation

MetLife, Inc.

Principal Financial Group, Inc.

Prudential Financial, Inc.

Prudential plc

  

Swiss Re Group

The Travelers Companies, Inc.

Tokio Marine Holdings, Inc.

Voya Financial, Inc.

XL Group Ltd.

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 AIG and each company in the peer group that have USD-denominated senior unsecured debt outstanding, OAS will be measured based on the OAS for each company as reported by Bloomberg, and AIG’s relative OAS percentile will be determined by the average monthly AIG OAS percentile, as compared to the peer group, over the three-year performance period.

Results will be certified by the Committee in the first quarter of 2019, and one-third of any earned PSUs will vest in each of January 2019, 2020 and 2021. Once earned, vested PSUs are settled in AIG Common Stock.

For 2016 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

 

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(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 2014 Long-Term Incentive Awards

The three-year performance period for our 2014 long-term incentive awards ended on December 31, 2016, and the Committee assessed performance in the first quarter 2017. The metrics for 2014 long-term incentive awards comprised relative TSR (weighted 75 percent) and relative change in CDS spread (weighted 25 percent), in each case measured relative to a peer group. The following table shows the results from the 2014 to 2016 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
   56th
percentile
   103%    75%    77%

Relative Change in CDS Spread

   5th
percentile
   20th to  80th
percentile
   95th
percentile
   30th
percentile
   100%    25%    25%
  

 

  

 

  

 

           

 

Payout:

   50%    100%    150%             102%

One-third of the earned PSUs settled in shares of AIG Common Stock in the first quarter of 2017. The remaining two-thirds of earned PSUs will vest one-third each in January 2018 and 2019 and be settled in AIG Common Stock.

Earned 2013 Long-Term Incentive Awards

Our 2013 long-term incentive awards, for which the three-year performance period ended on December 31, 2015, were earned at 147 percent of target, as determined by the Committee in the first quarter of 2016. One-third of the earned PSUs vested in January 2016, another one-third vested in January 2017 and the remaining one-third will vest in January 2018. All earned PSUs are settled in AIG Common Stock.

2017 Short-Term and Long-Term Incentive Structure

The Committee determined in the first quarter of 2017 to adjust both our short-term and long-term incentive programs for 2017 in order to continue our commitment to sustaining and rewarding a high performance culture with competitive compensation opportunities that are compatible with effective risk management and do not incentivize excessive risk taking, as well as enhance our ability to attract and retain key talent:

 

   

Short-term incentive awards: For 2017, individual awards for members of our Executive Leadership Team will be based on a combination of an enterprise-wide Company score and an assessment of individual performance, resulting in a potential range from 0 to 200 percent of target for each member of the Executive Leadership Team. In addition, for the Company score, in order to simplify the program and increase the weighting of return on equity (ROE), we are replacing the Normalized Insurance Company PTOI, Normalized AIG ROE and Normalized AIG GOE metrics with a Core Normalized ROE metric that is targeted based on an improvement in Core Normalized ROE relative to 2016. The Normalized Production RAP and Normalized VoNB metrics remain, and their weightings are increased.

 

   

Long-term incentive awards: Our 2017 long-term incentive program will consist of grants of PSUs, earned based on achievement of performance criteria during a three-year performance period, and grants of restricted stock units, earned based on continued employment through the three-year period, each of which vests after the three-year period. PSUs will continue to be based on relative TSR and may range from 0 to 200 percent of target. The Committee determined that 2017 long-term incentive awards for members of our Executive Leadership Team (except Mr. Hancock) will consist of 70 percent PSUs and 30 percent restricted stock units. For other participants, 2017 long-term incentive awards will consist of 50 percent PSUs and 50 percent restricted stock units.

 

   

Continuity awards: In the first quarter of 2017, the Committee also made one-time grants of restricted stock units to each member of our Executive Leadership Team, other than Mr. Hancock, designed to provide for

 

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continuity during the search for and transition to a new Chief Executive Officer in 2017. These continuity awards will vest on the second anniversary of the grant date, subject to the participant’s continued employment through such date (or the participant’s earlier termination without cause), and are not eligible for qualifying resignation or retirement treatment.

New Chief Executive Officer Compensation Arrangements

As disclosed in AIG’s Current Report on Form 8-K dated May 15, 2017, AIG appointed Mr. Duperreault as our new President and Chief Executive Officer and a director, and on May 14, 2017, AIG entered into an agreement with Mr. Duperreault establishing his compensation as President and Chief Executive Officer. Under this agreement, Mr. Duperreault’s initial compensation will consist of an annual base salary of $1.6 million, a short-term annual incentive target of $3.2 million (which will be prorated for 2017 and is not subject to any guarantee) and an annual long-term incentive award of $11.2 million. For 2017, consistent with AIG’s compensation program for other executive officers, Mr. Duperreault’s long-term incentive award is 70 percent in the form of PSUs earned based on achievement of performance criteria for the three-year performance period covering January 2017 through December 2019, and 30 percent in the form of restricted stock units earned based on continued employment through such three-year period.

In addition, Mr. Duperreault received a one-time, make-whole cash award of $12 million as compensation for unvested Hamilton equity awards forfeited by him in connection with his appointment as President and Chief Executive Officer of AIG, and a one-time, sign-on award of stock options (the Stock Options) to purchase 1,500,000 shares of AIG Common Stock (the Shares) for an exercise price equal to $61.82, the closing price per Share on the grant date, May 15, 2017, and having a seven-year term, as follows:

 

   

Stock Options for 500,000 Shares will vest in equal, annual installments on each of the first three anniversaries of the grant date;

 

   

Stock Options for 300,000 Shares will vest only if, for twenty consecutive trading days, the closing price per Share is at least $10.00 over $60.99, the closing price on May 12, 2017 (the Reference Price), but in no event will these Stock Options vest faster than in equal, annual installments on each of the first three anniversaries of the grant date;

 

   

Stock Options for 300,000 Shares will vest only if, for twenty consecutive trading days, the closing price per Share is at least $20.00 over the Reference Price; and

 

   

Stock Options for 400,000 shares will vest only if, for twenty consecutive trading days, the closing price per Share is at least $30.00 over the Reference Price.

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 2016). Accordingly, for the named executives in 2016, 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, Mr. Herzog participated in certain legacy nonqualified defined contribution plans. These plans are described in greater detail in “—2016 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 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

 

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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 (however, interest credits will continue to be earned by participants under the Qualified Retirement Plan and Non-Qualified Retirement Plan). These plans and their benefits are described in greater detail in “—2016 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, 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 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 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. In July 2016, the 2012 ESP was amended to provide that if a qualifying termination occurs within twelve months after a participant experiences a reduction in his or her base salary or annual short-term incentive opportunity, the severance payment will be calculated as if the qualifying termination occurred immediately prior to the reduction. In any event, executives in grade level 27 or above who participated in the prior plan, which includes Messrs. Hancock, Herzog, Sankaran, Schimek and Schreiber, may not receive less than the severance they would have received under the prior plan.

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 third and final installment, in the amount of $800,000, was paid in April 2016. This 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. 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 her October 21, 2013 offer letter and in consideration of compensation foregone from her former employer, Ms. Macia was granted a one-time bonus payable in three installments, subject to Ms. Macia’s continued employment through the payment date. The third and final installment, in the amount of $950,000, was paid in March 2016 before Ms. Macia’s separation from service from AIG. In connection with the offer letter, Ms. Macia entered into a non-solicitation and non-disclosure agreement, pursuant to which she agreed to perpetual non-disparagement and confidentiality covenants and to a non-solicitation covenant that applied during her employment and for a period of one year following her termination.

Named Executive Officers who Separated in 2016

Mr. Herzog. Mr. Herzog separated from AIG on April 8, 2016 and entered into a Release and Restrictive Covenant Agreement (Release Agreement) with AIG. Under the Release Agreement and pursuant to the 2012 ESP, Mr. Herzog was entitled to termination without cause benefits as a participant in the prior plan. Accordingly, Mr. Herzog received a lump sum severance payment of $6,173,333 and was entitled to continued health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), a $40,000 payment that

 

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may be applied toward continued health coverage and life insurance, outplacement services and one year of additional age and service for purposes of determining eligibility to participate in any AIG retiree medical plan. In addition, Mr. Herzog was entitled to one year of additional service credit and credit for additional age solely for purposes of determining vesting and eligibility for retirement, including early retirement, under the Non-Qualified Retirement Plan. Mr. Herzog was eligible for early retirement benefits under the Non-Qualified Retirement Plan as of his separation, with commencement of his benefits delayed six months as required under Section 409A of the Internal Revenue Code of 1986 (the Code). Mr. Herzog also elected to commence his early retirement benefits under the Qualified Retirement Plan pursuant to the terms of the Qualified Retirement Plan and the American General Corporation Supplemental Executive Retirement Plan, with payment of his benefits under this plan delayed six months as required under Section 409A of the Code, which Mr. Herzog participated in as a result of his employment by American General Corporation prior to its acquisition by AIG. AIG agreed to consider Mr. Herzog an eligible employee for purposes of the Assurance Agreement with respect to certain obligations of Starr International Company, Inc. (SICO) (SICO awards are described in greater detail in “—2016 Compensation—Holdings of and Vesting of Previously Awarded Equity”). Upon his separation, Mr. Herzog became entitled to a lump sum distribution of his balance under the Executive Deferred Compensation Plan, with payment of his benefits delayed six months as required under Section 409A of the Code, and a lump sum distribution of his balance under the American General Supplemental Thrift Plan, pursuant to the terms of each respective plan. Mr. Herzog’s separation benefits, including the treatment of outstanding long-term incentive awards, are discussed further in “—2016 Compensation—Potential Payments on Termination—Quantification of Termination Payments and Benefits.”

In the Release Agreement, Mr. Herzog agreed to one-year non-solicitation, six-month non-competition, perpetual non-disparagement and confidentiality covenants and a release of claims in favor of AIG.

Ms. Macia. Ms. Macia separated from AIG on March 31, 2016 and entered into a Release Agreement with AIG. Under the Release Agreement and pursuant to the 2012 ESP, Ms. Macia was entitled to termination without cause benefits. Accordingly, Ms. Macia received a lump sum severance payment of $3,000,000 and was entitled to continued health coverage under COBRA, a $40,000 payment that may be applied toward continued health coverage and life insurance, outplacement services and one year of additional age and service for purposes of determining eligibility to participate in any AIG retiree medical plan. In addition, AIG will make any tax equalization payments related to Ms. Macia’s prior international assignment during 2016 and 2017, pursuant to AIG’s practice generally applicable to employees on overseas assignments, and Ms. Macia will receive tax services for 2016 and 2017 tax returns. Ms. Macia’s separation benefits, including the treatment of outstanding long-term incentive awards, are discussed further in “—2016 Compensation—Potential Payments on Termination—Quantification of Termination Payments and Benefits.”

In the Release Agreement, Ms. Macia agreed to one-year non-solicitation, six-month non-competition, perpetual non-disparagement and confidentiality covenants and a release of claims in favor of AIG.

Mr. Schreiber. Mr. Schreiber separated from AIG on March 31, 2016 and entered into a Release Agreement with AIG. Under the Release Agreement and pursuant to the 2012 ESP, Mr. Schreiber was entitled to termination without cause benefits as a participant in the prior plan. Accordingly, Mr. Schreiber received a lump sum severance payment of $5,999,250 and was entitled to continued health coverage under COBRA, a $40,000 payment that may be applied toward continued health coverage and life insurance, outplacement services and one year of additional age and service for purposes of determining eligibility to participate in any AIG retiree medical plan. Mr. Schreiber elected to receive his Qualified Retirement Plan benefit effective November 1, 2016 in the form of a lump sum payment. Mr. Schreiber’s separation benefits, including the treatment of outstanding long-term incentive awards, are discussed further in “—2016 Compensation—Potential Payments on Termination—Quantification of Termination Payments and Benefits.”

In the Release Agreement, Mr. Schreiber agreed to one-year non-solicitation, six-month non-competition, perpetual non-disparagement and confidentiality covenants and a release of claims in favor of AIG.

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

 

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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.

Consultants. To provide independent advice, the Committee has used the services of Frederic W. Cook & Co. (FW Cook) since 2005. A senior consultant of FW Cook 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.” FW Cook 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 2016 executive compensation structure. FW Cook 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 2016 and February 2017, the Committee reviewed various items related to FW Cook’s relationship to AIG, the members of the Committee and AIG’s executive officers. The Committee confirmed that neither FW Cook nor any of its affiliates provides any other services to AIG or its management except with respect to director compensation, and that FW Cook had no business or personal relationship with any member of the Committee or executive officer that raised a conflict of interest with respect to FW Cook’s work for the AIG Board. The Committee also received information on the fees paid to FW Cook by AIG as a percentage of FW Cook’s total revenue and FW Cook’s ownership of any AIG Common Stock. Considering this information, the Committee determined that FW Cook is independent and that its work has not raised any conflict of interest.

In 2016, 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 FW Cook described above. The Committee noted that FW Cook 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, approximately 97 percent of the votes cast by shareholders were in favor of the 2015 compensation of our named executives as disclosed in our 2016 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 2016, 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., Chubb Group, CIGNA Corporation, Citigroup Inc., 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, 2015 and 2016 incentive awards. In the event that the Committee determines that a triggering event under the Clawback Policy has occurred, the Committee may require an

 

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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 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 2016. 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 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 2016 qualify for this exception.

Accordingly, separate from determining 2016 short- and long-term incentive opportunities, in the first quarter of 2016, 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 2016 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 2016 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 2016 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 for an explanation of how these measures are calculated from our audited financial statements.

Conclusion

Our 2016 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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2016 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 2016, as well as a former Chief Financial Officer who served during part of 2016 and two additional individuals who served as executive officers during part of 2016.

2016 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

    2016     $ 1,600,000     $ 0     $ 7,851,287     $ 0     $ 8,991     $ 116,257     $ 9,576,535  

Chief Executive Officer

    2015     $ 1,661,538     $ 0     $ 8,231,460     $ 2,496,000     $ 59,759     $ 49,218     $ 12,497,975  
    2014     $ 1,426,923     $ 0     $ 7,011,108     $ 3,497,334     $ 73,751     $ 55,312     $ 12,064,428  

Siddhartha Sankaran

    2016     $ 1,000,000     $ 0     $ 3,159,665     $ 680,000     $ 705     $ 39,598     $ 4,879,968  

Executive Vice President and Chief Financial Officer

               

Douglas A. Dachille

    2016     $ 1,000,000     $ 0     $ 3,829,868     $ 800,000     $ 213     $ 65,706     $ 5,695,787  

Executive Vice President and Chief Investment Officer

               

Kevin T. Hogan

    2016     $ 1,000,000     $ 800,000 (6)    $ 3,446,866     $ 760,000     $ 98,417     $ 51,430     $ 6,156,713  

Executive Vice President—

    2015     $ 1,038,462     $ 1,150,000 (6)    $ 3,613,812     $ 1,482,000     $ 12,995     $ 620,888     $ 7,918,157  

Consumer

    2014     $ 903,846     $ 1,300,000 (6)    $ 3,517,171     $ 2,058,750     $ 338,113     $ 895,534     $ 9,013,414  

Robert S. Schimek

    2016     $ 1,000,000     $ 0     $ 3,351,116     $ 700,000     $ 27,564     $ 44,457     $ 5,123,137  

Executive Vice President—

               

Commercial

               

Separated during 2016

               

David L. Herzog

    2016     $ 269,231     $ 0     $ 3,829,868     $ 200,000     $ 102,613     $ 6,336,748     $ 10,738,460  

Former Executive Vice President

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

and Chief Financial Officer

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

Seraina Macia

    2016     $ 250,000     $ 950,000 (7)          $ 170,000     $ 0     $ 5,581,224     $ 6,951,224  

Former Executive Vice President

               

Brian T. Schreiber

    2016     $ 233,846     $ 0           $ 175,000     $ 0     $ 9,494,318     $ 9,903,164  

Former Executive Vice President

               

Footnotes to 2016 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) 2016 Amounts. The amounts represent the grant date fair value of PSUs granted for the 2016-2018 performance period under the 2016 AIG Long-Term Incentive (2016 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—$12,410,252; Sankaran—$4,994,387; Dachille—$6,053,751; Hogan—$5,448,354; Schimek—$5,296,979; and Herzog—$6,053,751. All amounts are subject to clawback under the AIG Clawback Policy.

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; Hogan—$5,704,344; and Herzog—$6,338,110. 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; Hogan—$5,288,877; and Herzog—$5,882,089. All amounts are subject to clawback under the AIG Clawback Policy. In the first quarter of 2017, the Committee certified the results for the 2014—2016 performance period and determined the actual earned 2014 LTI awards for each named executive. See “—Compensation Discussion and Analysis—Adjudication of 2014 Long-Term Incentive Awards” for further information.

 

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Calculation. The amount shown for the awards granted by AIG was calculated using the assumptions described in Note 20 to the Consolidated Financial Statements included in AIG’s 2016 Annual Report on Form 10-K (for awards granted in 2016), Note 19 to the Consolidated Financial Statements included in AIG’s 2015 Annual Report on Form 10-K (for awards granted in 2015) and Note 21 to the Consolidated Financial Statements included in AIG’s 2014 Annual Report on Form 10-K (for awards granted in 2014).

 

(3) 2016 Amounts. The amounts represent the full amount of the awards earned under the AIG Annual Short-Term Incentive Plan for 2016 performance as determined by the Committee in the first quarter of 2017. 100 percent of the award was vested and paid in March 2017. All amounts are subject to clawback under the AIG Clawback Policy. Amounts for Messrs. Herzog and Schreiber and Ms. Macia represent the pro-rata portion of their 2016 short-term incentive earned awards based on the number of full months employed during 2016.

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 the remaining 50 percent of the award was paid in March 2017. All amounts are vested and 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. All amounts are vested and 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.” Ms. Macia and Mr. Schreiber had negative changes in pension value of $55,670 and $2,224,279, respectively, due to forfeitures under those plans upon their separation from AIG.

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. Schimek and Schreiber. 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 Messrs. Hancock and Sankaran under the Non-Qualified Retirement Plan, as they 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. Before joining AIG as Executive Vice President and Chief Investment Officer in September 2015, Mr. Dachille served as Chief Executive Officer of First Principles. Pursuant to the terms of AIG’s acquisition of First Principles, the AIG hire date of each First Principles employee was recognized for the purposes of determining vesting and eligibility to participate in the Qualified and Non-Qualified Retirement Plans. Accordingly, Mr. Dachille began to participate in the Qualified and Non-Qualified Retirement Plans on September 15, 2015, the date he joined 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. Ms. Macia was hired on November 11, 2013 and benefit accruals under the Qualified Retirement Plan and the Non-Qualified Retirement Plan commenced on December 1, 2014, after she completed one year of service with AIG.

 

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(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 2016.

Perquisites

 

Name

   Personal Use of
Company Pool Cars/

Parking(a)
     Personal Use of
Aircraft(b)
     Financial,
Tax and Legal
Planning(c)
     Non-U.S.
Assignment/

Relocation(d)
     Other(e)      Total  

Peter D. Hancock

   $ 20,513      $ 71,324      $ 0      $ 0      $ 0      $ 91,837  

Siddhartha Sankaran

   $ 10,573      $ 0      $ 0      $ 0      $ 4,605      $ 15,178  

Douglas A. Dachille

   $ 34,786      $ 0      $ 0      $ 0      $ 6,500      $ 41,286  

Kevin T. Hogan

   $ 11,837      $ 0      $ 15,173      $ 0      $ 0      $ 27,010  

Robert S. Schimek

   $ 3,181      $ 0      $ 10,056      $ 0      $ 6,800      $ 20,037  

Separated during 2016

                                         

David L. Herzog

   $ 3,642      $ 0      $ 15,000      $ 0      $ 0      $ 18,642  

Seraina Macia

   $ 932      $ 0      $ 28,754      $ 153,292      $ 0      $ 182,978  

Brian T. Schreiber

   $ 1,650      $ 0      $ 47,725      $ 0      $ 4,309      $ 53,684  

 

 

  (a) Includes the incremental costs of driver overtime compensation, fuel and maintenance attributable to personal use of company pool cars. For Mr. Schreiber, also includes parking costs.

 

  (b) Includes personal use by Mr. Hancock and his spouse of AIG-owned corporate aircraft and corporate aircraft owned by a third-party vendor. Mr. Hancock’s personal use of corporate aircraft is calculated based on the aggregate incremental cost of the flight to AIG. For use of AIG-owned corporate aircraft, aggregate incremental cost is calculated based on the direct operating cost of the aircraft, including fuel, additives and lubricants, maintenance, airport fees and assessments, crew expenses and in-flight supplies and catering, as applicable. For use of corporate aircraft owned by a third-party vendor, aggregate incremental cost is calculated based on the cost-per-flight-hour charge by the vendor as well as costs of fuel and airport fees and assessments, as applicable.

 

  (c) Incremental costs related to financial, tax and legal planning represent AIG’s direct expenditures. Includes reimbursement of tax preparation services related to prior international assignments for Messrs. Hogan and Schimek and Ms. Macia. Also includes reimbursement of legal services in connection with review of severance agreements for Mr. Schreiber ($30,000) and Ms. Macia.

 

  (d) Assignment-related expenses, including reimbursement of housing costs ($9,051) and relocation expenses ($134,191) and payment of education allowance ($10,050). Certain expenses were paid in British pounds (GBP) and were converted to U.S. dollars using the GBP to U.S. dollar exchange rate at the time of payment.

 

  (e) Includes the cost of an annual medical examination for certain named executives paid for by the company and moving expenses for Mr. Schreiber in connection with his separation.

 

     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 2016 company-paid costs were: Hancock—$570; Sankaran—$570; Dachille—$570; Hogan—$570; Schimek—$570; Herzog—$153; Macia—$110; and Schreiber—$132.

 

     This column also includes matching contributions and non-elective company contributions made by AIG under its 401(k) plan. These contributions include the following amounts in 2016: Hancock—$23,850; Sankaran—$23,850; Dachille—$23,850; Hogan—$23,850; Schimek—$23,850; Herzog—$23,850; Macia—$21,427; and Schreiber—$21,565. See “—Post-Employment Compensation—Nonqualified Deferred Compensation” for additional details.

 

    

For Mr. Herzog, this column includes $6,213,333 related to payments that he received following his separation on April 8, 2016 in accordance with his Release Agreement pursuant to the 2012 Executive Severance Plan and $80,770 related to accrued and unused paid time-off paid upon his separation. For Ms. Macia, this column includes $4,840,000 related to payments that she received following her separation on March 31, 2016 in accordance with her Release Agreement pursuant to the 2012 Executive Severance Plan and $28,846 related to accrued and unused paid time-off paid upon her separation. For Mr. Schreiber, this column

 

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  includes $9,339,250 related to payments that he received following his separation on March 31, 2016 in accordance with his Release Agreement pursuant to the 2012 Executive Severance Plan and $66,682 related to accrued and unused paid time-off paid upon his separation. The separation benefits for Messrs. Herzog and Schreiber and Ms. Macia are discussed further above in “—Compensation Discussion and Analysis—Named Executive Officers who Separated in 2016” and below in “—Potential Payments on Termination—Quantification of Termination Payments and Benefits.” In addition, this column also includes $507,863 representing tax equalization payments related to Ms. Macia’s prior international assignment, $10,964 representing the reimbursement of taxes owed on Mr. Schreiber’s financial and tax planning expenses and $2,041 representing the reimbursement of taxes owed on Mr. Schreiber’s moving expenses, each as 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, 2016 was approximately $15.7 million and for the year ending September 22, 2017 was approximately $12.7 million.

 

(6) Represents the first, second and third installments of Mr. Hogan’s transition award paid in April 2014, April 2015 and April 2016, 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.

 

(7) Represents the third installment of Ms. Macia’s transition award paid in March 2016. Payment was made pursuant to Ms. Macia’s offer letter. See “—Compensation Discussion and Analysis—Transition Arrangements for Named Executives” for further information.

 

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2016 Grants of Plan-Based Awards

Total 2016 Grants. The following table details all equity and non-equity plan-based awards granted to each of the named executives in 2016.

2016 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

                   

2016 STI

    03/08/16       $ 0     $ 3,200,000     $ 5,600,000                                

2016 LTI

    03/16/16       03/08/16                         78,185       156,369       234,554           $ 7,851,287  

Siddhartha Sankaran

                   

2016 STI

    02/18/16       $ 0     $ 1,700,000     $ 2,975,000                                

2016 LTI

    03/16/16                           31,465       62,929       94,394           $ 3,159,665  

Douglas A. Dachille

                   

2016 STI

    02/18/16       $ 0     $ 2,000,000     $ 3,500,000                                

2016 LTI

    03/16/16                           38,139       76,277       114,416           $ 3,829,868  

Kevin T. Hogan

                   

2016 STI

    02/18/16       $ 0     $ 1,900,000     $ 3,325,000                                

2016 LTI

    03/16/16                           34,325       68,649       102,974           $ 3,446,866  

Robert S. Schimek

                   

2016 STI

    02/18/16       $ 0     $ 1,750,000     $ 3,062,500                                

2016 LTI

    03/16/16                           33,371       66,742       100,113       $ 3,351,116  

Separated during 2016

                                                           

David L. Herzog

                   

2016 STI

    02/18/16       $ 0     $ 2,000,000     $ 3,500,000                                

2016 LTI

    03/16/16                           38,139       76,277       114,416           $ 3,829,868  

Seraina Macia

                   

2016 STI

    02/18/16       $ 0     $ 1,700,000     $ 2,975,000                                

2016 LTI

                                                       

Brian T. Schreiber

                   

2016 STI

    02/18/16       $ 0     $ 1,750,000     $ 3,062,500                                

2016 LTI

                                                       

 

(1) Amounts shown reflect the range of possible cash payouts under the AIG Annual Short-Term Incentive Plan for 2016 performance. Actual amounts earned, as determined by the Committee in the first quarter of 2017, are reflected in the 2016 Summary Compensation Table under Non-Equity Incentive Plan Compensation. For more information on the 2016 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 2016 LTI awards. Actual amounts earned are based on achieving relative TSR over the 2016—2018 performance period. The TSR metric is balanced by using relative OAS as a gating metric to protect against excessive risk-taking. If AIG’s relative OAS percentile is below the 20th percentile of the peer group, the payout level is reduced by half. Results will be certified by the Committee in the first quarter of 2019. For more information on the 2016 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 2016 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 2016—2018 performance period determined in accordance with FASB ASC Topic 718 using the assumptions presented in Note 20 to the Consolidated Financial Statements in AIG’s 2016 Annual Report on Form 10-K.

 

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HOLDINGS OF AND VESTING OF PREVIOUSLY AWARDED EQUITY

Outstanding Equity Awards at December 31, 2016

Equity-based awards held at the end of 2016 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 or 2007 Stock Incentive 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).

The following table sets forth outstanding equity-based awards held by each named executive as of December 31, 2016.

Outstanding Equity Awards at December 31, 2016

 

              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

                              2016 LTI         158,916     $ 10,378,804  
              2015 LTI         238,131     $ 15,552,336  
              2014 LTI     141,991     $ 9,273,432      
              2013 LTI     126,890     $ 8,287,186      
               

 

 

   

 

 

   

 

 

   

 

 

 
              Total     268,881     $ 17,560,618       397,047     $ 25,931,140  
 

Siddhartha Sankaran

                              2016 LTI         63,954     $ 4,176,836  
              2015 LTI         52,269     $ 3,413,688  
              2014 LTI     36,850     $ 2,406,674      
              2013 LTI     36,913     $ 2,410,788      
               

 

 

   

 

 

   

 

 

   

 

 

 
              Total     73,763     $ 4,817,462       116,223     $ 7,590,524  
 

Douglas A. Dachille

                              2016 LTI         77,519     $ 5,062,766  
              2015 LTI         100,144     $ 6,540,405  
                   

 

 

   

 

 

 
              Total         177,663     $ 11,603,171  

Kevin T. Hogan

                              2016 LTI         69,767     $ 4,556,483  
              2015 LTI         104,543     $ 6,827,703  
              2014 LTI     73,947     $ 4,829,479      
              2013 LTI     65,978     $ 4,309,023      
               

 

 

   

 

 

   

 

 

   

 

 

 
              Total     139,925     $ 9,138,502       174,310     $ 11,384,186  
 

Robert S. Schimek

    2007       499     $ 1,140.99       12/13/2017         2016 LTI         67,829     $ 4,429,912  
              2015 LTI         52,269     $ 3,413,688  
              2014 LTI     37,176     $ 2,427,965      
              2013 LTI     41,482     $ 2,709,189      
               

 

 

   

 

 

   

 

 

   

 

 

 
              Total     78,658     $ 5,137,154       120,098     $ 7,843,600  
                     
 

Separated during 2016

                                                     

David L. Herzog

                              2016 LTI         77,519     $ 5,062,766  
              2015 LTI         116,160     $ 7,586,410  
              SICO Plans     729     $ 47,611      
                   

 

 

   

 

 

 
              Total         193,679     $ 12,649,175  

Seraina Macia

                              2015 LTI         40,653     $ 2,655,047  

Brian T. Schreiber

                              2015 LTI         95,832     $ 6,258,788  

 

 

(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 2016 LTI awards are shown at target payout, all 2015 LTI awards are shown at maximum payout and all 2014 LTI awards and 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 30, 2016 of $65.31 per share. Actual amounts earned for the 2014 LTI awards and the 2013 LTI awards were determined by the Committee in the first

 

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  quarter of 2017 and the first quarter of 2016, respectively. See “—Compensation Discussion and Analysis—Earned 2013 Long-Term Incentive Awards” and “—Compensation Discussion and Analysis—Adjudication of 2014 Long-Term Incentive Awards” for further information. 2016 LTI and 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 2016 LTI or 2015 LTI awards (and 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 2016 LTI awards (including related dividend equivalents) to 2016 named executives will vest one-third on the first day of January in each of 2019, 2020 and 2021, and all 2015 LTI awards (including related dividend equivalents) to 2016 named executives will vest one-third on the first day of January in each of 2018, 2019 and 2020. One-third of the earned 2014 LTI awards to 2016 named executives vested on January 1, 2017, and the remaining two-thirds will vest one-third on the first day of January in each of 2018 and 2019. Two-thirds of the earned 2013 LTI awards to 2016 named executives vested one-third on the first day of January in each of 2016 and 2017, and the remaining one-third will vest on January 1, 2018. The one-third of 2013 LTI awards that vested January 2016 are reflected in the 2016 Vesting of Stock-Based Awards table below.

 

     Messrs. Herzog and Schreiber and Ms. Macia became vested in their 2013 LTI, 2014 LTI, 2015 LTI and 2016 LTI awards, as applicable, upon their respective separation dates. For 2013 LTI and 2014 LTI awards, the number of earned shares were based on actual performance as determined by the Committee in the first quarter of 2016 and the first quarter of 2017, respectively, and are reflected in the 2016 Vesting of Stock-Based Awards table below. For 2015 LTI and 2016 LTI awards, the number of earned shares, if any, will be based on AIG performance over the applicable three-year performance period. These unearned awards are reflected in the table above, at target payout for 2016 LTI awards and at maximum payout for 2015 LTI awards. For all awards, any earned amounts will be paid on the normal payment schedule.

 

(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 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 a participating named executive under the SICO Plans will not be paid until age 65 and generally are subject to forfeiture on earlier termination of employment. AIG agreed to consider Mr. Herzog, upon his separation, an eligible employee for the purposes of the AIG agreement with SICO, and he remains entitled to his SICO plans benefits subject to certain conditions. 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, since Mr. Herzog continued 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 35 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 30, 2016 of $65.31 per share.

 

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Vesting of Stock-Based Awards During 2016

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 2016. There were no options exercised in 2016 by any of the named executives.

2016 Vesting of Stock-Based Awards

 

     Stock-Based Awards
Vested in 2016
 

Name                                           

   Number of
Shares
Acquired on
Vesting
     Value
Realized on
Vesting
 

Peter D. Hancock(1)

     63,444      $ 3,833,921  

Siddhartha Sankaran(1)

     18,456      $ 1,115,296  

Douglas A. Dachille

             

Kevin T. Hogan(1)

     32,988      $ 1,993,465  

Robert S. Schimek(1)

     20,740      $ 1,253,318  

Separated during 2016

             

David L. Herzog(2)

     237,324      $ 12,988,862  

Seraina Macia(3)

     28,763      $ 1,554,640  

Brian T. Schreiber(4)

     194,153      $ 10,760,328  

 

(1) Represents one-third of the earned PSUs granted under the 2013 LTI awards that vested on January 1, 2016 (based on the value of the underlying shares of AIG Common Stock on the vesting date).

 

(2) Represents 153,804 shares underlying earned PSUs granted under Mr. Herzog’s 2013 LTI award, one-third of which vested on January 1, 2016 and the remaining two-thirds of which vested upon Mr. Herzog’s separation on April 8, 2016 (based on the value of underlying shares of AIG Common Stock on the respective vesting dates), and represents 83,520 shares underlying earned PSUs granted under Mr. Herzog’s 2014 LTI award, which fully vested upon his separation on April 8, 2016 (based on the value of underlying shares of AIG Common Stock on the vesting date). Two-thirds of Mr. Herzog’s earned 2013 LTI award has been delivered, and the remaining one-third will be delivered in January 2018. One-third of Mr. Herzog’s 2014 LTI award has been delivered, and the remaining two-thirds will be delivered in each of January 2018 and January 2019.

 

(3) Represents 28,763 shares underlying earned PSUs granted under Ms. Macia’s 2014 LTI award, which fully vested upon her separation on March 31, 2016 (based on the value of underlying shares of AIG Common Stock on the vesting date). One-third of Ms. Macia’s 2014 LTI award has been delivered, and the remaining two-thirds will be delivered in each of January 2018 and January 2019.

 

(4) Represents 125,249 shares underlying earned PSUs granted under Mr. Schreiber’s 2013 LTI award, one-third of which vested on January 1, 2016 and the remaining two-thirds of which vested upon Mr. Schreiber’s separation on March 31, 2016 (based on the value of underlying shares of AIG Common Stock on the respective vesting dates), and represents 68,904 shares underlying earned PSUs granted under Mr. Schreiber’s 2014 LTI award, which fully vested upon his separation on March 31, 2016 (based on the value of underlying shares of AIG Common Stock on the vesting date). Two-thirds of Mr. Schreiber’s earned 2013 LTI award has been delivered, and the remaining one-third will be delivered in January 2018. One-third of Mr. Schreiber’s 2014 LTI award has been delivered, and the remaining two-thirds will be delivered in each of January 2018 and January 2019.

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. Schreiber participated in and had a benefit under the SERP, and Mr. Herzog had 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. Schimek and Schreiber. Benefit accruals in the SERP ceased on December 11, 2009 for Mr. Schreiber. 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 Messrs. Hancock and Sankaran under the Non-Qualified Retirement Plan, as they 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. Dachille was hired on September 15, 2015 and benefit accruals under the Qualified Retirement Plan and the Non-Qualified Retirement Plan commenced on September 15, 2015. Ms. Macia was hired on November 11, 2013, and benefit accruals under the Qualified Retirement Plan and the Non-Qualified Retirement Plan commenced on December 1, 2014, after she 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. Pay credits under these plans accrued through 2015 (subject to the IRS limitation on qualified plans of $265,000 in 2015) and ceased on December 31, 2015. However, annual interest credits of 2.89 percent continued in 2016 (based upon the 30-year long-term Treasury rate). This rate is adjusted annually on January 1.

The definition of pensionable compensation under the cash balance formula is different from the definition used in the final average pay formula. Prior to the January 1, 2016 freeze date, and effective April 1, 2012, pensionable compensation under the cash balance formula included 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. None of the named executives met 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,

 

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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 accrued since April 1, 1985 up to 44 years through December 31, 2015 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 ten 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

 

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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 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.

2016 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 2016, none of our 2016 named executives were eligible for early retirement benefits under the Non-Qualified Retirement Plan.

Mr. Herzog was eligible for early retirement benefits under the Non-Qualified Retirement Plan and the AGC Retirement Plan upon his separation from employment on April 8, 2016, with commencement of his benefits delayed six months as required under Section 409A of the Code. Mr. Herzog elected to commence his early retirement benefits under the Qualified Retirement Plan effective May 1, 2016.

Ms. Macia was not vested in or eligible for early retirement benefits under the Qualified or Non-Qualified Retirement Plans upon her separation from employment on March 31, 2016. Ms. Macia forfeited these benefits upon her separation from AIG. Mr. Schreiber was not vested in or eligible for early retirement benefits under the Non-Qualified Retirement Plan or the SERP upon his separation from employment on March 31, 2016. Mr. Schreiber forfeited these benefits upon his separation from AIG. Mr. Schreiber elected to receive his Qualified Retirement Plan benefit effective November 1, 2016 in the form of a lump sum payment. 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) and, pursuant to the terms of AIG’s acquisition of First Principles, recognizing prior service by Mr. Dachille to First Principles for purposes of determining vesting and eligibility.

2016 Pension Benefits

 

Name                                                         

  

Plan Name

   Years of
Credited
Service(1)
     Present
Value of
Accumulated
Benefit(2)
     Payments
During 2016
 

Peter D. Hancock

  

Qualified Retirement Plan

     5.333      $ 109,459      $ 0  
  

Non-Qualified Retirement Plan

     3.000      $ 139,133      $ 0  
        

 

 

    
  

Total

      $ 248,592      $ 0  

Siddhartha Sankaran

  

Qualified Retirement Plan

     4.583      $ 57,428      $ 0  
  

Non-Qualified Retirement Plan

     3.000      $ 97,667      $ 0  
        

 

 

    
  

Total

      $ 155,095      $ 0  

Douglas A. Dachille

  

Qualified Retirement Plan

     0.333      $ 14,181      $ 0  
  

Non-Qualified Retirement Plan

     0.333      $ 1,998      $ 0  
        

 

 

    
  

Total

      $ 16,179      $ 0  

Kevin T. Hogan

  

Qualified Retirement Plan

     25.917      $ 607,617      $ 0  
  

Non-Qualified Retirement Plan

     25.917      $ 768,948      $ 0  
        

 

 

    
  

Total

      $ 1,376,565      $ 0  

Robert S. Schimek

  

Qualified Retirement Plan

     9.917      $ 202,258      $ 0  
  

Non-Qualified Retirement Plan

     6.917      $ 274,981      $ 0  
        

 

 

    
  

Total

      $ 477,239      $ 0  

 

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Name                                                         

  

Plan Name

   Years of
Credited
Service(1)
     Present
Value of
Accumulated
Benefit(2)
     Payments
During 2016
 

Separated during 2016

                         

David L. Herzog

  

Qualified Retirement Plan

     15.917      $ 0      $ 385,616  
  

Non-Qualified Retirement Plan

     12.750      $ 534,750      $ 168,897  
  

AGC Retirement Plan

     2.917      $ 0      $ 231,269  
        

 

 

    

 

 

 
  

Total

      $ 534,750      $ 785,782  

Seraina Macia

  

Qualified Retirement Plan

     1.083      $ 0      $ 0  
  

Non-Qualified Retirement Plan

     1.083      $ 0      $ 0  
        

 

 

    

 

 

 
  

Total

      $ 0      $ 0  

Brian T. Schreiber

  

Qualified Retirement Plan

     18.083      $ 0      $ 328,651  
  

Non-Qualified Retirement Plan

     15.083      $ 0      $ 0  
  

SERP

     15.583      $ 0      $ 0  
        

 

 

    

 

 

 
  

Total

      $ 0      $ 328,651  

 

(1) The 2016 named executives had the following years of service with AIG as of December 31, 2016: Mr. Hancock—6.917; Mr. Sankaran—6.167; Mr. Dachille—1.333; Mr. Hogan—27.5; and Mr. Schimek—11.5. As of their respective separation dates, the named executive officers who separated in 2016 had the following years of service with AIG: Mr. Herzog—14.75, Ms. Macia—2.417; and Mr. Schreiber—18.917.

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. The Qualified and Non-Qualified Retirement Plans were frozen effective January 1, 2016 and credited service accruals ceased under these plans as of December 31, 2015.

Mr. Sankaran. Mr. Sankaran 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. Sankaran became a participant in the Qualified Retirement Plan effective December 1, 2011 after he completed one year of service with AIG, with service credited retroactive to June 1, 2011. Mr. Sankaran 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. The Qualified and Non-Qualified Retirement Plans were frozen effective January 1, 2016 and credited service accruals ceased under these plans as of December 31, 2015.

Mr. Dachille. Mr. Dachille had fewer years of credited service than actual service under the Qualified Retirement Plan and the Non-Qualified Retirement Plan because the plans were frozen effective January 1, 2016 and credited service accruals ceased under these plans as of December 31, 2015. Mr. Dachille became a participant in the Qualified Retirement Plan and the Non-Qualified Retirement Plan effective September 15, 2015, the date he joined 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

 

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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. The Qualified and Non-Qualified Retirement Plans were frozen effective January 1, 2016 and credited service accruals ceased under these plans as of December 31, 2015.

Mr. Schimek. Mr. Schimek had fewer years of credited service than actual service under the Qualified Retirement Plan and 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. Schimek became a participant in the Qualified Retirement Plan and Non-Qualified Retirement Plan effective August 1, 2006 after he completed one year of service with AIG, with service credited retroactive to February 1, 2006. Mr. Schimek’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 accruals in the Non-Qualified Retirement Plan. He participates in the Qualified Retirement Plan and Non-Qualified Retirement Plan under the cash balance formula. Mr. Schimek resumed accrual of 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. The Qualified and Non-Qualified Retirement Plans were frozen effective January 1, 2016 and credited service accruals ceased under these plans as of December 31, 2015.

Mr. Herzog. Under the Qualified Retirement and Non-Qualified Retirement 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 accruals in the Non-Qualified Retirement Plan. He participated in the Qualified Retirement and Non-Qualified Retirement Plans under the cash balance formula. 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. The Qualified and Non-Qualified Retirement Plans were frozen effective January 1, 2016 and credited service accruals ceased under these plans as of December 31, 2015. For Mr. Herzog, years of credited service and pension values reflect the values as of his separation date of April 8, 2016.

Ms. Macia. Ms. Macia had fewer years of credited service than actual service under the Qualified Retirement Plan and the Non-Qualified Retirement Plan because, at the time she was hired, employees were required to wait a year after commencing employment with AIG before becoming participants in these plans. Ms. Macia became a participant in the Qualified Retirement Plan and the Non-Qualified Retirement Plan effective December 1, 2014 after she completed one year of service with AIG. She participated in the Qualified Retirement and Non-Qualified Retirement Plans under the cash balance formula. The Qualified and Non-Qualified Retirement Plans were frozen effective January 1, 2016 and credited service accruals ceased under these plans as of December 31, 2015. For Ms. Macia, years of credited service and pension values reflect the values as of her separation date of March 31, 2016.

Mr. Schreiber. Mr. Schreiber had fewer years of credited service than actual service under the Qualified Retirement Plan and 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. Schreiber became a participant in the Qualified Retirement Plan and Non-Qualified Retirement Plan effective June 1, 1998 after he completed one year of service with AIG, with service credited retroactive to December 1, 1997. Mr. Schreiber’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 participated in the Qualified Retirement Plan and Non-Qualified Retirement Plan under the cash balance formula.

 

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Mr. Schreiber resumed accrual of pay credits under the Non-Qualified Retirement Plan cash balance formula following December 14, 2012, the end of AIG’s TARP restrictions period. The Qualified and Non-Qualified Retirement Plans were frozen effective January 1, 2016 and credited service accruals ceased under these plans as of December 31, 2015. For Mr. Schreiber, years of credited service and pension values reflect the values as of his separation date of March 31, 2016.

 

(2) The actuarial present values of the accumulated benefits are based on service and earnings as of December 31, 2016 (the pension plan measurement date for purposes of AIG’s financial statement reporting), with the exception of Messrs. Herzog and Schreiber and Ms. Macia, whose values reflect their separation dates. The actuarial present values of the accumulated benefits under the Qualified Retirement Plan and the Non-Qualified Retirement Plan 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 21 to the Consolidated Financial Statements included in AIG’s 2016 Annual Report on Form 10-K. As described in that Note, the discount rate assumption is 4.15 percent for the Qualified Retirement Plan. The discount rate assumption is 4.03 percent for the Non-Qualified Retirement Plan and 3.87 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. Schimek and Schreiber. Benefit accruals in the SERP also ceased on December 11, 2009 for Mr. Schreiber. None of our other named executives 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. Dachille and Hogan and Ms. Macia were not employed by AIG during the TARP-related freeze period, and Messrs. Hancock and Sankaran 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 accruals. 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 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 Mr. Herzog, payments of account balances were not accelerated. 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.

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 2016, based on the performance of these funds, Mr. Herzog experienced a return of approximately 7.85 percent. Amounts deferred during each year, and earnings thereon, will be distributed in accordance with a 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. A participant whose employment terminates before reaching age 60 must receive his or her account balance in a lump sum payment. Mr. Herzog’s separation from AIG occurred prior to his reaching age 60, and accordingly, he received his account balance in a lump sum payment, credited with earnings or losses based on the returns of the mutual

 

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funds, after a six-month delay required under Section 409A of the Code. Balances under the plans in which the named executives participated are detailed in the following table.

2016 Nonqualified Deferred Compensation

 

Name

   Executive
Contributions
     AIG
Contributions
     Aggregate
Earnings
     Distributions             Aggregate
Balance at
Year-End
2016
 

Peter D. Hancock

   $ 0      $ 0      $ 0      $ 0           $ 0  
                 

Siddhartha Sankaran

   $ 0      $ 0      $ 0      $ 0           $ 0  
                 

Douglas A. Dachille

   $ 0      $ 0      $ 0      $ 0           $ 0  
                 

Kevin T. Hogan

   $ 0      $ 0      $ 0      $ 0           $ 0  
                 

Robert S. Schimek

   $ 0      $ 0      $ 0      $ 0           $ 0  

Separated during 2016

                                         

David L. Herzog

                 

EDCP

   $ 0      $ 0      $ 46,607      $ 640,430           $ 0  

AG Supplemental Thrift Plan

   $ 0      $ 0      $ 505      $ 22,933           $ 0 (1) 

Total

         $ 47,112      $ 663,363           $ 0  
                 

Seraina Macia

   $ 0      $ 0      $ 0      $ 0           $ 0  
                 

Brian T. Schreiber

   $ 0      $ 0      $ 0      $ 0           $ 0  

 

(1) 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 received a lump sum distribution from this plan after his separation from AIG and election to receive a lump sum 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 2.25 percent in 2016.

POTENTIAL PAYMENTS ON TERMINATION

Executive Severance Plan. As previously discussed, AIG maintains the 2012 Executive Severance Plan (the 2012 ESP) for AIG executives in grade level 27 or above, including the 2016 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, Sankaran, Dachille, Hogan and Schimek) 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 base salary and the average amount of 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, Sankaran, Dachille, Hogan and Schimek is eligible for the higher multipliers.

If the qualifying termination occurs within twelve months after experiencing a reduction in base salary or annual short-term incentive, the payments described above are calculated as if the qualifying termination occurred immediately prior to the reduction.

However, in any event, Prior Participants in grade level 27 or above, which includes Messrs. Hancock, Sankaran and Schimek, 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 continued health coverage and life insurance and one year of additional age and service under AIG’s

 

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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 certain 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: