AIG 2005 Annual Report Download - page 167

AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
2,067,643 shares of AIG common stock upon exercise of
14. Stock Compensation Plans
options expiring during 2006. In addition, nonemployee
Continued
directors of AIG made valid elections to defer delivery of
At January 1, 1999, the date of the AIG/SAI merger, SAI 21,093 shares of AIG common stock upon exercise of options
had five stock-based compensation plans pursuant to which expiring during 2006.
options, restricted stock, and deferred share and share unit As a result of the acquisition of the Hartford Steam Boiler
obligations had been issued and remained outstanding. Options Inspection and Insurance Company (HSB) in November 2000,
granted under these plans had an exercise price equal to the HSB options outstanding at the acquisition date were fully
market price on the date of grant, had a maximum term of ten vested and were converted into options to purchase AIG
years, and generally became exercisable ratably over a five-year common stock at the exchange ratio of 0.4178 shares of AIG
period. Substantially all of the SAI options outstanding at the common stock for each share of HSB common stock. No
merger date became fully vested on that date and were further options can be granted under the HSB option plans,
converted into options to purchase AIG common stock at the but outstanding options so converted continue in force until
exchange ratio of 0.855 shares of AIG common stock for each exercise or expiration. At December 31, 2005, there were
share of SAI common stock. No further options can be granted 688,648 shares of AIG common stock reserved for issuance
under the SAI plans, but outstanding options so converted under the HSB option plans, none of which qualified for ISO
continue in force until exercise or expiration. At December 31, Treatment.
2005, there were 11,526,992 shares of AIG common stock At August 29, 2001, AGC had stock-based compensation
reserved for issuance on exercise of options under these plans. plans pursuant to which options and restricted share units had
None of these options qualified for ISO Treatment as of been issued and remained outstanding. Options granted under
December 31, 2005. these plans had an exercise price equal to the market price on
During 2005, 2004 and 2003, deferred share and share unit the date of the grant, had a maximum term of ten years, and
obligations with respect to 1,895 shares, 1,895 shares and generally became exercisable ratably over a three-year period.
1,895 shares, respectively, of AIG common stock vested and All of the AGC options outstanding at the acquisition date
were issued. No additional deferred share or share unit became fully vested on that date and were converted into
obligations may be granted under the SAI plans. As of options to purchase AIG common stock at an exchange ratio
December 31, 2005, deferred share and share unit obligations of 0.5790 shares of AIG common stock for each share of AGC
with respect to 59,972 shares remained outstanding under the common stock. No further options can be granted under the
SAI plans. AGC plans, but outstanding options so converted continue in
The AIG Board of Directors has construed the AIG stock force until exercise or expiration. At December 31, 2005, there
option plans to allow, at the request of an optionee, the were 10,805,219 shares of AIG common stock reserved for
deferral of delivery of AIG shares otherwise deliverable upon issuance on exercise of options under these plans. Options with
the exercise of an option to a date or dates specified by the respect to 1,250,221 of these shares qualified for ISO Treat-
optionee. During 2005, options with respect to 1,731,471 ment as of December 31, 2005.
shares were exercised with delivery deferred. At December 31,
2005, optionees had made valid elections to defer delivery of
Additional information with respect to AIG’s plans at December 31, 2005, and changes for the three years then ended, were as
follows:
2005 2004 2003
Weighted Weighted Weighted
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
Shares Under Option:
Outstanding at beginning of year 54,463,003 $51.94 59,253,166 $48.00 54,214,016 $45.63
Granted 4,397,500 62.69 3,474,100 64.65 8,602,909 56.15
Exercised (2,263,377) 27.22 (3,387,734) 34.02 (2,182,680) 22.69
Exercised, delivery deferred (1,731,471) 11.29 (3,397,999) 5.98 (495,787) 8.46
Forfeited (2,320,230) 60.97 (1,478,530) 70.69 (885,292) 66.37
Outstanding at end of year 52,545,425 $54.84 54,463,003 $51.94 59,253,166 $48.00
Options exercisable at year-end 39,952,281 $52.47 40,211,710 $47.80 43,397,566 $42.17
Weighted average fair value per share of
options granted $21.84 $25.61 $20.86
AIG m Form 10-K 115