AIG 2011 Annual Report Download - page 350

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basic and diluted earnings (loss) per share are based on the weighted average number of common shares
outstanding, adjusted to reflect all stock dividends and stock splits. Diluted earnings per share is based on those
shares used in basic EPS plus shares that would have been outstanding assuming issuance of common shares for
all dilutive potential common shares outstanding, adjusted to reflect all stock dividends and stock splits. Basic
earnings (loss) per share was not affected by outstanding stock purchase contracts. Diluted earnings per share is
determined considering the potential dilution from outstanding stock purchase contracts using the treasury stock
method and was not affected by the previously outstanding stock purchase contracts because they were not
dilutive.
In connection with the issuance of the Series C Preferred Stock, AIG applied the two-class method for
calculating EPS. The two-class method is an earnings allocation method for computing EPS when a company’s
capital structure includes either two or more classes of common stock or common stock and participating
securities. This method determines EPS based on dividends declared on common stock and participating securities
(i.e., distributed earnings) as well as participation rights of participating securities in any undistributed earnings.
The Series C Preferred Stock was retired as part of the Recapitalization on January 14, 2011.
AIG applied the two-class method due to the participation rights of the Series C Preferred Stock through
January 14, 2011. However, application of the two-class method had no effect on earnings per share for 2011
because AIG recognized a net loss attributable to AIG common shareholders from continuing operations, which is
not applicable to participating stock for EPS, for 2011. Subsequent to January 14, 2011, AIG did not have any
outstanding participating securities that subjected AIG to the two-class method.
336 AIG 2011 Form 10-K
EARNINGS (LOSS) PER SHARE (EPS)