AIG 2011 Annual Report Download - page 353

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Payments of dividends to AIG by its insurance subsidiaries are subject to certain restrictions imposed by
regulatory authorities. With respect to AIG’s domestic insurance subsidiaries, the payment of any dividend
requires formal notice to the insurance department in which the particular insurance subsidiary is domiciled. For
example, unless permitted by the New York Superintendent of Insurance, general insurance companies domiciled
in New York may not pay dividends to shareholders that, in any 12-month period, exceed the lesser of ten percent
of such company’s statutory policyholders’ surplus or 100 percent of its ‘‘adjusted net investment income,’’ as
defined. Generally, less severe restrictions applicable to both general and life insurance companies exist in most of
the other states in which AIG’s insurance subsidiaries are domiciled. Under the laws of many states, an insurer
may pay a dividend without prior approval of the insurance regulator when the amount of the dividend is below
certain regulatory thresholds. Other foreign jurisdictions may restrict the ability of AIG’s foreign insurance
subsidiaries to pay dividends.
There are also various local restrictions limiting cash loans and advances to AIG by its subsidiaries. Largely as a
result of these restrictions, approximately 86 percent of the aggregate equity of AIG’s consolidated insurance
operations was restricted from transfer to AIG Parent at December 31, 2011. AIG cannot predict how regulatory
investigations may affect the ability of its regulated subsidiaries to pay dividends.
To AIG’s knowledge, no AIG insurance company is currently on any regulatory or similar ‘‘watch list’’ with
regard to solvency.
AIG’s Consolidated Statement of Operations included share-based compensation expense as follows:
Years Ended December 31,
(in millions) 2011 2010 2009
Share-based compensation expense – pre-tax* $ (16) $ 333 $ 209
Share-based compensation expense – after tax (10) 216 151
* As of December 31, 2011, compensation expense for the majority of AIG’s outstanding share-based awards is attributed to liability-classified
awards, the value of which are based on AIG’s share price at the reporting date. AIG’s share price was $23.20 and $57.62 at December 31,
2011 and December 31, 2010, respectively, and is the primary driver of the $349 million decrease in share-based compensation expense
recognized in 2011 compared to 2010. Includes pre-tax share-based compensation expense related to discontinued operations for the years
ended December 31, 2010 and 2009 of $12 million ($9 million after tax), and $21 million ($13 million after tax), respectively.
AIG employees are granted awards under the AIG 2010 Stock Incentive Plan, as amended (2010 Plan), under
which AIG has issued restricted stock, restricted stock units (RSUs) and stock appreciation rights (SARs). The
2010 Plan supersedes all Plans for which share-based awards remain outstanding and is currently the only plan
under which share-based awards can be issued.
However, awards granted under the following employee compensation plans remain outstanding at
December 31, 2011:
• AIG 1999 Stock Option Plan, as amended (1999 Plan) (superseded by the 2007 Plan);
• AIG 2002 Stock Incentive Plan, as amended (2002 Plan), under which AIG has issued performance
restricted stock units (performance RSUs) (superseded by the 2007 Plan);
AIG 2011 Form 10-K 339
SUBSIDIARY DIVIDEND RESTRICTIONS
19. SHARE-BASED COMPENSATION AND OTHER PLANS
EMPLOYEE PLANS