AIG 2011 Annual Report Download - page 358

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents a rollforward of SARs and cash-settled RSUs as well as the related expenses:
Number of Units
Year Ended December 31, 2011 SARs TARP RSUs RSUs(a)
Unvested, beginning of year 7,960,877 645,546 -
Granted(b) 8,745,612 938,226 271,131
Vested(c) (2,237,332) (96,980) (271,131)
Forfeited (346,095) (72,563) -
Unvested, end of year 14,123,062 1,414,229 -
Net compensation expense for the year (in millions) $ (42) $ 3 $ (2)
(a) Represent fully vested RSUs that were awarded in March 2011 based on 2010 performance. On December 20, 2011, 87,267 of these RSUs were
replaced with restricted stock, which is reflected in the 2010 Plan discussion and the applicable table above.
(b) The number of SARS outstanding increased by 1,548,574 on January 19, 2011 pursuant to anti-dilution provisions of the LTIP due to the
issuance of warrants in connection with the Recapitalization.
(c) Pursuant to the terms of the LTIP, vesting was accelerated for SARs awarded to employees who became retirement eligible.
The total unrecognized compensation cost (net of expected forfeitures) related to unvested SARs and cash-settled
RSUs and the weighted-average periods over which those costs are expected to be recognized are as follows:
Unrecognized Weighted- Expected
At December 31, 2011 Compensation Average Period Period
(in millions) Cost (years) (years)
SARs $ 25 1.16 3
TARP RSUs 21 1.17 3
Stock Appreciation Rights Valuation
AIG uses a Monte Carlo simulation approach, which incorporates a range of input parameters that is
consistently applied, to determine the fair value of SARs awards at each reporting period. The table below
presents the assumptions used to estimate the fair value of SARs on December 31, 2011.
2011
Expected dividend yield(a) -%
Expected volatility(b) 35.42 - 43.81%
Weighted-average volatility 42.06%
Risk-free interest rate(c) 0.66 - 0.81%
Expected term(d) 1.0 - 3.0 years
(a) The dividend yield is estimated at zero percent given AIG’s recent dividend history. See Note 17 herein for additional information.
(b) The expected volatilities are the implied volatilities with the nearest maturity and strike as of valuation date from actively traded stock options
on AIG Common Stock.
(c) The risk-free interest rate is the continuously compounded interest rate for the term between the valuation date and maturity date that is
assumed to be constant and equal to the interpolated value between the closest data points on the USD LIBOR-Swap curve as of valuation
date.
(d) The term to maturity is specified in the contract of each SARs grant.
344 AIG 2011 Form 10-K