AIG 2013 Annual Report Download - page 331

The following table presents a roll forward of SARs and cash-settled RSUs (excluding stock salary) as well
as the related expenses:
Unvested, beginning of year 686,290 1,889,434 12,356,573
Granted(a) 1,149,626 – 1,738,691
Vested(b) (149,346) (824,098) (4,400,053)
Forfeited (122,883) (207,757) (728,965)
Unvested, end of year(c) 1,563,687 857,579 8,966,246
Net compensation expense for the year (in millions) $ 43 $ 37 $ 154
(a) Represents additional SARs earned as a result of the completion of the performance period for the 2011 LTIP.
(b) Also includes SARs for which vesting was accelerated for employees who became retirement eligible or were deceased.
(c) Includes 4,773,976 SARs from the 2010 LTIP that vested on January 1, 2014.
The total unrecognized compensation cost (net of expected forfeitures) related to unvested SARs and
cash-settled RSUs (excluding stock salary) and the weighted-average periods over which those costs are
expected to be recognized are as follows:
SARs $ 14 0.62 1
TARP RSUs 15 0.76 2
RSUs 41 0.95 2
We use a Monte Carlo simulation approach, which incorporates a range of input parameters that is consistently
applied, to determine the fair value of SARs at each reporting period.
The table below presents the assumptions used to estimate the fair value of SARs:
Expected dividend yield(a) 1.08%
Expected volatility(b) 29.45 – 49.22%
Weighted-average volatility 30.04%
Risk-free interest rate(c) 0.31%
Expected term(d) 1.0 year
(a) The dividend yield is the projected annualized AIG dividend yield estimated by Bloomberg Professional service as of the valuation date.
(b) The expected volatilities are the implied volatilities with the nearest maturity and strike price as of the 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 U.S. dollar LIBOR-swap curve as of the
valuation date.
(d) The term to maturity is specified in the agreement for each SAR grant.
Stock Appreciation Rights Valuation
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AIG 2013 Form 10-K 313
ITEM 8 / NOTE 20. SHARE-BASED AND OTHER COMPENSATION PLANS
Number of Units
Year Ended December 31, 2013 Other RSUs TARP RSUs SARs
Unrecognized Weighted- Expected
At December 31, 2013 Compensation Average Period Period
(in millions) Cost (years) (years)
2013
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