AIG 2006 Annual Report Download - page 202

American International Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements Continued
ance period is September 21, 2005 to December 31, 2006. At
14. Stock Compensation Plans
the end of the performance period, common shares are contin-
Continued
gently allocated. The service period and related vesting consists
conditions, including but not limited to the participant’s termina- of three pre-retirement tranches and a final retirement tranche at
tion of employment with AIG prior to normal retirement age. age 65.
Historically, SICO’s Board of Directors could elect to pay a At December 31, 2006, there were units representing
participant cash in lieu of shares of AIG common stock. On 4,590,622 shares granted to participants.
December 9, 2005, SICO notified participants that essentially all
subsequent distributions would be made only in shares, and not AIG Partners Plan
cash. As of that date, AIG modified its accounting for the SICO
Plans from variable to fixed measurement accounting. Variable On June 26, 2006, AIG’s Compensation Committee approved two
measurement accounting is used for those few awards for which grants under the AIG Partners Plan. The first grant has a
cash elections had been made prior to March 2005. The SICO performance period which runs from January 1, 2006 through
Plans are also described in Note 16 herein. December 31, 2007. The second grant has a performance period
Although none of the costs of the various benefits provided which runs from January 1, 2007 through December 31, 2008.
under the SICO Plans have been paid by AIG, AIG has recorded Both grants vest 50 percent on the fourth and sixth anniversaries
compensation expense for the deferred compensation amounts of the first day of the related performance period. In addition, the
paid to AIG employees by SICO, with an offsetting amount Compensation Committee approved the performance metrics for
credited to additional paid-in capital reflecting amounts deemed the two grants prior to the date of grant. The measurement of the
contributed by SICO. grants is deemed to have occurred on June 26, 2006 when there
As of December 9, 2005, there were 12,650,292 non-vested was mutual understanding of the key terms and conditions of the
AIG shares under the SICO Plans with a weighted-average fair grants. Consistent with this treatment: a) 1,068,605 per formance
value per share of $61.92. As of December 31, 2006, there were RSUs for the first grant and 2,488,865 performance RSUs for the
11,443,772 non-vested AIG shares under the SICO Plans with a second grant and b) unrecognized compensation of $49 million for
weighted-average fair value per share of $61.72. the first grant and $137 million for the second grant are included
A significant portion of the awards under the SICO Plans vest in the related disclosure tables. Per formance RSUs related to the
upon retirement when or after the participant reaches age 65. The first grant are excluded from AIG’s diluted shares calculation
portion of the awards for which early payout is available vest on because an insufficient amount of time has elapsed to conclu-
the applicable payout date. sively determine that the performance metric will be achieved at
the end of the related performance period. Because the per form-
AIG DCPPP ance period for the second grant does not begin until January 1,
2007, compensation expense for the second grant is not included
Effective September 21, 2005, AIG adopted the AIG DCPPP, which in AIG’s 2006 results and diluted shares calculation.
provides equity-based compensation to key AIG employees, includ-
ing senior executive officers. The AIG DCPPP was modeled on the Valuation
SICO Plans.
The AIG DCPPP contingently allocates a fixed number of shares The fair value of each award granted under the 2002 Plan, the
to each participant if AIG’s cumulative adjusted earnings per AIG DCPPP, the AIG Partners Plan, and the SICO Plans is based
share, as determined by AIG’s Compensation Committee, for on the closing price of AIG stock on the date of grant.
2005 and 2006 exceed that for 2003 and 2004. The perform-
The following table presents a summary of shares relating to outstanding awards unvested under the foregoing plans
as of December 31, 2006, and changes for the year then ended:
Number of Shares Weighted Average Grant-Date Fair Value
AIG AIG Partners Total SICO AIG AIG Partners Total SICO
2002 Plan DCPPP Plan 2002 Plan Plans 2002 Plan DCPPP Plan 2002 Plan Plans
Unvested at January 1, 2006 4,322,265 4,898,880 — 9,221,145 12,650,292 $63.63 $52.55 $ — $57.74 $61.92
Granted 3,198,885 — 3,637,900 6,836,785 — 70.04 — 56.49 62.83 —
Vested (130,185) — — (130,185) (794,814) 61.44 — — 61.44 65.68
Forfeited (209,370) (308,258) (30,860) (548,488) (411,706) 62.53 59.40 56.22 60.41 60.38
Unvested at December 31,
2006 7,181,595 4,590,622 3,607,040 15,379,257 11,443,772 $66.56 $52.09 $56.50 $59.88 $61.72
152 AIG 2006 Form 10-K