AIG 2006 Annual Report Download - page 212

American International Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements Continued
15. Employee Benefits
Continued
The weighted average assumptions used to determine the net periodic benefit costs for the years ended December 31,
2006, 2005 and 2004 were as follows:
Pension Postretirement
Non-U.S. U.S. Non-U.S. U.S.
Plans* Plans Plans* Plans
2006
Discount rate 1.75-12.00% 5.50% 4.50-5.50% 5.50%
Rate of compensation increase 1.50-10.00% 4.25% 2.50-3.00% 4.25%
Expected return on assets 2.50-13.50% 8.00% N/A N/A
2005
Discount rate 1.75-12.00% 5.75% 4.50-6.00% 5.75%
Rate of compensation increase 1.50-10.00% 4.25% 3.00% 4.25%
Expected return on assets 2.15-13.50% 8.00% N/A N/A
2004
Discount rate 2.00-8.00% 6.00% 5.50-6.00% 6.00%
Rate of compensation increase 1.50-7.00% 4.25% 5.50% 4.25%
Expected return on assets 2.50-10.00% 8.25% N/A N/A
* The benefit obligations for non-U.S. plans reflect those assumptions that were most appropriate for the local economic environments of the subsidiaries
providing such benefits.
AIG’s postretirement plans provide benefits primarily in the form of defined employer contributions rather than defined employer benefits.
Changes in the assumed healthcare cost trend rate do not have a material effect on postretirement expense.
December 9, 2005, the date of SICO’s notice to participants in
16. Benefits Provided by Starr International
the SICO Plans. See also Note 12(b) Commitments herein.
Company, Inc. and C.V. Starr & Co., Inc.
Compensation expense in 2006 included various out of period
SICO has provided a series of two-year Deferred Compensation adjustments totaling $61 million, primarily relating to stock-splits
Profit Participation Plans (SICO Plans) to certain AIG employees. and other miscellaneous items for the SICO plans. See also
The SICO Plans came into being in 1975 when the voting Note 14 herein.
shareholders and Board of Directors of SICO, a private holding In January 2006, C.V. Starr & Co., Inc. (Starr) completed its
company whose principal asset is AIG common stock, decided tender offer to purchase Starr interests from AIG employees. In
that a portion of the capital value of SICO should be used to conjunction with AIG’s adoption of FAS 123R, Starr is considered
provide an incentive plan for the current and succeeding manage- to be an ‘‘economic interest holder’’ in AIG. As a result,
ments of all American International companies, including AIG. compensation expense of $54 million was recorded in 2006
None of the costs of the various benefits provided under the results with respect to the Starr tender offer.
SICO Plans has been paid by AIG, although AIG has recorded a As a result of its changing relationship with Starr and SICO,
charge to reported earnings for the deferred compensation AIG has established new executive compensation plans to replace
amounts paid to AIG employees by SICO, with an offsetting the SICO plans and investment opportunities previously provided
amount credited to additional paid-in capital reflecting amounts by Starr. See Note 14 for a description of these plans.
deemed contributed by SICO. The SICO Plans provide that shares Compensation expense with respect to the SICO Plans aggre-
currently owned by SICO are set aside by SICO for the benefit of gated $108 million, $205 million and $62 million for 2006, 2005
the participant and distributed upon retirement. The SICO Board and 2004, respectively.
of Directors currently may permit an early payout of units under
certain circumstances. Prior to payout, the participant is not 17. Ownership and Transactions With
entitled to vote, dispose of or receive dividends with respect to Related Parties
such shares, and shares are subject to forfeiture under certain
(a) Ownership: According to the Schedule 13D filed on Novem-
conditions, including but not limited to the participant’s voluntary
ber 20, 2006 by Starr, SICO, Edward E. Matthews, Maurice R.
termination of employment with AIG prior to normal retirement
Greenberg, the Maurice R. and Corinne P. Greenberg Family
age. Under the SICO Plans, SICO’s Board of Directors may elect
Foundation, Inc., the Universal Foundation, Inc. and the Maurice
to pay a participant cash in lieu of shares of AIG common stock.
R. and Corinne P. Greenberg Joint Tenancy Company, LLC, these
Following notification from SICO to participants in the SICO Plans
reporting persons could be deemed to beneficially own
that it will settle specific future awards under the SICO Plans with
365,923,844 shares of common stock at that date. Based on the
shares rather than cash, AIG modified its accounting for the
shares of common stock outstanding as of January 31, 2007,
SICO Plans from variable to fixed measurement accounting. AIG
this ownership would represent approximately 14 percent of the
gave effect to this change in settlement method beginning on
162 AIG 2006 Form 10-K