AIG 2006 Annual Report Download - page 9

Annual Report 2006 AIG 7
Stock Price and Dividends
AIG’s common stock price closed 2006 at $71.66, 5.0 percent
higher than the 2005 close of $68.23. By comparison, the S&P
500 Stock Index rose 13.6 percent in 2006. During the year, the
price of AIG stock ranged from a high of $72.81 to a low of
$57.76. In May, the Board voted to increase the quarterly cash div-
idend to 16.5 cents per share, a 10 percent increase over the pre-
vious quarterly dividend, which marked the 21st consecutive year
that AIG has increased its dividend. Over the past 10 years, AIG’s
common stock, including reinvested dividends, has increased 190.9
percent, compared to a gain of 124.5 percent in the S&P 500.
Economic Capital Modeling
In the fourth quarter of 2006, we advanced our economic capital
modeling (ECM) initiative by completing an initial, firm-wide review
of AIG’s capital requirements. The ECM framework will help AIG
optimize risk-adjusted returns, manage competing demands for
capital, maintain our superior capital strength, and support current
and future growth opportunities. The ECM analysis has reinforced
our view that AIG’s capital position is strong with an estimated
$15 billion to $20 billion in excess capital at the end of 2006.
This analysis supported the decision by the Board of Directors to
announce a new dividend policy with a plan of increasing the com-
mon stock dividend by approximately 20 percent annually, under
ordinary circumstances. The new policy will be effective with the
dividend to be declared in May of 2007.
Additionally, the Board expanded AIG’s existing share repurchase
program by authorizing the repurchase of up to $8 billion in com-
mon stock. Weintend to repurchase $5 billion of common stock
during 2007. Throughout 2007 and beyond, we will continue to
enhance the economic capital model, allowing us to deploy capital
more effectively and evaluate alternatives to utilize excess capital.
Board and Management Changes
As I reported last year, AIG made changes to its Board of Directors
and management structure that put the company on the leading
edge of progressive corporate governance. Notably,we separated
the Chairman and Chief Executive positions and strengthened the
independence of our Board. In September, Board member Robert B.
Willumstad, former President and Chief Operating Officer of
Citigroup, Inc., was elected non-executive Chairman of the AIG
Board. Mr. Willumstad succeeds interim Chairman Frank G. Zarb,
who remains an AIG director.We are greatly indebted to Mr. Zarb for
his quality leadership during a challenging period for AIG, and to Mr.
Willumstad for making this important commitment to our company.
The AIG Board gained two very talented directors in 2006 with
the elections of Virginia M. Rometty and James F. Orr, III. Ms.
Rometty is Senior Vice President, Global Business Services,
of IBM Corporation with 25 years of experience in systems and
general management. Her guidance will be particularly valuable as
AIG seeks to build competitive advantage through better use of
AIG is on the leading edge of progressive
corporate governance.
AIG finds significant opportunity in
emerging markets such as Vietnam,
where it has thriving life and general
insurance businesses. In 2006, the
company expanded its general
insurance license, which allows it to
sell property-casualty coverages to
individuals in Vietnam. Vietnam has
a population of 84 million people.
Giving back to the communities it
serves is a long-standing AIG tradi-
tion. Pictured here, fellow employees
and family members volunteer at
“AIG Summer of Service Day” to
help with a range of painting projects
at P.S. 48 in the Bronx. The
much-needed painting services were
brought to AIG’s attention by
New York Cares, an organization
that provides hands-on services to
New Yorkers in need.