AIG 2008 Annual Report Download - page 301

restrictions other than restrictions necessary to comply with U.S. federal and state securities laws. AIG is obligated,
at the request of the United States Department of the Treasury, to file a registration statement with respect to the
Warrant and the common stock for which the Warrant can be exercised. During the ten-year term of the Warrant, if
the shares of common stock of AIG are no longer listed or trading on a national securities exchange, AIG may be
obligated, at the direction of the United States Department of the Treasury, to exchange all or a portion of the
Warrant for another economic interest of AIG classified as permanent equity under U.S. GAAP with an equivalent
fair value. If the Series D Preferred Stock issued in connection with the Warrant is redeemed in whole or transferred
to third parties, AIG may repurchase the Warrant then held by the United States Department of the Treasury at any
time for its fair market value so long as the Trust does not control or have the potential to control AIG through Board
of Director representation.
Dividends
Dividends declared per common share were $0.42, $0.77, and $0.65 in 2008, 2007, and 2006, respectively.
Effective September 23, 2008, AIG’s Board of Directors suspended the declaration of dividends on AIG’s common
stock. Pursuant to the Fed Credit Agreement, AIG is restricted from paying dividends on its common stock. In
addition, pursuant to the terms of the Series D Preferred Stock, AIG is not able to declare or pay any dividends on
AIG’s common stock or on any AIG preferred stock ranking pari passu with or junior to the Series D Preferred
Stock until dividends on the Series D Preferred Stock have been paid.
Share Issuance and Repurchases
In February 2007, AIG’s Board of Directors increased AIG’s share repurchase program by authorizing the
purchase of shares with an aggregate purchase price of $8 billion. In November 2007, AIG’s Board of Directors
authorized the purchase of an additional $8 billion in common stock. In 2007, AIG entered into structured share
repurchase arrangements providing for the purchase of shares over time with an aggregate purchase price of
$7 billion.
A total of 37,926,059 shares were purchased during the first six months of 2008 to meet commitments that
existed at December 31, 2007. There were no repurchases during the third and fourth quarters of 2008. At
February 18, 2009, $9 billion was available for purchases under the aggregate authorizations.
Pursuant to the Fed Credit Agreement, however, AIG is restricted from repurchasing shares of its common
stock.
In May 2008, AIG sold 196,710,525 shares of common stock at a price per share of $38 for gross proceeds of
$7.47 billion and 78,400,000 equity units (the Equity Units) at a price per unit of $75 for gross proceeds of
$5.88 billion. The Equity Units, the key terms of which are summarized below, are recorded as long-term debt in the
consolidated balance sheet.
Equity Units
Each Equity Unit has an initial stated amount of $75 and consists of a stock purchase contract issued by AIG
and, initially, a 1/40th or 2.5 percent undivided beneficial ownership interest in three series of junior subordinated
debentures (Series B-1, B-2 and B-3), each with a principal amount of $1,000.
Each stock purchase contract requires its holder to purchase, and requires AIG to sell, a variable number of
shares of AIG common stock for $25 in cash on each of February 15, 2011, May 1, 2011 and August 1, 2011. The
number of shares that AIG is obligated to deliver on each stock purchase date is set forth in the chart below (where
the “applicable market value” is an average of the trading prices of AIG’s common stock over the 20-trading-day
period ending on the third business day prior to the relevant stock purchase date).
AIG 2008 Form 10-K 295
American International Group, Inc., and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)