AIG 2009 Annual Report Download - page 315

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Benefits Provided by Starr International Company, Inc. and C.V. Starr & Co., Inc.
SICO has provided a series of two-year Deferred Compensation Profit Participation Plans (SICO Plans) to certain
AIG employees. The SICO Plans were created in 1975 when the voting shareholders and Board of Directors of SICO,
a private holding company whose principal asset is AIG Common Stock, decided that a portion of the capital value of
SICO should be used to provide an incentive plan for the current and succeeding managements of all American
International companies, including AIG.
None of the costs of the various benefits provided under the SICO Plans has been paid by AIG, although AIG has
recorded a charge to reported earnings for the deferred compensation amounts paid to AIG employees by SICO, with
an offsetting amount credited to Additional paid-in capital reflecting amounts considered to be contributed by SICO.
The SICO Plans provide that shares currently owned by SICO are set aside by SICO for the benefit of the participant
and distributed upon retirement. The SICO Board of Directors currently may permit an early payout of units under
certain circumstances. Prior to payout, the participant is not entitled to vote, dispose of or receive dividends with
respect to such shares, and shares are subject to forfeiture under certain conditions, including but not limited to the
participant’s voluntary termination of employment with AIG prior to normal retirement age. Under the SICO Plans,
SICO’s Board of Directors may elect to pay a participant cash in lieu of shares of AIG Common Stock. Following
notification from SICO to participants in the SICO Plans that it will settle specific future awards under the SICO
Plans with shares rather than cash, AIG modified its accounting for the SICO Plans from variable to fixed
measurement accounting. AIG gave effect to this change in settlement method beginning on December 9, 2005, the
date of SICO’s notice to participants in the SICO Plans.
(d) Guarantees
• See Note 10 herein for commitments and guarantees associated with VIEs.
• See Note 11 herein for disclosures on derivatives, including AIGFP and MIP written credit default swaps and
other derivatives with credit risk-related contingent features.
• See Note 14 herein for additional disclosures on guarantees of outstanding debt.
Subsidiaries
AIG has issued unconditional guarantees with respect to the prompt payment, when due, of all present and future
payment obligations and liabilities of AIG Financial Products and certain of its subsidiaries arising from transactions
entered into by such companies.
SAI Deferred Compensation Holdings, Inc., a wholly owned subsidiary of AIG, has established a deferred
compensation plan for registered representatives of certain AIG subsidiaries, pursuant to which participants have the
opportunity to invest deferred commissions and fees on a notional basis. The value of the deferred compensation
fluctuates with the value of the deferred investment alternatives chosen. AIG has provided a full and unconditional
guarantee of the obligations of SAI Deferred Compensation Holdings, Inc. to pay the deferred compensation under
the plan. In December 2008, AIG terminated the plan for current employees and ceased to permit new deferrals into
the plan.
In connection with AIGFP’s leasing business, AIGFP has issued, in a limited number of transactions, standby letters
of credit or similar facilities to equity investors in an amount equal to the termination value owing to the equity
investor by the lessee in the event of a lessee default (the equity termination value). The total amount outstanding at
December 31, 2009 was $1.3 billion. In those transactions, AIGFP has agreed to pay such amount if the lessee fails to
pay. The amount payable by AIGFP is usually, but not always, partially offset by amounts payable under other
instruments typically equal to the accreted value of a deposit held by AIGFP. In the event AIGFP is required to make
a payment to the equity investor, the lessee is unconditionally obligated to reimburse AIGFP. To the extent the equity
investor is paid the equity termination value from the standby letter of credit and/or other sources, including payments
by the lessee, AIGFP takes an assignment of the equity investor’s rights under the lease of the underlying property.
307 AIG 2009 Form 10-K