AIG 2009 Annual Report Download - page 327

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following weighted-average assumptions were used for stock options granted:
2008 2007
Expected annual dividend yield(a) 3.77% 1.39%
Expected volatility(b) 53.27% 32.82%
Risk-free interest rate(c) 4.43% 4.08%
Expected term(d) 4 years 7 years
(a) The dividend yield is determined at the grant date.
(b) In 2008 and 2007, expected volatility is the average of historical volatility (based on seven years of daily stock price changes) and the implied
volatility of actively traded options on AIG shares.
(c) The interest rate curves used in the valuation model were the U.S. Treasury STRIP rates with terms from 3 months to 10 years.
(d) In 2008, the expected term is 4 years based on the average time to exercise derived from the output of the valuation model. In 2007, the contractual
term of the option was generally 10 years with an expected term of 7 years calculated based on an analysis of historical employee and executive
exercise behavior and employee turnover (post-vesting terminations). The early exercise rate is a function of time elapsed since the grant. Fifteen years
of historical data were used to estimate the early exercise rate.
The following table provides a roll forward of stock option activity:
As of or for the Year Ended December 31, 2009 Weighted
Average
Weighted Remaining Aggregate
Average Contractual Intrinsic Values
Shares Exercise Price Life (in millions)
Options:
Outstanding at beginning of year 1,713,282 $1,261.56 $ -
Granted - $ - -
Exercised - $ - -
Forfeited or expired (356,527) $1,250.43 -
Cancelled (4,479) $1,319.88 -
Outstanding at end of year*1,352,276 $1,264.30 3.77 $ -
Options exercisable at end of year 1,255,907 $1,292.93 3.43 $ -
Weighted average fair value per share of options granted - $ -
* Includes vested and expected-to-vest options at December 31, 2009 of 1,346,383, with a weighted average exercise price of $1,266.20, a weighted
average contractual life of 3.67 years and a zero aggregate intrinsic value.
At December 31, 2009, total unrecognized compensation cost (net of expected forfeitures) was $16 million with a
blended weighted average period of 0.91 years. The cost of awards outstanding under these plans at December 31,
2009 is expected to be recognized over approximately two years.
The following table provides additional information about stock options:
As of or for the Year Ended December 31,
(in millions, except weighted average grant date fair value of options granted) 2009 2008 2007
Intrinsic value of options exercised*$- $ 2 $ 360
Grant date fair value of options vesting 25 67 63
Weighted average grant date fair value of options granted*-212.20 419.40
Cash received from exercise of stock options -16 482
Tax benefits realized on stock option exercises -116
* There were no options granted or exercised in 2009.
319 AIG 2009 Form 10-K