AIG 2010 Annual Report Download - page 357

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The total unrecognized compensation cost (net of expected forfeitures) related to unvested share-settled
compensation awards and the weighted-average periods over which those costs are expected to be recognized are
as follows:
Weighted-
At December 31, 2010 Unrecognized Average Expected
Compensation Period Period
(in millions) Cost (years) (years)
Plans:
Time-vested RSUs – 2007 Plan $ 4 0.72 2
AIG DCPPP $ 6 0.63 1
AIG Partners Plan $ 3 0.62 1
Total AIG Plans $13 0.65 2
Total SICO Plans $92 5.39 29
Liability Awards
AIG has issued various share-based grants, including restricted stock units, linked to AIG Common Stock, but
providing for cash settlement to certain of its most highly compensated employees and executive officers. Share-
based cash settled awards are recorded as liabilities until the final payout is made or the award is replaced with a
stock-settled award. Unlike share-settled awards, which have a fixed grant-date fair value (unless the award is
subsequently modified), the fair value of unsettled or unvested liability awards is remeasured at the end of each
reporting period based on the change in fair value of one share of AIG Common Stock (except for long term
performance units, the value of which is currently based on only 20 percent of AIG Common Stock as discussed
below). The liability and corresponding expense are adjusted accordingly until the award is settled.
Stock Salary Awards
In 2009, AIG established a program of regular grants of vested stock or restricted stock units that is generally
referred to as ‘‘Stock Salary’’. Stock Salary is determined as a dollar amount through the date that salary is earned
and accrued at the same time or times as the salary would otherwise be paid in cash. Stock Salary was granted to
any individual qualifying as a senior executive officer or one of AIG’s next twenty most highly compensated
employees (the Top 25). Stock salary for a Top 25 employee (other than AIG’s CEO) will be settled in three equal
installments on the first, second and third anniversary of grant. Stock salary granted to any individual qualifying as
an executive officer or one of AIG’s next 75 most highly compensated employees (Top 26-100) will be settled on
either the first or third anniversary of grant in accordance with the terms of an employee’s award. The Stock
Salary grants issued in 2009 were awarded in the form of immediately vested RSUs, and the number of units
awarded was based on the value of AIG Common Stock on the grant date. The RSUs are settled in cash based on
the value of AIG Common Stock on the applicable settlement date. For the 2009 Stock Salary Awards, AIG paid
$18 million to settle awards and recognized compensation expense of $36 million for unsettled awards to reflect
increases in the price of AIG Common Stock during 2010.
In 2010, AIG adopted the Long-Term Performance Units Plan (LTPUs) and awarded Stock Salary in the form
of LTPUs. The units are also fully vested on the date of grant and settlement terms are substantially the same as
the 2009 Stock Salary awards. However, each unit is measured based on the underlying value of a mix of AIG
hybrid securities and AIG Common Stock weighted 80 percent and 20 percent, respectively, on the date of grant.
Both components of the LTPU are market observable. During 2010, compensation expense of approximately
$156 million was recognized related to this plan. By their terms, the LTPUs will be converted into AIG Common
Stock 90 days after the date on which at least 75 percent of the preferred securities in AIG held by the
Department of the Treasury are exchanged for AIG Common Stock. The Recapitalization on January 14, 2011
included the exchange of more than 75 percent of the Department of the Treasury’s preferred holdings for AIG
Common Stock. Accordingly, on April 14, 2011 the AIG hybrid securities portion of any outstanding LTPU will be
AIG 2010 Form 10-K 341