AIG 2013 Annual Report Download - page 328

AIG Common Stock based on AIG achieving specified performance measures at the end of the three-year
performance period. These performance measures are based on AIG’s total shareholder return (TSR) and growth in
tangible book value per share (TBVPS) (excluding Accumulated other comprehensive income) relative to a specified
peer group, and are weighted at 50 percent each. The actual number of PSUs earned can vary from zero to
150 percent of the target depending on AIG’s performance relative to the peer group. Vesting occurs in three equal
installments beginning on January 1 of the year immediately following the end of the performance period and
January 1 of each of the next two years, resulting in a graded vesting schedule of up to five years. Dividends do not
accrue on awards until the shares are delivered. Recipients must be employed at each vesting date to be entitled to
share delivery, except upon the occurrence of an accelerated vesting event, such as an involuntary termination
without cause, disability, retirement or retirement eligibility during the vesting period. Awards made under the 2013
LTIP prior to May 2013 were issued under the 2010 Plan; awards made subsequently were issued under the 2013
Plan.
The SICO Plans provide that shares of AIG Common Stock currently held by SICO are set aside for the benefit of
the participant and distributed upon retirement. The SICO Board of Directors currently may permit an early payout of
shares 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 termination of employment with us prior to normal retirement age. A significant portion of
the awards under the SICO Plans vest the year after the participant reaches age 65, provided that the participant
remains employed by us through age 65. The portion of the awards for which early payout is available vests on the
applicable payout date.
SICO Plan awards issued in the form of restricted stock were valued based on the closing price of AIG’s Common
Stock on the grant date. Although none of the costs of the various benefits provided under the SICO Plans have
been paid by us, we have recorded compensation expense for the deferred compensation amounts payable to our
employees by SICO, with an offsetting amount credited to Additional paid-in capital reflecting amounts deemed
contributed by SICO.
Our non-employee directors, who serve on AIG’s Board of Directors, receive share-based compensation in the form
of deferred stock units (DSUs) with delivery deferred until retirement from the Board. In 2013, we granted to
non-employee directors 25,735 DSUs under the 2013 Plan, and in 2012 and 2011, we granted 19,434 and 21,203
DSUs, respectively, under the 2010 Plan.
The fair value of a PSU that will be earned based on AIG’s achieving growth in TBVPS relative to a specified peer
group was based on the closing price of AIG Common Stock on the grant date; off cycle grants issued after
August 1, 2013 were discounted because PSUs are not entitled to dividends during the vesting periods. The fair
value of a PSU that will be earned based on AIG’s TSR relative to a specified peer group was determined on the
grant date using a Monte Carlo simulation.
The following table presents the assumptions used to estimate the fair value of PSUs based on AIG’s TSR:
Expected dividend yield(a) 0.38%
Expected volatility(b) 30.79%
Risk-free interest rate(c) 0.50%
(a) The dividend yield is the projected annualized AIG dividend yield estimated by Bloomberg Professional service as of the valuation date.
(b) The expected volatility is equal to the interpolated value between the implied volatilities of actively traded stock options with maturities that are
closest to the PSU term to maturity.
(c) The risk-free interest rate is the continuously compounded interest rate for the term between the valuation date and maturity date that is
assumed to be constant and equal to the interpolated value between the closest data points on the U.S. dollar LIBOR-swap curve as of the
valuation date.
SICO Plans
Non-Employee Plans
Performance Share Unit Valuation
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AIG 2013 Form 10-K310
ITEM 8 / NOTE 20. SHARE-BASED AND OTHER COMPENSATION PLANS
2013
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