2007 Annual Report - AIG.com

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American International Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements Continued 17. Share-based Employee Compensation Plans Continued The following table presents a summary of shares relating to outstanding awards unvested under the foregoing plans at December 31, 2007, and changes for the year then ended * : Number of Shares Weighted Average Grant-Date Fair Value Total Total Total Total Time-vested AIG Partners AIG SICO Time-vested AIG Partners AIG SICO RSUs DCPPP Plan Plan Plans RSUs DCPPP Plan Plans Plans Unvested at January 1, 2007 7,181,595 4,590,622 3,607,040 15,379,257 11,443,772 $66.56 $52.09 $56.50 $59.88 $61.72 Granted 4,752,738 — 2,547,620 7,300,358 — 57.90 — 53.93 56.51 — Vested (168,214) (196,690) (550) (365,454) (1,691,306) 63.82 61.44 66.97 62.55 64.18 Forfeited (422,431) (173,472) (1,212,585) (1,808,488) (282,657) 65.34 53.25 56.83 58.47 59.93 Unvested at December 31, 2007 11,343,688 4,220,460 4,941,525 20,505,673 9,469,809 $63.01 $54.53 $55.08 $59.36 $61.27 * Options and DSUs awarded under the 2007 Plan are not included. For the AIG DCPPP, includes all incremental shares granted or to be granted. The total unrecognized compensation cost (net of ex- In 2007, AIG acquired the outstanding minority interest of 21st pected forfeitures) related to non-vested share-based Century. Assets, obligations and costs with respect to 21st compensation awards granted under the 2002 Plan, the Century’s plans are included herein. The assumptions used by 2007 Plan, the AIG DCPPP, and the SICO Plans at 21st Century in its plans were not significantly different from December 31, 2007 and the blended weighted-average those used by AIG in AIG’s U.S. plans. periods over which those costs are expected to be AIG also sponsors several unfunded defined benefit plans for recognized at December 31, 2007 are as follows: certain employees, including key executives, designed to supplement pension benefits provided by AIG’s other retirement plans. Blended Unrecognized Weighted- These include the AIG Excess Retirement Income Plan, which Compensation Average provides a benefit equal to the reduction in benefits payable to (in millions) Cost Period certain employees under the AIG U.S. retirement plan as a result Time-vested RSUs - 2002 Plan $218 1.35 years of federal tax limitations on compensation and benefits payable, Time-vested RSUs - 2007 Plan $209 2.05 years and the Supplemental Executive Retirement Plan (Supplemental AIG DCPPP $146 5.47 years Plan), which provides additional retirement benefits to designated Total AIG Plans $573 2.65 years executives. Under the Supplemental Plan, an annual benefit Total SICO Plans $249 5.93 years accrues at a percentage of final average pay multiplied by each year of credited service, not greater than 60 percent of final The total cost for awards outstanding at December 31, 2007 average pay, reduced by any benefits from the current and any under the 2002 Plan, the 2007 Plan, the AIG DCPPP and the predecessor retirement plans (including the AIG Excess Retire- SICO Plans is expected to be recognized over approximately ment Income Plan and any comparable plans), Social Security, if 4 years, 4 years, 32 years and 32 years, respectively. any, and from any qualified pension plan of prior employers. 18. Employee Benefits Postretirement Plans Pension Plans AIG and its subsidiaries also provide postretirement medical care and life insurance benefits in the U.S. and in certain non-U.S. countries. Eligibility in the various plans is generally based upon completion of a specified period of eligible service and attaining a specified age. Overseas, benefits vary by geo- graphic location. U.S. postretirement medical and life insurance benefits are based upon the employee electing immediate retirement and having a minimum of ten years of service. Medical benefits are contributory, while the life insurance benefits are non-contributory. Retiree medical contributions vary with age and length of service and range from requiring no cost for pre-1989 retirees to requiring actual premium payments reduced by certain credits for post- 1993 retirees. These contributions are subject to adjustment annually. Other cost sharing features of the medical plan include deductibles, coinsurance and Medicare coordination and a lifetime maximum benefit of $2 million. AIG, its subsidiaries and certain affiliated companies, offer various defined benefit plans to eligible employees based on either completion of a specified period of continuous service or date of hire, subject to age limitations. AIG’s U.S. retirement plan is a qualified, noncontributory defined benefit plan which is subject to the provisions of ERISA. U.S. employees who are employed by a participating company, have attained age 21 and completed twelve months of continuous service are eligible to participate in this plan. Employees generally vest after 5 years of service. Unreduced benefits are paid to retirees at normal retirement (age 65) and are based upon a percentage of final average compensation multiplied by years of credited service, up to 44 years. Non-U.S. defined benefit plans are generally either based on the employee’s years of credited service and compensation in the years preceding retirement, or on points accumulated based on the employee’s job grade and other factors during each year of service. 188 AIG 2007 Form 10-K
American International Group, Inc. and Subsidiaries 18. Employee Benefits Continued The following table presents the funded status of the plans, reconciled to the amount reported in the consolidated balance sheet at December 31, 2007 and 2006. The measurement date for some of the non-U.S. defined benefit pension and postretirement plans is November 30, consistent with the fiscal year end of the sponsoring companies. For all other plans, measurement occurs as of December 31, 2007. Pension Postretirement (a) Non-U.S. Plans (b) U.S. Plans (c) Non-U.S. Plans U.S. Plans (in millions) 2007 2006 2007 2006 2007 2006 2007 2006 Change in projected benefit obligation: Benefit obligation, beginning of year $1,578 $1,351 $3,079 $3,131 $53 $43 $ 252 $ 205 Service cost 90 78 135 130 5 4 11 6 Interest cost 50 36 186 169 3 2 15 11 Participant contributions 4 1 — — — — — — Actuarial (gain) loss (12) (40) (159) (245) (2) 5 (3) (1) Plan amendments and mergers (2) — 17 — — — — 47 Benefits paid: AIG assets (36) (28) (11) (10) (1) (1) (18) (16) Plan assets (43) (27) (91) (84) — — — — Effect of foreign currency fluctuation 78 71 — — 4 — — — Other 38 136 — (12) 17 — — — Projected benefit obligation, end of year $1,745 $1,578 $3,156 $3,079 $79 $53 $ 257 $ 252 Change in plan assets: Fair value of plan assets, at beginning of year $ 850 $ 699 $2,760 $2,561 $ — $— $ — $ — Actual return on plan assets, net of expenses 36 33 162 282 — — — — AIG contributions 87 69 309 11 1 1 18 16 Participant contributions 4 1 — — — — — — Benefits paid: AIG assets (36) (28) (11) (10) (1) (1) (18) (16) Plan assets (43) (27) (91) (84) — — — — Effect of foreign currency fluctuation 51 41 — — — — — — Other 3 62 — — — — — — Fair value of plan assets, end of year $ 952 $ 850 $3,129 $2,760 $ — $— $ — $ — Funded status, end of year $ (793) $ (728) $ (27) $ (319) $(79) $(53) $(257) $(252) Amounts recognized in the consolidated balance sheet: Assets $ 28 $ 18 $ 228 $ — $ — $— $ — $ — Liabilities (821) (746) (255) (319) (79) (53) (257) (252) Total amounts recognized $ (793) $ (728) $ (27) $ (319) $(79) $(53) $(257) $(252) Amounts recognized in Accumulated other comprehensive income (loss): Net loss $ 242 $ 256 $ 513 $ 687 $ 6 $ 7 $ (5) $ 3 Prior service cost (credit) (67) (72) (2) (20) — — 23 22 Total amounts recognized $ 175 $ 184 $ 511 $ 667 $ 6 $ 7 $ 18 $ 25 (a) AIG does not currently fund postretirement benefits. (b) Includes unfunded plans for which the aggregate pension benefit obligation was $559 million and $494 million at December 2007, and 2006, respectively. For 2007 and 2006, approximately 83% pertain to Japanese plans, which are not required by local regulation to be funded. The projected benefit obligation for these plans total $464 million and $414 million, respectively. (c) Includes non-qualified unfunded plans, for which the aggregate projected benefit obligation was $240 million and $228 million at December 2007 and 2006, respectively. AIG 2007 Form 10-K 189
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AMERICAN INTERNATIONAL GROUP, INC.
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FINANCIAL HIGHLIGHTS (in millions,
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overall financial condition, althou
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Group Executive Committee We are ad
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AIG’s life insurance network is t
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We have also begun to address the e
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WHAT WE SEE The ability to see and
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The Major Accounts Practice within
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Around the world, the middle class
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WE SEE GROWTH OPPORTUNITIES IN EMER
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To grow the strength of the AIG glo
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Since 2003, the AIG Disaster Relief
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RESPECT Respect encompasses how we
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Life Insurance & Retirement Service
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Domestic Brokerage Group— Gross P
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In the summer of 2007, widespread f
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in gross premiums written. It launc
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It grew new business premiums from
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emerging markets for its services,
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ILFC—Revenues by Region Total = $
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AIG Investments acquired a 94 perce
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and changing interest rates, as wel
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American International Group, Inc.
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UNITED STATES SECURITIES AND EXCHAN
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Page 191 and 192: Index of Notes to Consolidated Fina
Page 193 and 194: American International Group, Inc.
Page 241: American International Group, Inc.
Page 275 and 276: SHAREHOLDER INFORMATION Corporate H
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2007 Annual Report - AIG.com

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