2007 Annual Report - AIG.com

American International Group, Inc. and Subsidiaries
18. Employee Benefits
amount credited to additional paid-in capital reflecting amounts
Continued
deemed contributed by SICO. The SICO Plans provide that shares
Expected Cash Flows
currently owned by SICO are set aside by SICO for the benefit of
the participant and distributed upon retirement. The SICO Board
Funding for the U.S. pension plan ranges from the minimum of Directors currently may permit an early payout of units under
amount required by ERISA to the maximum amount that would be certain circumstances. Prior to payout, the participant is not
deductible for U.S. tax purposes. This range is generally not entitled to vote, dispose of or receive dividends with respect to
determined until the fourth quarter. Contributed amounts in such shares, and shares are subject to forfeiture under certain
excess of the minimum amounts are deemed voluntary. Amounts conditions, including but not limited to the participant’s voluntary
in excess of the maximum amount would be subject to an excise termination of employment with AIG prior to normal retirement
tax and may not be deductible under the Internal Revenue Code. age. Under the SICO Plans, SICO’s Board of Directors may elect
Supplemental and excess plans’ payments and postretirement to pay a participant cash in lieu of shares of AIG common stock.
plan payments are deductible when paid.
Following notification from SICO to participants in the SICO Plans
During 2007 AIG contributed $396 million to its U.S. and that it will settle specific future awards under the SICO Plans with
non-U.S. pension plans. The annual pension contribution in 2008 shares rather than cash, AIG modified its accounting for the SICO
is expected to be approximately $118 million for U.S. and
Plans from variable to fixed measurement accounting. AIG gave
non-U.S. plans.
effect to this change in settlement method beginning on December
9, 2005, the date of SICO’s notice to participants in the SICO
The expected future benefit payments, net of partici-
Plans. See also Note 12(a) Commitments herein.
pants’ contributions, with respect to the defined benefit
Compensation expense in 2006 included various out of period
pension plans and other postretirement benefit plans, are
adjustments totaling $61 million, primarily relating to stock-splits
as follows:
and other miscellaneous items for the SICO plans. See also
Pension Postretirement Note 17 herein.
(in millions)
Non-U.S. U.S. Non-U.S. U.S. In January 2006, C.V. Starr & Co., Inc. (Starr) completed its
Plans Plans Plans Plans
tender offer to purchase Starr interests from AIG employees. In
2008 $ 74 $ 135 $ 1 $ 17 conjunction with AIG’s adoption of FAS 123R, Starr is considered
2009 79 130 1 17 to be an ‘‘economic interest holder’’ in AIG. As a result,
2010 79 139 1 18 compensation expense of $54 million was recorded in 2006
2011 85 150 1 18
results with respect to the Starr tender offer.
2012 85 163 2 19
As a result of its changing relationship with Starr and SICO,
2013-2017 474 1,022 10 102
AIG has established new executive compensation plans to replace
Defined Contribution Plans
the SICO plans and investment opportunities previously provided
by Starr. See Note 17 for a description of these plans.
In addition to several small defined contribution plans, AIG
Compensation expense with respect to the SICO Plans aggresponsors
a voluntary savings plan for domestic employees (the gated $39 million, $108 million and $205 million in 2007, 2006
AIG Incentive Savings plan), which provides for salary reduction and 2005, respectively.
contributions by employees and matching contributions by AIG of
up to seven percent of annual salary depending on the employees’
years of service. Pre-tax expense associated with this plan
20. Ownership and Transactions With
Related Parties
was $114 million, $104 million and $96 million in 2007, 2006
and 2005, respectively.
(a) Ownership: According to the Schedule 13D filed on
March 20, 2007 by Starr, SICO, Edward E. Matthews, Maurice R.
Greenberg, the Maurice R. and Corinne P. Greenberg Family
19. Benefits Provided by Starr International
Foundation, Inc., the Universal Foundation, Inc., the Maurice R.
Company, Inc. and C.V. Starr & Co., Inc.
and Corinne P. Greenberg Joint Tenancy Company, LLC and the
SICO has provided a series of two-year Deferred Compensation C.V. Starr & Co., Inc. Trust, these reporting persons could be
Profit Participation Plans (SICO Plans) to certain AIG employees. deemed to beneficially own 354,987,261 shares of AIG’s common
The SICO Plans came into being in 1975 when the voting
stock at that date. Based on the shares of AIG’s common stock
shareholders and Board of Directors of SICO, a private holding outstanding at January 31, 2008, this ownership would represent
company whose principal asset is AIG common stock, decided approximately 14.1 percent of the voting stock of AIG. Although
that a portion of the capital value of SICO should be used to these reporting persons have made filings under Section 16 of
provide an incentive plan for the current and succeeding manage- the Exchange Act, reporting sales of shares of common stock, no
ments of all American International companies, including AIG. amendment to the Schedule 13D has been filed to report a
None of the costs of the various benefits provided under the change in ownership subsequent to March 20, 2007.
SICO Plans has been paid by AIG, although AIG has recorded a
(b) Transactions with Related Parties: Prior to the terminacharge
to reported earnings for the deferred compensation
tion of their agency relationships with Starr during 2006, AIG and
amounts paid to AIG employees by SICO, with an offsetting
AIG 2007 Form 10-K 193