AMERICAN INTERNATIONAL GROUP INC | 2013 | FY | 3


16. EQUITY

 

 

Shares Outstanding

 

The following table presents a rollforward of outstanding shares:

 

   
 
  Preferred Stock    
   
   
 
 
  Common
Stock Issued

  Treasury
Stock

  Common Stock
Outstanding

 
 
  AIG Series E
  AIG Series F
  AIG Series C
  AIG Series G
 
   

Year Ended December 31, 2011

                                           

Shares, beginning of year

    400,000     300,000     100,000         147,124,067     (6,660,908 )   140,463,159  

Issuances

                20,000     100,799,653         100,799,653  

Settlement of equity unit stock purchase contracts

                    3,606,417         3,606,417  

Shares exchanged

    (400,000 )   (300,000 )   (100,000 )       1,655,037,962     (11,678 )   1,655,026,284  

Shares purchased

                        (3,074,031 )   (3,074,031 )

Shares cancelled

                (20,000 )          
   

Shares, end of year

                    1,906,568,099     (9,746,617 )   1,896,821,482
   

Year Ended December 31, 2012

                                           

Shares, beginning of year

                            1,906,568,099     (9,746,617 )   1,896,821,482  

Issuances

                            43,581     685,727     729,308  

Shares purchased

                                (421,228,855 )   (421,228,855 )
   

Shares, end of year

                            1,906,611,680     (430,289,745 )   1,476,321,935
   

Year Ended December 31, 2013

                                           

Shares, beginning of year

                            1,906,611,680     (430,289,745 )   1,476,321,935  

Shares issued

                            34,009     24,778     58,787  

Shares repurchased

                                (12,317,399 )   (12,317,399 )
   

Shares, end of year

                            1,906,645,689     (442,582,366 )   1,464,063,323
   

 

Preferred Stock and Recapitalization

 

On January 14, 2011, we completed the Recapitalization in which the Series C Perpetual, Convertible, Participating Preferred Stock, par value $5.00 per share (the Series C Preferred Stock), Series E Fixed Rate Non-Cumulative Perpetual Preferred Stock, par value $5.00 per share (the Series E Preferred Stock) and the Series F Preferred Stock were exchanged for AIG Common Stock and the Series G Cumulative Mandatory Convertible Preferred Stock, par value $5.00 per share (the Series G Preferred Stock) was issued. In connection with the Recapitalization, we repaid all amounts outstanding under the FRBNY Credit Facility. In connection with the May 2011 AIG Common Stock Offering (described below under AIG Common Stock Offerings by the Department of the Treasury and AIG Purchases of AIG Common Stock in 2012), the Series G Preferred Stock was cancelled.

The following table presents the principal Consolidated Balance Sheet line items affected by the Recapitalization on January 14, 2011, further described in Note 24 herein:

 

   
 
  Effect of Recapitalization    
 
Increase (Decrease)
(in millions)
  Repayment
and
Termination
of FRBNY
Credit Facility(a)

  Repurchase
and Exchange
of SPV
Preferred
Interests

  Exchange
of Preferred
Stock for
Common
Stock(c)

  Total Effect of
Recapitalization

 
   

Other assets

  $ (24,297 ) $ (6,140 )(b) $   $ (30,437 )

Other liabilities

    (325 )           (325 )

Federal Reserve Bank of New York credit facility

    (20,689 )           (20,689 )

Redeemable noncontrolling nonvoting, callable, junior preferred interests held by Department of Treasury

       
20,292
       
20,292
 

AIG shareholders' equity:

                         

Preferred stock

                         

Series C preferred stock                              

            (23,000 )   (23,000 )

Series E preferred stock                              

            (41,605 )   (41,605 )

Series F preferred stock                              

        20,292     (7,378 )   (7,378 )

 

          (20,292 )            

Series G preferred stock; 20,000 shares issued; liquidation value $0(d)                               

                 

Common stock                              

            4,138     4,138  

Additional paid-in capital

            67,845     67,845  

Retained Earnings

    (3,283 )           (3,283 )

Noncontrolling nonvoting, callable, junior and senior preferred interests held by Federal Reserve Bank of New York

        (26,432 )       (26,432 )

Shares outstanding

                1,655,037,962     1,655,037,962
   

(a)  Repayment and Termination of the FRBNY Credit Facility — Funds held in escrow and included in Other assets from the AIA IPO and the ALICO sale were used to repay the FRBNY Credit Facility. The adjustments to Other assets and Accumulated deficit reflects the write-off of the unamortized portion of the net prepaid commitment fee asset.

(b)  Repurchase and Exchange of SPV Preferred Interests — We used remaining net cash proceeds from the AIA IPO and the ALICO sale to pay down a portion of the liquidation preference on the SPV Preferred Interests held by the FRBNY and drew down approximately $20.3 billion under the Department of the Treasury Commitment (Series F) to repurchase the FRBNY's remaining SPV Preferred Interests, which we then transferred to the Department of the Treasury as part of the consideration for the exchange of the Series F Preferred Stock.

(c)  Exchange of our Series C, E and F Preferred Stock for AIG Common Stock. The adjustments represent the exchange of Series C Preferred Stock, Series E Preferred Stock, and Series F Preferred Stock for AIG Common Stock. As a result of the Recapitalization, the Department of the Treasury acquired 1,655,037,962 shares of newly issued AIG Common Stock.

(d)  In connection with the May 2011 AIG Common Stock offering and sale, the Series G Preferred Stock was cancelled.

The following table presents a rollforward of preferred stock:

 

   
(in millions)
  AIG Series E
  AIG Series F
  AIG Series C
  Total
Preferred
Stock

 
   

Balance, January 1, 2011

  $ 41,605   $ 7,378   $ 23,000   $ 71,983  

Shares Exchanged

    (41,605 )   (7,378 )   (23,000 )   (71,983 )
   

Balance, December 31, 2011

  $   $   $   $
   

Dividends and Repurchase of AIG Common Stock

 

Payment of future dividends to our shareholders and repurchases of AIG Common Stock depends in part on the regulatory framework that we are currently subject to and that will ultimately be applicable to us, including as a savings and loan holding company, a systemically important financial institution under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) and a global systemically important insurer. In addition, dividends are payable on AIG Common Stock only when, as and if declared by our Board of Directors in its discretion, from funds legally available therefor. In considering whether to pay a dividend or purchase shares of AIG Common Stock, our Board of Directors considers such matters as the performance of our businesses, our consolidated financial condition, results of operations and liquidity, available capital, the existence of investment opportunities, contractual, legal and regulatory restrictions on the payment of dividends by our subsidiaries, rating agency considerations, including the potential effect on our debt ratings, and such other factors as our Board of Directors may deem relevant.

AIG paid a dividend of $0.10 per share on AIG Common Stock on each of September 26, 2013 and December 19, 2013.

On August 1, 2013, our Board of Directors authorized the repurchase of shares of AIG Common Stock, with an aggregate purchase price of up to $1.0 billion, from time to time in the open market, private purchases, through forward, derivative, accelerated repurchase or automatic repurchase transactions or otherwise. The timing of such repurchases will depend on market conditions, our financial condition, results of operations, liquidity and other factors. For the year ended December 31, 2013, we repurchased approximately 12 million shares of AIG Common Stock for an aggregate purchase price of approximately $597 million pursuant to this authorization.

Share Issuances and Purchases

 

AIG Common Stock Offerings by the Department of the Treasury and AIG Purchases of AIG Common Stock in 2012

 

Through registered public offerings, the Department of the Treasury has disposed of all of its ownership of AIG Common Stock as of December 31, 2012, from ownership of approximately 92 percent (1.7 billion shares) prior to the completion of the first registered public offering initiated by the Department of the Treasury as selling shareholder in May 2011. During 2012, the Department of the Treasury, as selling shareholder, completed registered public offerings of AIG Common Stock on March 13 (the March Offering), May 10 (the May Offering), August 8 (the August Offering), September 14 (the September Offering) and December 14 (the December Offering). We participated as a purchaser in the first four 2012 offerings. Each of these purchases was authorized by our Board of Directors.

The following table presents certain information relating to these offerings:

 

   
 
   
  U.S. Treasury   AIG*  
(dollars in millions, except share-price data)
  Price
  Shares Sold
  Amount
  Shares Purchased
  Amount
 
   

May 2011 Offering

  $ 29.00     200,000,000   $ 5,800       $  

2012 Offerings:

                               

March Offering

    29.00     206,896,552     6,000     103,448,276     3,000  

May Offering                              

    30.50     188,524,589     5,750     65,573,770     2,000  

August Offering

    30.50     188,524,590     5,750     98,360,656     3,000  

September Offering

    32.50     636,923,075     20,700     153,846,153     5,000  

December Offering

    32.50     234,169,156     7,610        
   

 

          1,655,037,962   $ 51,610     421,228,855   $ 13,000
   

*  Shares purchased by us in each of the 2012 offerings were purchased pursuant to AIG Board of Directors authorization. In connection with the May 2011 Offering, AIG issued and sold 100 million shares of AIG Common Stock for aggregate net proceeds of approximately $2.9 billion.

AIG Common Stock Purchases in 2011

 

In November 2011, our Board of Directors authorized the purchase of shares of AIG Common Stock, with an aggregate purchase amount of up to $1 billion from time to time in the open market, through derivative or automatic purchase contracts or otherwise. This authorization replaced all prior AIG Common Stock purchase authorizations. We purchased a total of 3,074,031 shares of AIG Common Stock for approximately $70 million in 2011.

Equity Units

 

In 2011, we remarketed the three series of debentures (the Series B-1, B-2 and B-3 junior subordinated debentures) included in the Equity Units. The Equity Units also included a stock purchase contract obligating the holder of an Equity Unit to purchase, and obligating AIG to sell, a variable number of shares of AIG Common Stock for $25 per share in cash. We purchased and retired all of the Series B-1, B-2 and B-3 junior subordinated debentures representing $2.2 billion in aggregate principal and as of December 31, 2011, we had issued approximately 1.8 billion shares of AIG Common Stock in connection with the settlement of the stock purchase contracts underlying the Equity Units.

 

Accumulated Other Comprehensive Income

 

The following table presents a rollforward of Accumulated other comprehensive income:

 

   
(in millions)
  Unrealized Appreciation
(Depreciation) of Fixed
Maturity Investments
on Which Other-Than-
Temporary Credit
Impairments
Were Recognized

  Unrealized
Appreciation
(Depreciation)
of All Other
Investments

  Foreign
Currency
Translation
Adjustments

  Net Derivative
Gains (Losses)
Arising from
Cash Flow
Hedging
Activities

  Change in
Retirement
Plan
Liabilities
Adjustment

  Total
 
   

Balance, January 1, 2011

  $ (634 ) $ 9,855   $ 553   $ (34 ) $ (869 ) $ 8,871  

Change in unrealized appreciation of investments

    55     5,463                 5,518  

Change in deferred policy acquisition costs adjustment and other

    11     (641 )               (630 )

Change in future policy benefits*

        (2,302 )               (2,302 )

Change in foreign currency translation adjustments

            (97 )           (97 )

Change in net derivative gains arising from cash flow hedging activities

                51         51  

Net actuarial loss

                    (752 )   (752 )

Prior service credit

                    387     387  

Change attributable to divestitures and deconsolidations

    23     (3,643 )   (1,681 )       260     (5,041 )

Deferred tax asset (liability)

    (163 )   (362 )   786     (34 )   35     262
   

Total other comprehensive income (loss)

    (74 )   (1,485 )   (992 )   17     (70 )   (2,604 )
   

Acquisition of noncontrolling interests

        45     66         (18 )   93  

Noncontrolling interests

    3     (160 )   36             (121 )
   

Balance, December 31, 2011

  $ (711 ) $ 8,575   $ (409 ) $ (17 ) $ (957 ) $ 6,481
   

Change in unrealized appreciation of investments

    2,306     8,404                 10,710  

Change in deferred policy acquisition costs adjustment and other

    (49 )   (840 )               (889 )

Change in future policy benefits

    (85 )   (432 )               (517 )

Change in foreign currency translation adjustments

            (33 )           (33 )

Change in net derivative gains arising from cash flow hedging activities

                33         33  

Net actuarial loss

                    (273 )   (273 )

Prior service credit

                    (46 )   (46 )

Deferred tax asset (liability)

    (886 )   (2,252 )   33     (16 )   232     (2,889 )
   

Total other comprehensive income (loss)

    1,286     4,880         17     (87 )   6,096  

Noncontrolling interests

        9     (6 )           3
   

Balance, December 31, 2012

  $ 575   $ 13,446   $ (403 ) $   $ (1,044 ) $ 12,574
   

Change in unrealized appreciation (depreciation) of investments

    464     (14,069 )               (13,605 )

Change in deferred policy acquisition costs adjustment and other

    (127 )   1,000                 873  

Change in future policy benefits

    79     2,658                 2,737  

Change in foreign currency translation adjustments

            (454 )           (454 )

Net actuarial gain

                    1,012     1,012  

Prior service cost

                    (51 )   (51 )

Deferred tax asset (liability)

    (55 )   3,738     (102 )       (330 )   3,251
   

Total other comprehensive income (loss)

    361     (6,673 )   (556 )       631     (6,237 )

Noncontrolling interests

        (16 )   (7 )           (23 )
   

Balance, December 31, 2013

  $ 936   $ 6,789   $ (952 ) $   $ (413 ) $ 6,360
   

*     The adjustment to policyholder benefit reserves assumes that the unrealized appreciation on available for sale securities is actually realized and that the proceeds are reinvested at lower yields.

The following table presents the other comprehensive income (loss) reclassification adjustments for the years ended December 31, 2013, 2012 and 2011:

 

   
(in millions)
  Unrealized Appreciation
(Depreciation) of Fixed
Maturity Investments
on Which Other-Than-
Temporary Credit
Impairments Were
Recognized

  Unrealized
Appreciation
(Depreciation)
of All Other
Investments

  Foreign
Currency
Translation
Adjustments

  Net Derivative
Gains (Losses)
Arising from
Cash Flow
Hedging
Activities

  Change in
Retirement
Plan
Liabilities
Adjustment

  Total
 
   

December 31, 2011

                                     

Unrealized change arising during period

  $ 84   $ 4,222   $ (97 ) $ (5 ) $ (440 ) $ 3,764  

Less: Reclassification adjustments included in net income

    (5 )   5,345     1,681     (56 )   (335 )   6,630
   

Total other comprehensive income
(loss), before income tax expense (benefit)

    89     (1,123 )   (1,778 )   51     (105 )   (2,866 )

Less: Income tax expense (benefit)

    163     362     (786 )   34     (35 )   (262 )
   

Total other comprehensive income (loss), net of income tax expense (benefit)

  $ (74 ) $ (1,485 ) $ (992 ) $ 17   $ (70 ) $ (2,604 )
   

December 31, 2012

                                     

Unrealized change arising during period

  $ 2,236   $ 8,896   $ (33 ) $ (2 ) $ (406 ) $ 10,691  

Less: Reclassification adjustments included in net income

    64     1,764         (35 )   (87 )   1,706
   

Total other comprehensive income (loss), before income tax expense (benefit)

    2,172     7,132     (33 )   33     (319 )   8,985  

Less: Income tax expense (benefit)

    886     2,252     (33 )   16     (232 )   2,889
   

Total other comprehensive income (loss), net of income tax expense (benefit)

  $ 1,286   $ 4,880   $   $ 17   $ (87 ) $ 6,096
   

December 31, 2013

                                     

Unrealized change arising during period

  $ 507   $ (9,556 ) $ (454 ) $   $ 851   $ (8,652 )

Less: Reclassification adjustments included in net income

    91     855             (110 )   836
   

Total other comprehensive income (loss), before income tax expense (benefit)

    416     (10,411 )   (454 )       961     (9,488 )

Less: Income tax expense (benefit)

    55     (3,738 )   102         330     (3,251 )
   

Total other comprehensive income (loss), net of income tax expense (benefit)

  $ 361   $ (6,673 ) $ (556 ) $   $ 631   $ (6,237 )
   

The following table presents the effect of the reclassification of significant items out of Accumulated other comprehensive income on the respective line items in the Consolidated Statements of Income:

 

   
 
  Amount Reclassified
from Accumulated Other
Comprehensive Income
   
 
(in millions)
  Year Ended
December 31, 2013

  Affected Line Item in the
Consolidated Statements of Income

 
   

Unrealized appreciation (depreciation) of fixed maturity investments on which other-than-temporary credit impairments were recognized

           

Investments

  $ 91   Other realized capital gains
 

Total

    91    
 

Unrealized appreciation (depreciation) of all other investments

           

Investments

    2,452   Other realized capital gains  

Deferred acquisition costs adjustment

    (28 ) Amortization of deferred acquisition costs  

Future policy benefits

    (1,569 ) Policyholder benefits and claims incurred
 

Total

    855    
 

Change in retirement plan liabilities adjustment

           

Prior-service costs

    47   *  

Actuarial gains/(losses)

    (157 ) *
 

Total

    (110 )  
 

Deferred tax asset (liability)

       
 

Total reclassifications for the period

  $ 836    
 

*     These Accumulated other comprehensive income components are included in the computation of net periodic pension cost. See Note 21 to the Consolidated Financial Statements.


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