DEF 14A of American International Group, Inc.

Filed May 19, 2017 · FY20160001193125-17-175936

Open on EDGAR

PROPOSAL 1—ELECTION OF DIRECTORS
PROPOSAL 1—ELECTION OF DIRECTORS The following table provides summary information about each of our thirteen director nominees. AIG aims to maintain a balanced and independent board that is committed to representing the long-term interests of AIG’s shareholders, and which has the substantial and diverse expertise necessary to oversee AIG’s strategic and business planning as well as management’s approach to addressing the significant risks and challenges facing AIG. Each nominee is elected annually by a majority of votes cast.
PROPOSAL 1—ELECTION OF DIRECTORS
| Name | Age | Director Since | Occupation/Background | Indepen- dent | Other Public Boards | Current Committee Memberships (1) | | W. Don Cornwell | 69 | 2011 | Former Chairman and CEO of Granite Broadcasting Corporation | ✓ | Avon Products, Inc.; Pfizer Inc. | CMRC (Chair) NCGC | | Brian Duperreault | 70 | 2017 | President and CEO, AIG | | Johnson Controls International plc | | | Peter R. Fisher | 60 | 2014 | Senior Fellow at the Center for Business, Government and Society, and Senior Lecturer, at the Tuck School of Business at Dartmouth College; Former Head of Fixed Income Portfolio Management of BlackRock, Inc. | ✓ | KCG Holdings, Inc. | Regulatory RCC | | John H. Fitzpatrick | 60 | 2011 | Chairman of White Oak Global Advisors LLC; Former Secretary General of The Geneva Association; Former Chief Financial Officer, Head of the Life and Health Reinsurance Business Group and Head of Financial Services of Swiss Re | ✓ | | Audit RCC (Chair) | | William G. Jurgensen | 65 | 2013 | Former CEO of Nationwide Insurance | ✓ | Lamb Weston Holdings, Inc. | Audit (Chair) RCC | | Christopher S. Lynch | 59 | 2009 | Independent Consultant and Former National Partner in Charge of Financial Services of KPMG LLP | ✓ | Federal Home Loan Mortgage Corporation | NCGC RCC Tech | | Samuel J. Merksamer (2) | 36 | 2016 | Former Managing Director of Icahn Capital LP | ✓ | Cheniere Energy Inc.; Hertz Global Holdings, Inc.(3); Navistar International Corporation; Transocean Ltd. | NCGC RCC Regulatory | | Henry S. Miller | 71 | 2010 | Chairman of Marblegate Asset Management, LLC; Former Chairman and Managing Director of Miller Buckfire & Co., LLC | ✓ | The Interpublic Group of Companies, Inc. | Regulatory RCC | | Linda A. Mills | 67 | 2015 | Former Corporate Vice President of Operations of Northrop Grumman Corporation; Former Corporate Vice President and President of Information Systems/Information Technology | ✓ | Navient Corporation | Audit CMRC Tech | | Suzanne Nora Johnson | 59 | 2008 | Former Vice Chairman of The Goldman Sachs Group, Inc. | ✓ | Intuit Inc.; Pfizer Inc.; Visa Inc. | CMRC NCGC (Chair) Tech | | Ronald A. Rittenmeyer | 69 | 2010 | Chairman and CEO, Millennium Health, LLC; Former Chairman, CEO and President of Electronic Data Systems Corporation | ✓ | Quintiles IMS Holdings, Inc.; Tenet Healthcare Corporation | Audit CMRC Tech (Chair) | | Douglas M. Steenland | 65 | 2009 | Former President and CEO of Northwest Airlines Corporation | ✓ | Hilton Worldwide Holdings Inc.; Performance Food Group Company; Travelport Limited | (4) | | Theresa M. Stone | 73 | 2013 | Former Executive Vice President and Treasurer of the Massachusetts Institute of Technology; Former Executive Vice President and Chief Financial Officer of Jefferson-Pilot Corporation; Former President of Chubb Life Insurance Company | ✓ | | Audit Regulatory (Chair) |
PROPOSAL 1—ELECTION OF DIRECTORS
| The full Committee names are as follows:(1) |
PROPOSAL 1—ELECTION OF DIRECTORS
Audit—Audit Committee CMRC—Compensation and Management Resources Committee NCGC—Nominating and Corporate Governance Committee Regulatory—Regulatory, Compliance and Public Policy Committee RCC—Risk and Capital Committee Tech—Technology Committee
PROPOSAL 1—ELECTION OF DIRECTORS
| Mr. Merksamer was initially nominated in accordance with a Nomination Agreement as described further in “Proposal 1—Election of Directors.”(2) |
PROPOSAL 1—ELECTION OF DIRECTORS
| Mr. Merksamer will not be standing for re-election as a director of Hertz Global Holdings, Inc. at its annual meeting of shareholders in May 2017.(3) |
PROPOSAL 1—ELECTION OF DIRECTORS
| Mr. Steenland, as Chairman of the Board, is an ex-officio, non-voting member of each of the Committees.(4) |
PROPOSAL 1—ELECTION OF DIRECTORS
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PROPOSAL 1—ELECTION OF DIRECTORS
PROPOSAL 1—ELECTION OF DIRECTORS AIG’s Board of Directors currently consists of sixteen directors. All directors serve a one-year term. We are asking our shareholders to elect thirteen directors at the Annual Meeting, to hold office until the next annual election and until their successors are duly elected and qualified or their earlier resignation. Messrs. George L. Miles, Jr. and Robert S. Miller are retiring from the Board this year after reaching the age of 75, which is the general director retirement age guideline under our Corporate Governance Guidelines. Following discussions with Mr. Paulson, the Nominating and Corporate Governance Committee determined not to nominate him for re-election as a director this year due to his other time commitments. As previously announced, Mr. Brian Duperreault was appointed President and Chief Executive Officer and as a director effective May 14, 2017. Mr. Peter D. Hancock resigned as President and Chief Executive Officer and as a director effective at that time, and is not standing for re-election to the Board. It is the intention of the persons named in the accompanying form of proxy to vote for the election of the nominees listed below. All of the nominees are currently members of AIG’s Board of Directors. It is not expected that any of the nominees will become unavailable for election as a director, but if any should become unavailable prior to the Annual Meeting, proxies will be voted for such persons as the persons named in the accompanying form of proxy may determine in their discretion. Directors will be elected by a majority of the votes cast by the shareholders of the AIG Common Stock, which votes are cast “for” or “against” election. Pursuant to AIG’s By-laws and Corporate Governance Guidelines, each nominee has submitted to the Board an irrevocable resignation from the Board that would become effective upon (1) the failure of such nominee to receive the required vote at the shareholder meeting and (2) Board acceptance of such resignation. In the event that a nominee fails to receive the required vote, AIG’s Nominating and Corporate Governance Committee will then make a recommendation to the Board on the action to be taken with respect to the resignation. The Board will accept such resignation unless the Board determines (after consideration of the Nominating and Corporate Governance Committee’s recommendation) that the best interests of AIG and its shareholders would not be served by doing so. Mr. Merksamer was recommended for nomination in 2016 as a director pursuant to that certain Nomination Agreement (the Nomination Agreement), dated February 11, 2016, by and between AIG and each of High River Limited Partnership, Icahn Partners Master Fund LP, Icahn Partners LP and Carl C. Icahn (collectively, the Icahn Parties). The Board of Directors has decided to re-nominate Mr. Merksamer to the Board and therefore, under the Nomination Agreement, AIG is obligated to use commercially reasonable efforts to cause his re-election. As long as Mr. Merksamer serves on AIG’s Board, the Nomination Agreement requires the Icahn Parties to adhere to certain standstill obligations and to vote the shares of AIG Common Stock they beneficially own for each of the thirteen director nominees. See AIG’s Current Report on Form 8-K filed on February 11, 2016 for further information regarding the Nomination Agreement, including a copy of the Nomination Agreement.
PROPOSAL 1—ELECTION OF DIRECTORS
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PROPOSAL 1—ELECTION OF DIRECTORS
The Board believes that, if elected, the nominees will continue to provide effective oversight of AIG’s business and continue to advance our shareholders’ interests by drawing upon their collective qualifications, skills and experiences. This diverse and complementary set of skills, experience and backgrounds creates a highly qualified and independent Board of Directors. The following table highlights relevant key attributes and professional experience of our director nominees:
PROPOSAL 1—ELECTION OF DIRECTORS
| Key Attributes: | Professional experience in: | | ✓ Experience in business transformations and strategic restructurings | ✓ Insurance and reinsurance | | ✓ Experience managing large, complex, international institutions | ✓ Financial services, the banking industry and asset management | | ✓ Risk oversight and management expertise | ✓ Operations | | ✓ Corporate governance expertise | ✓ Information technology and cyber security | | ✓ High level of financial literacy and accounting expertise | ✓ Regulatory markets, government, academia and research | | ✓ Global consumer, commercial and industrial backgrounds | ✓ Public company accounting |
PROPOSAL 1—ELECTION OF DIRECTORS
Below are biographies of each of the nominees for director, including the principal occupation or affiliation and public company directorships held by each nominee during the past five years. The nominees as a group have extensive direct experience in the oversight of public companies as a result of their service on AIG’s Board and/or the boards of other public companies and/or as a result of their involvement in the other organizations described below.
PROPOSAL 1—ELECTION OF DIRECTORS
| | W. DON CORNWELL Director since 2011 | Former Chairman of the Board and Chief Executive Officer of Granite Broadcasting Corporation Age 69 |
PROPOSAL 1—ELECTION OF DIRECTORS
Mr. Cornwell is the former Chairman of the Board and Chief Executive Officer of Granite Broadcasting Corporation, serving from 1988 until his retirement in August 2009, and Vice Chairman until December 2009. Mr. Cornwell spent 17 years at Goldman, Sachs & Co. where he served as Chief Operating Officer of the Corporate Finance Department from 1980 to 1988 and Vice President of the Investment Banking Division from 1976 to 1988. Mr. Cornwell is currently a director of Avon Products, Inc., where he is Lead Director, Chairman of the Finance Committee and a member of the Audit Committee and Nominating and Corporate Governance Committee, and Pfizer Inc., where he is a member of the Audit, Compensation, Regulatory and Compliance, and Science and Technology Committees. In light of Mr. Cornwell’s experience in finance and strategic business transformations, as well as his professional experience across the financial services industry, AIG’s Board has concluded that Mr. Cornwell should be re-elected to the Board.
PROPOSAL 1—ELECTION OF DIRECTORS
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PROPOSAL 1—ELECTION OF DIRECTORS
| | BRIAN DUPERREAULT Director since 2017 | President and CEO, AIG Age 70 |
PROPOSAL 1—ELECTION OF DIRECTORS
Mr. Duperreault was appointed as AIG’s President, Chief Executive Officer and a member of the Board effective May 14, 2017. Mr. Duperreault was previously the Chief Executive Officer of Hamilton Insurance Group, Ltd. (Hamilton), a Bermuda-based holding company of property and casualty insurance and reinsurance operations in Bermuda, the U.S. and the UK, from December 2013 to May 2017, and served as Chairman of Hamilton from February 2016 to May 2017. He served as President and Chief Executive Officer of Marsh & McLennan Companies, Inc. from February 2008 until his retirement in December 2012. Before joining Marsh, he served as non-executive Chairman of ACE Limited from 2006 through the end of 2007 and as Chief Executive Officer from October 1994 to May 2004. Prior to joining ACE, Mr. Duperreault served in various senior executive positions with AIG and its affiliates from 1973 to 1994. Mr. Duperreault is a director of Johnson Controls International plc, where he is a member of the Corporate Governance Committee, and was a director of Tyco International plc from 2004 to 2016, when it merged with Johnson Controls International plc. In light of Mr. Duperreault’s deep experience in the insurance industry, his history with AIG and his management of large, complex, international institutions, AIG’s Board has concluded that Mr. Duperreault should be elected to the Board.
PROPOSAL 1—ELECTION OF DIRECTORS
| | PETER R. FISHER Director since 2014 | Senior Fellow at the Center for Business, Government and Society, and Senior Lecturer, at the Tuck School of Business at Dartmouth College; Former Head of Fixed Income Portfolio Management of BlackRock, Inc. Age 60 |
PROPOSAL 1—ELECTION OF DIRECTORS
Mr. Fisher is a Senior Fellow at the Center for Business, Government and Society, and also a Senior Lecturer, at the Tuck School of Business at Dartmouth College, positions he has held since July 2013. Mr. Fisher is also a director of KCG Holdings, Inc., where he is Chair of the Nominating and Corporate Governance Committee and serves on the Compensation Committee. Mr. Fisher previously served as an officer of BlackRock, Inc. and certain of its subsidiaries (BlackRock) from 2004 through 2013, as a Senior Managing Director (2010 to 2013) and a Managing Director (2004 to 2009). While at BlackRock, Mr. Fisher served as Head (2010 to 2013) and as Co-Head (2008 to 2009) of BlackRock’s Fixed Income Portfolio Management Group, overseeing portfolio managers responsible for more than $1 trillion of fixed income client accounts and funds, and as Chairman of BlackRock Asia (2005 to 2007). Mr. Fisher was a Senior Director of the BlackRock Investment Institute from March 2013 through July 2016, serving in such capacity as an independent consultant from January 2014 through July 2016. Prior to joining BlackRock in 2004, Mr. Fisher served as Under Secretary of the U.S. Department of the Treasury for Domestic Finance from 2001 to 2003, and, in that capacity, served on the board of the Securities Investor Protection Corporation, as a member of the Airline Transportation Stabilization Board and as the U.S. Treasury representative to the Pension Benefit Guaranty Corporation. From 2007 to 2013, Mr. Fisher was a non-executive director of the Financial Services Authority of the United Kingdom, where he was a member of the Risk Committee. Mr. Fisher also worked at the Federal Reserve Bank of New York from 1985 to 2001, ending his service there as an Executive Vice President and Manager of the System Open Market Account. In light of Mr. Fisher’s broad experience in asset management and government and his knowledge of the regulation of financial services companies, AIG’s Board has concluded that Mr. Fisher should be re-elected to the Board.
PROPOSAL 1—ELECTION OF DIRECTORS
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PROPOSAL 1—ELECTION OF DIRECTORS
| | JOHN H. FITZPATRICK Director since 2011 | Chairman of White Oak Global Advisors LLC; Former Secretary General of The Geneva Association; Former Chief Financial Officer, Head of the Life and Health Reinsurance Business Group and Head of Financial Services of Swiss Re Age 60 |
PROPOSAL 1—ELECTION OF DIRECTORS
Mr. Fitzpatrick has been Chairman of White Oak Global Advisors LLC, an asset management firm lending to small and medium sized companies, since September 1, 2015, and Chairman of Oak Street Management Co., LLC, an insurance / management consulting company, and Oak Family Advisors, LLC, a registered investment advisor, since 2010. In May 2014, he completed a two-year term as Secretary General of The Geneva Association. From 2006 to 2010, Mr. Fitzpatrick was a partner at Pension Corporation and a director of Pension Insurance Corporation Ltd. From 1998 to 2006, he was a member of Swiss Re’s Executive Board Committee and served at Swiss Re as Chief Financial Officer, Head of the Life and Health Reinsurance Business Group and Head of Financial Services. From 1996 to 1998, Mr. Fitzpatrick was a partner in insurance private equity firms sponsored by Zurich Financial Services, Credit Suisse and Swiss Re. From 1990 to 1996, Mr. Fitzpatrick served as the Chief Financial Officer and a Director of Kemper Corporation, a NYSE-listed insurance and financial services organization where he started his career in corporate finance in 1978. Mr. Fitzpatrick is a Certified Public Accountant and a Chartered Financial Analyst. In light of Mr. Fitzpatrick’s broad experience in the insurance and reinsurance industry, as well as his professional experience in insurance policy and regulation, AIG’s Board has concluded that Mr. Fitzpatrick should be re-elected to the Board.
PROPOSAL 1—ELECTION OF DIRECTORS
| | WILLIAM G. JURGENSEN Director since 2013 | Former Chief Executive Officer of Nationwide Insurance Age 65 |
PROPOSAL 1—ELECTION OF DIRECTORS
Mr. Jurgensen is the former Chief Executive Officer of Nationwide Mutual Insurance Company and Nationwide Financial Services, Inc., serving from May 2000 to February 2009. During this time, he also served as director and Chief Executive Officer of several other companies within the Nationwide enterprise. Prior to his time in the insurance industry, he spent 27 years in the commercial banking industry. Before joining Nationwide, Mr. Jurgensen was an Executive Vice President with BankOne Corporation (now a part of JPMorgan Chase & Co.) where he was responsible for corporate banking products, including capital markets, international banking and cash management. He managed the merger integration between First Chicago Corporation and NBD Bancorp, Inc. and later was Chief Executive Officer for First Card, First Chicago’s credit card subsidiary. At First Chicago, he was responsible for retail banking and began his career there as Chief Financial Officer in 1990. Mr. Jurgensen started his banking career at Norwest Corporation (now a part of Wells Fargo & Company) in 1973. The majority of Mr. Jurgensen’s career has involved capital markets, securities trading and investment activities, with the balance in corporate banking. Mr. Jurgensen has been a director of Lamb Weston Holdings, Inc. since 2016, where he serves as Lead Director and Chair of the Audit Committee. Mr. Jurgensen was a director of ConAgra Foods, Inc. from 2002 to 2016, where he served on the Audit, Human Resources and Nominating, Governance and Public Affairs Committees. He was also a director of The Scotts Miracle-Gro Company from 2009 to 2013, where he served on the Audit, Finance, and Governance and Nominating Committees. In light of Mr. Jurgensen’s experience in insurance, financial services and risk management, AIG’s Board has concluded that Mr. Jurgensen should be re-elected to the Board.
PROPOSAL 1—ELECTION OF DIRECTORS
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PROPOSAL 1—ELECTION OF DIRECTORS
| | CHRISTOPHER S. LYNCH Director since 2009 | Former National Partner in Charge of Financial Services, KPMG LLP Age 59 |
PROPOSAL 1—ELECTION OF DIRECTORS
Mr. Lynch has been an independent consultant since 2007, providing a variety of services to public and privately held financial intermediaries, including corporate restructuring, risk management, strategy, governance, financial accounting and regulatory reporting, and troubled-asset management. Mr. Lynch is the former National Partner in Charge of KPMG LLP’s Financial Services Line of Business. He held a variety of positions with KPMG from 1979 to 2007, including chairing KPMG’s Americas Financial Services Leadership team and being a member of the Global Financial Services Leadership and the U.S. Industries Leadership teams. Mr. Lynch was an audit signing partner under Sarbanes-Oxley for some of KPMG’s largest financial services clients. He also served as a Partner in KPMG’s National Department of Professional Practice and as a Practice Fellow at the Financial Accounting Standards Board. Mr. Lynch is a member of the Advisory Board of the Stanford Institute for Economic Policy Research and a member of the National Audit Committee Chair Advisory Council of the National Association of Corporate Directors. Mr. Lynch is currently Non-Executive Chairman of the Federal Home Loan Mortgage Corporation, where he is also Chairman of the Executive Committee. In light of Mr. Lynch’s experience in finance, accounting and risk management and strategic business transformations, as well as his professional experience across the financial services industry, AIG’s Board has concluded that Mr. Lynch should be re-elected to the Board.
PROPOSAL 1—ELECTION OF DIRECTORS
| | SAMUEL J. MERKSAMER Director since 2016 | Former Managing Director of Icahn Capital LP Age 36 |
PROPOSAL 1—ELECTION OF DIRECTORS
Mr. Merksamer is a former Managing Director of Icahn Capital LP, a subsidiary of Icahn Enterprises L.P., a diversified holding company engaged in multiple business segments, where he was employed from 2008 to 2016. Mr. Merksamer is a director of Cheniere Energy Inc., where he serves on the Audit and Compensation Committees, Hertz Global Holdings, Inc., where he serves on the Financing and Nominating and Governance Committees, Navistar International Corporation, where he serves on the Audit and Compensation Committees and Transocean Ltd., where he serves on the Finance and Health, Safety and Environment Committees. Mr. Merksamer will not be standing for re-election as a director of Hertz Global Holdings, Inc. at its annual meeting of shareholders in May 2017. He previously served as a director of American Railcar Industries, Inc. from 2011 to 2013; Dynegy Inc. from 2011 to 2012; Hologic Inc. from 2013 to 2016; Talisman Energy Inc. from 2013 to 2015; and Transocean Partners LLC from 2014 to 2016. In light of Mr. Merksamer’s extensive public company experience and, in accordance with the Nomination Agreement with the Icahn Parties, AIG’s Board has concluded that Mr. Merksamer should be re-elected to the Board.
PROPOSAL 1—ELECTION OF DIRECTORS
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PROPOSAL 1—ELECTION OF DIRECTORS
| | HENRY S. MILLER Director since 2010 | Chairman, Marblegate Asset Management, LLC; Former Chairman and Managing Director, Miller Buckfire & Co., LLC Age 71 |
PROPOSAL 1—ELECTION OF DIRECTORS
Mr. Miller co-founded and has been Chairman of Marblegate Asset Management, LLC since 2009. Mr. Miller was co-founder, Chairman and a Managing Director of Miller Buckfire & Co., LLC, an investment bank, from 2002 to 2011 and Chief Executive Officer from 2002 to 2009. Prior to founding Miller Buckfire & Co., LLC, Mr. Miller was Vice Chairman and a Managing Director at Dresdner Kleinwort Wasserstein and its predecessor company Wasserstein Perella & Co., where he served as the global head of the firm’s financial restructuring group. Prior to that, Mr. Miller was a Managing Director and Head of both the Restructuring Group and Transportation Industry Group of Salomon Brothers Inc. From 1989 to 1992, Mr. Miller was a managing director and, from 1990 to 1992, co-head of investment banking at Prudential Securities. Mr. Miller is currently a director of The Interpublic Group of Companies, Inc., where he serves on the Corporate Governance Committee and the Audit Committee and previously served on the Finance Committee. Mr. Miller was also a director of Ally Financial Inc., from 2012 until July 2014, where he served on the Risk and Compliance Committee. In light of Mr. Miller’s experience in strategic business transformations as well as his professional experience across the financial services industry, AIG’s Board has concluded that Mr. Miller should be re-elected to the Board.
PROPOSAL 1—ELECTION OF DIRECTORS
| | LINDA A. MILLS Director since 2015 | Former Corporate Vice President of Operations of Northrop Grumman Corporation Age 67 |
PROPOSAL 1—ELECTION OF DIRECTORS
Ms. Mills is the former Corporate Vice President of Operations for Northrop Grumman Corporation, with responsibility for operations, including risk management, engineering and information technology. During her 12 years with Northrop Grumman, from 2002 to 2014, Ms. Mills held a number of operational positions, including Corporate Vice President and President of Information Systems and Information Technology sectors; President of the Civilian Agencies Group; and Vice President of Operations and Process in the firm’s Information Technology Sector. Prior to joining Northrop Grumman, Ms. Mills was Vice President of Information Systems and Processes at TRW, Inc. She began her career as an engineer at Bell Laboratories, Inc. Ms. Mills also serves on the board of Navient Corporation where she is the Chair of the Compensation and Personnel Committee and serves on the Finance & Operations Committee and the Executive Committee. In light of Ms. Mills’ in-depth experience with large complex, often international, operations, information technology and cyber security, and her success in managing a significant line of business at Northrop Grumman, AIG’s Board has concluded that Ms. Mills should be re-elected to the Board.
PROPOSAL 1—ELECTION OF DIRECTORS
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PROPOSAL 1—ELECTION OF DIRECTORS
| | SUZANNE NORA JOHNSON Director since 2008 | Former Vice Chairman, The Goldman Sachs Group, Inc. Age 59 |
PROPOSAL 1—ELECTION OF DIRECTORS
Ms. Nora Johnson is the former Vice Chairman of The Goldman Sachs Group, Inc., serving from 2004 to 2007. During her 21 years at Goldman Sachs, she also served as the Chairman of the Global Markets Institute, Head of the Global Investment Research Division and Head of the Global Investment Banking Healthcare Business. Ms. Nora Johnson is currently a director of Intuit Inc., where she is Lead Director and Chair of the Compensation and Organizational Development Committee and serves on the Nominating and Governance Committee, Pfizer Inc., where she is Chair of the Audit Committee, serves on the Regulatory and Compliance, Science and Technology and Executive Committees, and previously served on the Compensation Committee, and Visa Inc., where she is Chair of the Compensation Committee and serves on the Nominating and Corporate Governance Committee. In light of Ms. Nora Johnson’s experience in managing large, complex, international institutions, her experience in finance as well as her professional experience across the financial services industry, AIG’s Board has concluded that Ms. Nora Johnson should be re-elected to the Board.
PROPOSAL 1—ELECTION OF DIRECTORS
| | RONALD A. RITTENMEYER Director since 2010 | Chairman and Chief Executive Officer, Millennium Health, LLC; Former Chairman, Chief Executive Officer and President, Electronic Data Systems Corporation Age 69 |
PROPOSAL 1—ELECTION OF DIRECTORS
Mr. Rittenmeyer has served as Chairman and Chief Executive Officer of Millennium Health, LLC, a health solutions company, since April 2016. Mr. Rittenmeyer is the former Chairman, President and Chief Executive Officer of Expert Global Solutions, Inc. (formerly known as NCO Group, Inc.), a global provider of business process outsourcing services, serving from 2011 to 2014. Mr. Rittenmeyer is also the former Chairman, Chief Executive Officer and President of Electronic Data Systems Corporation, serving from 2005 to 2008. Prior to that, Mr. Rittenmeyer was a Managing Director of the Cypress Group, a private equity firm, serving from 2004 to 2005. Mr. Rittenmeyer also served as Chairman, Chief Executive Officer and President of Safety-Kleen Corp. from 2001 to 2004. Among his other leadership roles, Mr. Rittenmeyer served as President and Chief Executive Officer of AmeriServe Food Distribution Inc. from 2000 to 2001, Chairman, Chief Executive Officer and President of RailTex, Inc. from 1998 to 2000, President and Chief Operating Officer of Ryder TRS, Inc. from 1997 to 1998, President and Chief Operating Officer of Merisel, Inc. from 1995 to 1996 and Chief Operating Officer of Burlington Northern Railroad Co. from 1994 to 1995. Mr. Rittenmeyer is currently a director of Quintiles IMS Holdings, Inc., where he is Chairman of the Leadership Development and Compensation Committee and serves on the Audit Committee, and Tenet Healthcare Corporation, where he is Lead Director, Chairman of the Executive and Human Resources Committees and serves on the Health Information Technology and Audit Committees. In light of Mr. Rittenmeyer’s experience in managing large, complex, international institutions, his experience in finance and strategic business transformations as well as his professional experience across the financial services industry and technology industry, AIG’s Board has concluded that Mr. Rittenmeyer should be re-elected to the Board.
PROPOSAL 1—ELECTION OF DIRECTORS
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PROPOSAL 1—ELECTION OF DIRECTORS
| | DOUGLAS M. STEENLAND Director since 2009 | Former President and Chief Executive Officer, Northwest Airlines Corporation Age 65 |
PROPOSAL 1—ELECTION OF DIRECTORS
Mr. Steenland is the former Chief Executive Officer of Northwest Airlines Corporation, serving from 2004 to 2008, and President, serving from 2001 to 2004. Prior to that, he served in a number of Northwest Airlines executive positions after joining Northwest Airlines in 1991, including Executive Vice President, Chief Corporate Officer and Senior Vice President and General Counsel. Mr. Steenland retired from Northwest Airlines upon its merger with Delta Air Lines, Inc. Prior to joining Northwest Airlines, Mr. Steenland was a senior partner at a Washington, D.C. law firm that is now part of DLA Piper. Mr. Steenland is currently a director of Travelport Limited, where he serves as Chairman of the Board and Chairman of the Nominating and Corporate Governance Committee, Performance Food Group Company, where he serves as Chairman of the Board and a member of the Audit Committee and the Compensation Committee, and Hilton Worldwide Holdings Inc., where he serves as a member of the Audit and Nominating and Corporate Governance Committees. In the past five years, Mr. Steenland has also served as a director of Chrysler Group LLC (now FCA US LLC), where he served as Chairman of the Audit Committee, International Lease Finance Corporation (ILFC), a former AIG subsidiary, now a part of AerCap Holdings N.V. (AerCap), and Digital River, Inc., where he was Chairman of the Compensation Committee and served on the Finance and Nominating and Corporate Governance Committees. In light of Mr. Steenland’s experience in managing large, complex, international institutions and his experience in strategic business transformations, AIG’s Board has concluded that Mr. Steenland should be re-elected to the Board.
PROPOSAL 1—ELECTION OF DIRECTORS
| | THERESA M. STONE Director since 2013 | Former Executive Vice President and Treasurer of the Massachusetts Institute of Technology; Former Executive Vice President and Chief Financial Officer of Jefferson-Pilot Corporation; Former President of Chubb Life Insurance Company Age 73 |
PROPOSAL 1—ELECTION OF DIRECTORS
Ms. Stone is the former Executive Vice President and Treasurer of the Massachusetts Institute of Technology (MIT), serving from February 2007 until October 2011. In her role as Executive Vice President and Treasurer, Ms. Stone served as MIT’s Chief Financial Officer and was also responsible for MIT’s operations, including capital projects, campus planning, facilities operations, information technology, environmental health and safety, human resources, medical services and police. Ms. Stone also served as the Special Assistant to the President of MIT from October 2011 to January 2012. From November 2001 to March 2006, Ms. Stone served as Executive Vice President and Chief Financial Officer of Jefferson-Pilot Corporation (now Lincoln Financial Group) and, from 1997 to 2006, she also served as President of Jefferson-Pilot Communications. Ms. Stone also served as the President of Chubb Life Insurance Company from 1994 to 1997. From 1990 to 1994, Ms. Stone served as Senior Vice President—Acquisitions of The Chubb Corporation, in which role she advised the Chairman and Chief Executive Officer on domestic and international property casualty and life insurance strategy, acquisitions and divestitures. Ms. Stone also served as a director of the Federal Reserve Bank of Richmond from 2003 to 2007 and as Deputy Chairman from 2005 to 2007. Ms. Stone began her career as an investment banker, advising clients primarily in the insurance and financial services industries on financial and strategic matters. Ms. Stone served as a director of Progress Energy, Inc. from 2005 to 2012, where she served as Chairman of the Audit and Corporate Performance Committee and a member of the Executive, Finance and Governance Committees. She also served as a director of Duke Energy Corporation during July 2012 following the company’s merger with Progress Energy Inc. In light of Ms. Stone’s broad experience in both business and academia and her expertise in insurance, finance and management, AIG’s Board has concluded that Ms. Stone should be re-elected to the Board.
PROPOSAL 1—ELECTION OF DIRECTORS
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COMMITTEES
COMMITTEES AIG’s Board Committee structure is organized around key strategic issues to facilitate oversight of management. Committee Chairs regularly coordinate with one another to ensure appropriate information sharing. To further facilitate information sharing, all Committees provide a summary of significant actions to the full Board, and Committee meetings are scheduled to allow all directors to attend each meeting, with many directors attending such meetings. As required under AIG’s Corporate Governance Guidelines, each standing Committee conducts an annual self-assessment and review of its Charter. The following table sets forth the current membership on each standing Committee of the Board and the number of Committee meetings held in 2016. Mr. Duperreault does not serve on any Committees of the Board. Mr. Steenland serves as an ex-officio member of each Committee.
COMMITTEES
| Director | Audit Committee | Compensation and Management Resources Committee | Nominating and Corporate Governance Committee | Regulatory, Compliance and Public Policy Committee | Risk and Capital Committee | Technology Committee | | W. Don Cornwell | | C | M | | | | | Peter R. Fisher | | | | M | M | | | John H. Fitzpatrick | M | | | | C | | | William G. Jurgensen | C | | | | M | | | Christopher S. Lynch | | | M | | M | M | | Samuel J. Merksamer | | | M | M | M | | | George L. Miles, Jr.* | | M | M | | | M | | Henry S. Miller | | | | M | M | | | Robert S. Miller* | | | M | | | M | | Linda A. Mills | M | M | | | | M | | Suzanne Nora Johnson | | M | C | | | M | | John A. Paulson* | | | | | | | | Ronald A. Rittenmeyer | M | M | | | | C | | Douglas M. Steenland | ** | ** | ** | ** | ** | ** | | Theresa M. Stone | M | | | C | | | | Number of meetings in 2016 | 11 | 8 | 5 | 3 | 16 | 4 |
COMMITTEES
M = Member C = Chair
COMMITTEES
| Messrs. Miles, Robert S. Miller and Paulson are not standing for re-election as directors at the 2017 Annual Meeting.* |
COMMITTEES
| Mr. Steenland is an ex-officio, non-voting member.** |
COMPENSATION OF DIRECTORS
COMPENSATION OF DIRECTORS The following table describes the compensation structure for AIG’s non-management directors in 2016.
2016 Non-Management Director Compensation
2016 Non-Management Director Compensation
2016 Non-Management Director Compensation
| Non-Management Members of the Board in 2016 | Fees Earned or Paid in Cash(1) | Stock Awards(2) | All Other Compensation(3) | Total | | W. Don Cornwell | $180,000 | $129,995 | $10,000 | $319,995 | | Peter R. Fisher | $150,000 | $129,995 | $0 | $279,995 | | John H. Fitzpatrick | $190,000 | $129,995 | $0 | $319,995 | | William G. Jurgensen | $190,000 | $129,995 | $0 | $319,995 | | Christopher S. Lynch | $150,000 | $129,995 | $0 | $279,995 | | Samuel J. Merksamer | $95,192 | $129,995 | $0 | $225,187 | | George L. Miles, Jr. | $150,000 | $129,995 | $10,000 | $289,995 | | Henry S. Miller | $150,000 | $129,995 | $10,000 | $289,995 | | Robert S. Miller | $150,000 | $129,995 | $10,000 | $289,995 | | Linda A. Mills | $150,000 | $129,995 | $10,000 | $289,995 | | Suzanne Nora Johnson | $170,000 | $129,995 | $10,000 | $309,995 | | John A. Paulson | $95,192 | $129,995 | $0 | $225,187 | | Ronald A. Rittenmeyer | $170,000 | $129,995 | $0 | $299,995 | | Douglas M. Steenland | $410,000 | $129,995 | $0 | $539,995 | | Theresa M. Stone | $170,000 | $129,995 | $10,000 | $309,995 |
2016 Non-Management Director Compensation
| This column represents annual retainer fees and Committee Chair retainer fees. For Messrs. Merksamer and Paulson, the amounts include prorated annual retainer fees for their service as directors from the date of the 2016 Annual Meeting.(1) |
2016 Non-Management Director Compensation
| | 30 |
2016 Non-Management Director Compensation
| This column represents the grant date fair value of DSUs granted in 2016 to directors, based on the closing sale price of AIG Common Stock on the date of grant.(2) |
2016 Non-Management Director Compensation
| This column represents charitable contributions by AIG under AIG’s Matching Grants Program.(3) |
2016 Non-Management Director Compensation
The following table sets forth information with respect to the option and stock awards outstanding at December 31, 2016 for the non-management directors of AIG.
Compensation Structure
| • Balanced Structure: Total direct compensation consists of market-competitive base salary, approximately 25 to 35 percent target short-term incentive opportunity and at least 40 percent target long-term incentive opportunity. • Emphasis on Long-Term Incentives: At least 75 percent of each executive’s target total direct compensation is “at risk” and based on performance, and the majority of his or her incentive pay opportunity is based on performance over a three-year period and paid over a five-year period. • Direct Link to AIG Performance: 100 percent of long-term incentives are in the form of performance share units (PSUs) that, for 2016, are earned over a three-year period based on achieving total shareholder return (TSR) measured relative to AIG’s peers, and balanced by using option adjusted spread (OAS) relative to peers. • Robust Recovery Policy: At least 75 percent of each executive’s target total direct compensation is subject to our clawback policy, which applies while awards are outstanding and to covered compensation paid in the year preceding the triggering event. | |
Compensation Philosophy
| • | Aligning the long-term economic interests of key employees with those of shareholders by ensuring that a meaningful component of each key employee’s compensation is represented by AIG securities. |
Compensation Philosophy
| Compensation Best Practices | | | What we do: ✓ Pay for performance ✓ Comprehensive clawback policy ✓ Share ownership guidelines and holding requirements ✓ No-hedging policy ✓ Double-trigger change-in-control benefits ✓ Annual risk assessment of compensation plans ✓ Independent compensation consultant | What we don’t do: × No golden parachute tax gross-ups × No excessive pension payments, perquisites or other benefits × No equity grants below 100% of fair market value × No dividends or dividend equivalents paid on unvested long-term incentive awards × No repricing of underwater stock options or stock appreciation rights |
Compensation Structure—Direct Compensation Components
| Named Executive Officer | Annual Base Salary | Target Short-Term Incentive | Target Long-Term Incentive | Total | | Peter D. Hancock, President and Chief Executive Officer | $1,600,000 | $3,200,000 | $8,200,000 | $13,000,000 | | Siddhartha Sankaran, Chief Financial Officer | $1,000,000 | $1,700,000 | $3,300,000 | $6,000,000 | | Douglas A. Dachille, Executive Vice President—Chief Investment Officer | $1,000,000 | $2,000,000 | $4,000,000 | $7,000,000 | | Kevin T. Hogan, Executive Vice President—Consumer | $1,000,000 | $1,900,000 | $3,600,000 | $6,500,000 | | Robert S. Schimek, Executive Vice President—Commercial | $1,000,000 | $1,750,000 | $3,500,000 | $6,250,000 |
Compensation Structure—Direct Compensation Components
Base Salary. Annual base salary is paid in cash and is the sole fixed component of an executive’s total direct compensation. An executive’s base salary is established based on his or her experience, performance and salaries for comparable positions at competitors, but will not exceed 25 percent of the executive’s target total direct compensation opportunity. This allocation is intended to fairly compensate the executive for the responsibilities of his or her position, achieve an appropriate balance of fixed and variable pay and provide the executive with sufficient liquidity to discourage excessive risk-taking. Short-Term Incentive. Our short-term incentive, which represents approximately 30 percent of an executive’s target total direct compensation opportunity, is designed to reward annual performance and drive near-term business objectives and strategies. It consists of an annual cash award with individual target amounts that reflect business unit or corporate function responsibilities and experience and that is earned based on pre-established goals for Company performance that produce an objective Company score. As applied to our named executives, earned 2016 awards could range from 0 to 175 percent of target and are subject to clawback. The Committee has discretion to determine the final award amount.
Compensation Structure—Direct Compensation Components
| Certain of our operating performance metrics are non-GAAP financial measures. See Appendix B for an explanation of how these measures are calculated for AIG from our audited financial statements.* |
Compensation Structure—Direct Compensation Components
Determination of Earned Short-Term Incentive Awards. Short-term incentive awards for the Executive Leadership Team (comprising our Chief Executive Officer and certain key senior executives) are generally based solely on the Company score. This approach reflects the view that these individuals are collectively accountable for, and should be rewarded based on, the performance of the Company as a whole. To maintain continuity with our general program, which uses both a Company score and individual score that are multiplied together and are calibrated accordingly, a multiple of three times the Company score is used in order to determine the earned short-term incentive for Executive Leadership Team members. For example, if performance is 10 percent above target, awards for these individuals would be 130 percent of target; conversely, if performance is 10 percent below target, awards for these individuals would be 70 percent of target. Based on the Company score of 40 percent, the multiplier resulted in a 0 percent payout for Executive Leadership Team members. The Committee does not believe that this result reflected the accomplishments achieved by AIG with respect to 2016, including, but not limited to, expense reductions and capital returns to shareholders that exceeded strategic targets, the completion or announcement of over ten transactions that will generate over $10 billion in liquidity and the growth and improved profitability of Consumer Insurance. After discussions with Mr. Hancock, the Committee determined not to apply the multiplier to the members of the Executive Leadership Team other than him.
Compensation Structure—Direct Compensation Components
| | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | | 2013 Long-Term Incentive Awards | Performance Period: 2013—2015 Metrics comprise relative TSR (weighted 50%) and relative growth in tangible book value per share (excluding average accumulated other comprehensive income) (weighted 50%) | | | 1/3 of Earned PSUs Vest in January | 1/3 of Earned PSUs Vest in January | 1/3 of Earned PSUs Vest in January | | | | | | 2014 Long-Term Incentive Awards | Performance Period: 2014—2016 Metrics comprise relative TSR (weighted 75%) and relative change in CDS spread (weighted 25%) | | | 1/3 of Earned PSUs Vest in January | 1/3 of Earned PSUs Vest in January | 1/3 of Earned PSUs Vest in January | | | | | | 2015 Long-Term Incentive Awards | Performance Period: 2015—2017 Metrics comprise relative TSR (weighted 75%) and relative final CDS spread (weighted 25%) | | | 1/3 of Earned PSUs Vest in January | 1/3 of Earned PSUs Vest in January | 1/3 of Earned PSUs Vest in January | | | | | | 2016 Long-Term Incentive Awards | Performance Period: 2016—2018 Metrics comprise relative TSR (100%). If relative OAS percentile is below 20(th) percentile of peers, payout reduced by half. | | | 1/3 of Earned PSUs Vest in January | 1/3 of Earned PSUs Vest in January | 1/3 of Earned PSUs Vest in January |
Compensation Structure—Direct Compensation Components
Grant of 2016 Long-Term Incentive Awards To determine PSU grants, the Committee approves (and, for our Chief Executive Officer, the Board ratifies) the target dollar amount of an executive’s long-term incentive award, which is then converted to a number of PSUs based on the average closing price of AIG Common Stock over the calendar month preceding the reference date rounded down to the nearest whole unit. In general, the reference date refers to the grant date in the case of annual awards, the date of the offer of employment to a new hire or the effective date of a recipient’s promotion. For 2016, earned PSUs range from 0 to 150 percent of the target grant based on achieving relative
Compensation Structure—Direct Compensation Components
TSR, in order to align with our business strategy and evaluate long-term performance relative to peers. To protect against excessive risk-taking, the TSR metric is balanced by using relative OAS as a gating metric. OAS is a measurement of the spread of a fixed income security’s return and the risk-free rate of return, which is adjusted to take into account embedded options. Relative OAS acts as a measure of our relative creditworthiness and serves only as a gating metric such that, if our relative OAS percentile is below the 20th percentile of our peer group, the payout level resulting from the relative TSR score is reduced by half. The Committee determined that relative OAS is now a more reliable and effective risk-adjustment metric than relative credit default swap spread (CDS), which is the risk-adjusted metric used for our long-term incentive awards granted in 2014 and 2015, given the decreased liquidity in the CDS market. Earned PSUs vest one-third in January of each of 2019, 2020 and 2021 and are settled in AIG Common Stock. The table below summarizes the performance metrics used for the 2016 to 2018 performance period. Earned awards are based 100 percent on relative TSR, which is targeted at median. Actual performance below threshold will result in a 0 percent payout. Relative OAS acts as a gating metric to protect against excessive risk-taking, and will reduce the payout level (if any) resulting from the relative TSR score in half if our relative OAS percentile is below the 20th percentile of the peer group.
Compensation Structure—Direct Compensation Components
| Metric | Weighting | Threshold | Target | Maximum | | Relative TSR | 100% | 25(th) percentile | 50(th) percentile | 75(th) percentile | | Relative OAS | | Acts as a gating metric: If OAS percentile is less than 20(th) percentile of peer group, the payout level is reduced by half. | | | | Payout: | | 50% | 100% | 150% |
Compensation Structure—Direct Compensation Components
(if any) are delivered. The number of additional PSUs earned at any such time will be equal to (i) the cash dividend amount per share of AIG Common Stock times (ii) the number of PSUs covered by the award (and, unless otherwise determined by AIG, any dividend equivalent units previously credited under the award) that have not been previously settled through the delivery of shares (or cash) prior to such date, divided by the fair market value of a share of AIG Common Stock on the applicable dividend record date. Adjudication of 2014 Long-Term Incentive Awards The three-year performance period for our 2014 long-term incentive awards ended on December 31, 2016, and the Committee assessed performance in the first quarter 2017. The metrics for 2014 long-term incentive awards comprised relative TSR (weighted 75 percent) and relative change in CDS spread (weighted 25 percent), in each case measured relative to a peer group. The following table shows the results from the 2014 to 2016 performance period as certified by the Committee:
Compensation Structure—Direct Compensation Components
| Performance Metric | Threshold | Target | Maximum | Actual | % Achieved | Weighting | % Achieved (Weighted) | | Relative TSR | 25(th) percentile | 55(th) percentile | 75(th) percentile | 56(th) percentile | 103% | 75% | 77% | | Relative Change in CDS Spread | 5(th) percentile | 20(th) to 80(th) percentile | 95(th) percentile | 30(th) percentile | 100% | 25% | 25% | | Payout: | 50% | 100% | 150% | | | | 102% |
Compensation Structure—Direct Compensation Components
One-third of the earned PSUs settled in shares of AIG Common Stock in the first quarter of 2017. The remaining two-thirds of earned PSUs will vest one-third each in January 2018 and 2019 and be settled in AIG Common Stock. Earned 2013 Long-Term Incentive Awards Our 2013 long-term incentive awards, for which the three-year performance period ended on December 31, 2015, were earned at 147 percent of target, as determined by the Committee in the first quarter of 2016. One-third of the earned PSUs vested in January 2016, another one-third vested in January 2017 and the remaining one-third will vest in January 2018. All earned PSUs are settled in AIG Common Stock.
2017 Short-Term and Long-Term Incentive Structure
2017 Short-Term and Long-Term Incentive Structure The Committee determined in the first quarter of 2017 to adjust both our short-term and long-term incentive programs for 2017 in order to continue our commitment to sustaining and rewarding a high performance culture with competitive compensation opportunities that are compatible with effective risk management and do not incentivize excessive risk taking, as well as enhance our ability to attract and retain key talent:
2017 Short-Term and Long-Term Incentive Structure
| • | Short-term incentive awards: For 2017, individual awards for members of our Executive Leadership Team will be based on a combination of an enterprise-wide Company score and an assessment of individual performance, resulting in a potential range from 0 to 200 percent of target for each member of the Executive Leadership Team. In addition, for the Company score, in order to simplify the program and increase the weighting of return on equity (ROE), we are replacing the Normalized Insurance Company PTOI, Normalized AIG ROE and Normalized AIG GOE metrics with a Core Normalized ROE metric that is targeted based on an improvement in Core Normalized ROE relative to 2016. The Normalized Production RAP and Normalized VoNB metrics remain, and their weightings are increased. |
2017 Short-Term and Long-Term Incentive Structure
| • | Long-term incentive awards: Our 2017 long-term incentive program will consist of grants of PSUs, earned based on achievement of performance criteria during a three-year performance period, and grants of restricted stock units, earned based on continued employment through the three-year period, each of which vests after the three-year period. PSUs will continue to be based on relative TSR and may range from 0 to 200 percent of target. The Committee determined that 2017 long-term incentive awards for members of our Executive Leadership Team (except Mr. Hancock) will consist of 70 percent PSUs and 30 percent restricted stock units. For other participants, 2017 long-term incentive awards will consist of 50 percent PSUs and 50 percent restricted stock units. |
2017 Short-Term and Long-Term Incentive Structure
| • | Continuity awards: In the first quarter of 2017, the Committee also made one-time grants of restricted stock units to each member of our Executive Leadership Team, other than Mr. Hancock, designed to provide for |
2017 Short-Term and Long-Term Incentive Structure
| | 46 |
2017 Short-Term and Long-Term Incentive Structure
| continuity during the search for and transition to a new Chief Executive Officer in 2017. These continuity awards will vest on the second anniversary of the grant date, subject to the participant’s continued employment through such date (or the participant’s earlier termination without cause), and are not eligible for qualifying resignation or retirement treatment. |
Compensation Structure—Indirect Compensation Components
Non-Qualified Retirement Plan and the SERP were frozen. As a result, the Qualified Retirement Plan, the Non-Qualified Retirement Plan and the SERP were closed to new participants, and current participants no longer earn additional benefits (however, interest credits will continue to be earned by participants under the Qualified Retirement Plan and Non-Qualified Retirement Plan). These plans and their benefits are described in greater detail in “—2016 Compensation—Post-Employment Compensation—Pension Benefits.” Perquisites and Other Compensation. To facilitate the performance of their management responsibilities, AIG provides some employees, including the named executives, with aircraft usage (including by an executive’s spouse when traveling with the executive on business travel), automobile allowances, use of company pool cars and drivers or parking, legal services, financial, estate and tax planning and other benefits categorized as “perquisites” or “other” compensation under the SEC rules. Termination Benefits and Policies. AIG provides severance benefits to its executives in order to offer competitive total compensation packages, ensure executives’ ongoing retention when considering potential transactions that may create uncertainty as to their future employment with AIG and enable AIG to obtain a release of employment-related claims. In 2012, the Committee established the 2012 ESP, which replaced AIG’s prior Executive Severance Plan established in March 2008. The 2012 ESP extends to AIG executives in grade level 27 or above, including the named executives, and other executives who participated in the prior plan. For purposes of the 2012 ESP, a participant’s grade level is the highest level at which he or she was employed at any time in the 12 months immediately prior to the qualifying termination. The 2012 ESP provides for severance payments and benefits upon a termination by AIG without “Cause” or if a qualifying executive terminates for “Good Reason,” including, for qualifying executives, after a “Change in Control.” In the event of a qualifying termination, a participant is generally eligible to receive severance in an amount equal to the product of a multiplier times the sum of salary and three-year-average annual incentives. The multiplier is either 1 or 1.5 depending on the executive’s grade level and increases to 1.5 or 2 for qualifying terminations within two years following a Change in Control. In July 2016, the 2012 ESP was amended to provide that if a qualifying termination occurs within twelve months after a participant experiences a reduction in his or her base salary or annual short-term incentive opportunity, the severance payment will be calculated as if the qualifying termination occurred immediately prior to the reduction. In any event, executives in grade level 27 or above who participated in the prior plan, which includes Messrs. Hancock, Herzog, Sankaran, Schimek and Schreiber, may not receive less than the severance they would have received under the prior plan.
Process for Compensation Decisions
oversees AIG’s management development and succession planning programs. Attendance at Committee meetings generally includes members of the executive team as appropriate, including representatives from internal legal and human resources, outside counsel, and the Committee’s independent consultant. Consultants. To provide independent advice, the Committee has used the services of Frederic W. Cook & Co. (FW Cook) since 2005. A senior consultant of FW Cook regularly attends the Committee’s meetings and is instructed to provide independent, analytical and evaluative advice about AIG’s compensation programs for senior executives, including views of how the program and proposals compare to market practices in financial services and general industry and to “best practices.” FW Cook responds on a regular basis to questions from the Committee and the Committee’s other advisors, providing its opinions with respect to the design and implementation of current or proposed compensation programs, including the 2016 executive compensation structure. FW Cook also participated in the Committee meeting in which the compensation risk assessment discussed under “—Report of the Compensation and Management Resources Committee—Risk and Compensation Plans” was conducted and previously advised that the process was thorough and well designed. In compliance with SEC and NYSE rules, in February 2016 and February 2017, the Committee reviewed various items related to FW Cook’s relationship to AIG, the members of the Committee and AIG’s executive officers. The Committee confirmed that neither FW Cook nor any of its affiliates provides any other services to AIG or its management except with respect to director compensation, and that FW Cook had no business or personal relationship with any member of the Committee or executive officer that raised a conflict of interest with respect to FW Cook’s work for the AIG Board. The Committee also received information on the fees paid to FW Cook by AIG as a percentage of FW Cook’s total revenue and FW Cook’s ownership of any AIG Common Stock. Considering this information, the Committee determined that FW Cook is independent and that its work has not raised any conflict of interest. In 2016, the Committee also considered materials prepared by Johnson Associates related to market compensation levels. Johnson Associates was engaged by AIG to assist with this work. In particular, Johnson Associates prepared reports presenting market comparisons of total compensation levels for existing employees, new hires and promotions with respect to positions within the Committee’s purview. The Committee performed a review of Johnson Associates’ services similar to the review of FW Cook described above. The Committee noted that FW Cook reviewed the reports prepared by Johnson Associates prior to consideration by the Committee and determined that this appropriately addressed any conflict of interest raised by Johnson Associates’ work or business relationship with AIG. Consideration of Shareholder Feedback. The Committee values feedback from AIG’s shareholders, including the feedback received through our say-on-pay advisory vote. Since 2010, AIG has held an annual say-on-pay advisory vote. In the most recent advisory vote, approximately 97 percent of the votes cast by shareholders were in favor of the 2015 compensation of our named executives as disclosed in our 2016 Proxy Statement. The Committee believes this level of approval indicates our shareholders’ strong support of our compensation philosophy and goals and the structure of our executive compensation program. Consideration of Competitive Compensation Levels. In 2016, the Committee considered information from data disclosed in surveys, market practices and levels disclosed in proxy statements and employment contracts from a number of peer companies (Broad Data), as well as Johnson Associates’ benchmarks, which reflect proprietary data, third-party references and market impressions and judgment. The companies used in the Broad Data set were: Aetna, Inc., AFLAC, The Allstate Corporation, American Express Company, Ameriprise Financial, Inc., Bank of America Corporation, Bank of New York Mellon, BlackRock, Inc., Capital One Financial Corp., Chubb Group, CIGNA Corporation, Citigroup Inc., Hartford Financial Services, Invesco Ltd., JP Morgan Chase & Co., Lincoln National Corporation, Marsh & McLennan Companies, Inc., MetLife Inc., Principal Financial Group, Inc., Prudential Financial Inc., T. Rowe Price Group, Inc., The Travelers Companies Inc., U.S. Bancorp and Wells Fargo & Company.
Other Considerations
executive officer or other covered employee to forfeit and/or repay all or any portion of any unpaid covered compensation or covered compensation paid in the 12 months (or such longer period of time as required by any applicable statute or government regulation) preceding the event. Triggering events generally include a material financial restatement; the award or receipt of covered compensation based on materially inaccurate financial statements or performance metrics that are materially inaccurately determined; a failure of risk management, including in a supervisory role, or material violation of AIG’s risk policies; and an action or omission that results in material financial or reputational harm to AIG. Share Ownership Guidelines and Holding Requirements. AIG’s share ownership guidelines establish levels of ownership of AIG Common Stock at five times salary for the Chief Executive Officer and three times salary for other executive officers, which included the other named executives during 2016. Until the guidelines are met, such employees are required to retain 50 percent of the shares of AIG Common Stock received upon the exercise, vesting or payment of certain equity-based awards granted by AIG. Shares held for purposes of the guidelines may include stock owned outright by the officer or his or her spouse and earned but unvested share-based awards. Executive officers are required to comply with the guidelines until six months after they cease to be executive officers. No-Hedging Policy. AIG’s Code of Conduct and Insider Trading Policy prohibit employees from engaging in hedging transactions with respect to any of AIG’s securities, including by trading in any derivative security relating to AIG’s securities. Deductibility of Executive Compensation. Section 162(m) of the Code generally limits the tax deductibility of compensation in excess of $1 million per year paid by a public company to its chief executive officer and three other most highly compensated executive officers (other than the chief financial officer), subject to certain exceptions, with an exception for qualifying “performance-based compensation” (as defined under applicable tax regulations). At AIG’s 2013 Annual Meeting, our shareholders approved the AIG 2013 Omnibus Incentive Plan, which is designed to allow for the issuance of awards that satisfy the “performance-based compensation” exception under Section 162(m), and the Committee intends that short-term and long-term incentives awarded to covered employees for 2016 qualify for this exception. Accordingly, separate from determining 2016 short- and long-term incentive opportunities, in the first quarter of 2016, the Committee established performance criteria and set one percent of Normalized Insurance Company PTOI, as defined in Appendix B, as the Section 162(m) compliant maximum for 2016 short- and long-term incentives awarded to each individual covered employee, including the named executives. This limit does not serve as a basis for the Committee’s compensation decisions for our named executives, but rather provides for the maximum amount of tax deductible 2016 short- and long-term incentive compensation that the Committee can award to the covered employee, with the Committee retaining the discretion to pay less than the maximum. Once the maximum amount is established, the qualifying performance-based compensation for each covered employee is delivered through the 2016 short-term incentive and long-term incentive programs. If the total amount earned under these programs is less than the maximum deductible amount, the Committee will pay only the amount earned. The Committee retains the ability to pay compensation that exceeds $1 million and does not constitute qualifying performance-based compensation when it determines that such payments are in the best interests of AIG and our shareholders. The Committee believes that retaining the flexibility to attract, retain and motivate our employees with a compensation program that supports long-term value creation, even though some compensation awards may not be deductible, is in the best interests of our shareholders.
Summary Compensation Table
Summary Compensation Table The following tables contain information with respect to AIG’s named executives. As required by SEC rules, AIG’s named executives include the Chief Executive Officer, Chief Financial Officer and the three other most highly paid executive officers, who each served through the end of 2016, as well as a former Chief Financial Officer who served during part of 2016 and two additional individuals who served as executive officers during part of 2016.
2016 Summary Compensation Table
2016 Summary Compensation Table
2016 Summary Compensation Table
| Name and Principal Position | Year | Salary(1) | Bonus | Stock Awards(2) | Non-Equity Incentive Plan Compensation(3) | Change in Pension Value(4) | All Other Compensation(5) | Total | | Peter D. Hancock | 2016 | $1,600,000 | $0 | $7,851,287 | $0 | $8,991 | $116,257 | $9,576,535 | | Chief Executive Officer | 2015 | $1,661,538 | $0 | $8,231,460 | $2,496,000 | $59,759 | $49,218 | $12,497,975 | | | 2014 | $1,426,923 | $0 | $7,011,108 | $3,497,334 | $73,751 | $55,312 | $12,064,428 | | Siddhartha Sankaran | 2016 | $1,000,000 | $0 | $3,159,665 | $680,000 | $705 | $39,598 | $4,879,968 | | Executive Vice President and Chief Financial Officer | | | | | | | | | | Douglas A. Dachille | 2016 | $1,000,000 | $0 | $3,829,868 | $800,000 | $213 | $65,706 | $5,695,787 | | Executive Vice President and Chief Investment Officer | | | | | | | | | | Kevin T. Hogan | 2016 | $1,000,000 | $800,000(6) | $3,446,866 | $760,000 | $98,417 | $51,430 | $6,156,713 | | Executive Vice President— | 2015 | $1,038,462 | $1,150,000(6) | $3,613,812 | $1,482,000 | $12,995 | $620,888 | $7,918,157 | | Consumer | 2014 | $903,846 | $1,300,000(6) | $3,517,171 | $2,058,750 | $338,113 | $895,534 | $9,013,414 | | Robert S. Schimek | 2016 | $1,000,000 | $0 | $3,351,116 | $700,000 | $27,564 | $44,457 | $5,123,137 | | Executive Vice President— | | | | | | | | | | Commercial | | | | | | | | | | Separated during 2016 | | | | | | | | | | David L. Herzog | 2016 | $269,231 | $0 | $3,829,868 | $200,000 | $102,613 | $6,336,748 | $10,738,460 | | Former Executive Vice President | 2015 | $1,038,462 | $0 | $4,015,335 | $1,560,000 | $28,172 | $41,405 | $6,683,374 | | and Chief Financial Officer | 2014 | $1,000,000 | $0 | $3,935,432 | $2,440,000 | $271,673 | $48,000 | $7,695,105 | | Seraina Macia | 2016 | $250,000 | $950,000(7) | — | $170,000 | $0 | $5,581,224 | $6,951,224 | | Former Executive Vice President | | | | | | | | | | Brian T. Schreiber | 2016 | $233,846 | $0 | — | $175,000 | $0 | $9,494,318 | $9,903,164 | | Former Executive Vice President | | | | | | | | |
2016 Grants of Plan-Based Awards
2016 Grants of Plan-Based Awards Total 2016 Grants. The following table details all equity and non-equity plan-based awards granted to each of the named executives in 2016.
2016 Grants of Plan-Based Awards
2016 Grants of Plan-Based Awards
2016 Grants of Plan-Based Awards
| Name | Grant Date | Board Action Date | Estimated Possible Payouts Under Non-Equity Plan Awards(1) | | | Estimated Possible Payouts Under Equity Incentive Plan Awards (Performance Share Units)(2) | | | All Other Stock Awards (# of AIG Shares) | Grant Date Fair Value of Equity Awards(3) | | | | | Threshold | Target | Maximum | Threshold | Target | Maximum | | | | Peter D. Hancock | | | | | | | | | | | | 2016 STI | 03/08/16 | | $0 | $3,200,000 | $5,600,000 | — | — | — | — | — | | 2016 LTI | 03/16/16 | 03/08/16 | — | — | — | 78,185 | 156,369 | 234,554 | — | $7,851,287 | | Siddhartha Sankaran | | | | | | | | | | | | 2016 STI | 02/18/16 | | $0 | $1,700,000 | $2,975,000 | — | — | — | — | — | | 2016 LTI | 03/16/16 | | — | — | — | 31,465 | 62,929 | 94,394 | — | $3,159,665 | | Douglas A. Dachille | | | | | | | | | | | | 2016 STI | 02/18/16 | | $0 | $2,000,000 | $3,500,000 | — | — | — | — | — | | 2016 LTI | 03/16/16 | | — | — | — | 38,139 | 76,277 | 114,416 | — | $3,829,868 | | Kevin T. Hogan | | | | | | | | | | | | 2016 STI | 02/18/16 | | $0 | $1,900,000 | $3,325,000 | — | — | — | — | — | | 2016 LTI | 03/16/16 | | — | — | — | 34,325 | 68,649 | 102,974 | — | $3,446,866 | | Robert S. Schimek | | | | | | | | | | | | 2016 STI | 02/18/16 | | $0 | $1,750,000 | $3,062,500 | — | — | — | — | — | | 2016 LTI | 03/16/16 | | — | — | — | 33,371 | 66,742 | 100,113 | | $3,351,116 | | Separated during 2016 | | | | | | | | | | | | David L. Herzog | | | | | | | | | | | | 2016 STI | 02/18/16 | | $0 | $2,000,000 | $3,500,000 | — | — | — | — | — | | 2016 LTI | 03/16/16 | | — | — | — | 38,139 | 76,277 | 114,416 | — | $3,829,868 | | Seraina Macia | | | | | | | | | | | | 2016 STI | 02/18/16 | | $0 | $1,700,000 | $2,975,000 | — | — | — | — | — | | 2016 LTI | — | | — | — | — | — | — | — | — | — | | Brian T. Schreiber | | | | | | | | | | | | 2016 STI | 02/18/16 | | $0 | $1,750,000 | $3,062,500 | — | — | — | — | — | | 2016 LTI | — | | — | — | — | — | — | — | — | — |
2016 Grants of Plan-Based Awards
| Amounts shown reflect the range of possible cash payouts under the AIG Annual Short-Term Incentive Plan for 2016 performance. Actual amounts earned, as determined by the Committee in the first quarter of 2017, are reflected in the 2016 Summary Compensation Table under Non-Equity Incentive Plan Compensation. For more information on the 2016 short-term incentive awards, including the applicable performance metrics, please see “—Compensation Discussion and Analysis—Compensation Structure—Direct Compensation Components—Short-Term Incentive.”(1) |
2016 Grants of Plan-Based Awards
| Amounts shown reflect the potential range of PSUs that may be earned under the 2016 LTI awards. Actual amounts earned are based on achieving relative TSR over the 2016—2018 performance period. The TSR metric is balanced by using relative OAS as a gating metric to protect against excessive risk-taking. If AIG’s relative OAS percentile is below the 20(th) percentile of the peer group, the payout level is reduced by half. Results will be certified by the Committee in the first quarter of 2019. For more information on the 2016 LTI awards, including the applicable performance metrics, please see “—Compensation Discussion and Analysis—Compensation Structure—Direct Compensation Components—Long-Term Incentive.” Holders of PSUs earned under the 2016 LTI awards are also entitled to dividend equivalent rights in the form of additional PSUs beginning with the first dividend record date following the PSU grant date, which are subject to the same vesting and performance conditions as the related PSUs and are paid when such related earned shares (if any) are delivered.(2) |
2016 Grants of Plan-Based Awards
| Amounts shown represent the grant date fair value of the PSU awards for the 2016—2018 performance period determined in accordance with FASB ASC Topic 718 using the assumptions presented in Note 20 to the Consolidated Financial Statements in AIG’s 2016 Annual Report on Form 10-K.(3) |
2016 Grants of Plan-Based Awards
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Outstanding Equity Awards at December 31, 2016
Outstanding Equity Awards at December 31, 2016 Equity-based awards held at the end of 2016 by each named executive were issued under the incentive plans and arrangements described below. Shares of AIG Common Stock deliverable under AIG’s time-vested equity and option awards will be delivered under the 2013 Omnibus Incentive Plan, 2010 Stock Incentive Plan or 2007 Stock Incentive Plan, as applicable. Also included in outstanding equity-based awards are grants historically made by Starr International Company, Inc. (SICO) under a series of two-year Deferred Compensation Profit Participation Plans (the SICO Plans). The following table sets forth outstanding equity-based awards held by each named executive as of December 31, 2016.
Outstanding Equity Awards at December 31, 2016
Outstanding Equity Awards at December 31, 2016
Outstanding Equity Awards at December 31, 2016
| | | | | | | Stock Awards | | | | | | Option Awards(1) | | | | | Unvested (No Longer Subject to Performance Conditions) | | Equity Incentive Plan Awards (Unearned and Unvested) | | | Name | Year Granted(1) | Number Exercisable | Exercise Price | Expiration Date | Plan(2)(3) | Number | Market Value(2)(3) | Number | Market Value(2) | | Peter D. Hancock | — | — | — | — | 2016 LTI | | | 158,916 | $10,378,804 | | | | | | | 2015 LTI | | | 238,131 | $15,552,336 | | | | | | | 2014 LTI | 141,991 | $9,273,432 | | | | | | | | | 2013 LTI | 126,890 | $8,287,186 | | | | | | | | | Total | 268,881 | $17,560,618 | 397,047 | $25,931,140 | | Siddhartha Sankaran | — | — | — | — | 2016 LTI | | | 63,954 | $4,176,836 | | | | | | | 2015 LTI | | | 52,269 | $3,413,688 | | | | | | | 2014 LTI | 36,850 | $2,406,674 | | | | | | | | | 2013 LTI | 36,913 | $2,410,788 | | | | | | | | | Total | 73,763 | $4,817,462 | 116,223 | $7,590,524 | | Douglas A. Dachille | — | — | — | — | 2016 LTI | | | 77,519 | $5,062,766 | | | | | | | 2015 LTI | | | 100,144 | $6,540,405 | | | | | | | Total | | | 177,663 | $11,603,171 | | Kevin T. Hogan | — | — | — | — | 2016 LTI | | | 69,767 | $4,556,483 | | | | | | | 2015 LTI | | | 104,543 | $6,827,703 | | | | | | | 2014 LTI | 73,947 | $4,829,479 | | | | | | | | | 2013 LTI | 65,978 | $4,309,023 | | | | | | | | | Total | 139,925 | $9,138,502 | 174,310 | $11,384,186 | | Robert S. Schimek | 2007 | 499 | $1,140.99 | 12/13/2017 | 2016 LTI | | | 67,829 | $4,429,912 | | | | | | | 2015 LTI | | | 52,269 | $3,413,688 | | | | | | | 2014 LTI | 37,176 | $2,427,965 | | | | | | | | | 2013 LTI | 41,482 | $2,709,189 | | | | | | | | | Total | 78,658 | $5,137,154 | 120,098 | $7,843,600 | | Separated during 2016 | | | | | | | | | | | David L. Herzog | — | — | — | — | 2016 LTI | | | 77,519 | $5,062,766 | | | | | | | 2015 LTI | | | 116,160 | $7,586,410 | | | | | | | SICO Plans | 729 | $47,611 | | | | | | | | | Total | | | 193,679 | $12,649,175 | | Seraina Macia | — | — | — | — | 2015 LTI | | | 40,653 | $2,655,047 | | Brian T. Schreiber | — | — | — | — | 2015 LTI | | | 95,832 | $6,258,788 |
Outstanding Equity Awards at December 31, 2016
| None of the named executives has received options since 2008. All previously granted options had four-year pro-rata vesting schedules. All outstanding options were exercisable and have an exercise price equal to the closing sale price of AIG Common Stock on the NYSE on the date of grant.(1) |
Outstanding Equity Awards at December 31, 2016
| All 2016 LTI awards are shown at target payout, all 2015 LTI awards are shown at maximum payout and all 2014 LTI awards and 2013 LTI awards are shown at actual amounts earned, in each case using the closing sale price of AIG Common Stock on the NYSE on December 30, 2016 of $65.31 per share. Actual amounts earned for the 2014 LTI awards and the 2013 LTI awards were determined by the Committee in the first(2) |
Outstanding Equity Awards at December 31, 2016
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Outstanding Equity Awards at December 31, 2016
| quarter of 2017 and the first quarter of 2016, respectively. See “—Compensation Discussion and Analysis—Earned 2013 Long-Term Incentive Awards” and “—Compensation Discussion and Analysis—Adjudication of 2014 Long-Term Incentive Awards” for further information. 2016 LTI and 2015 LTI award amounts also include additional PSUs accrued in respect of dividend equivalent rights, which are subject to the same vesting and performance conditions as the related PSUs and are paid when such related earned shares (if any) are delivered. Whether the 2016 LTI or 2015 LTI awards (and related dividend equivalents) will be earned at the level shown or a different level, or at all, depends on AIG performance against plan metrics over a three-year performance period. |
Outstanding Equity Awards at December 31, 2016
| Once earned, all 2016 LTI awards (including related dividend equivalents) to 2016 named executives will vest one-third on the first day of January in each of 2019, 2020 and 2021, and all 2015 LTI awards (including related dividend equivalents) to 2016 named executives will vest one-third on the first day of January in each of 2018, 2019 and 2020. One-third of the earned 2014 LTI awards to 2016 named executives vested on January 1, 2017, and the remaining two-thirds will vest one-third on the first day of January in each of 2018 and 2019. Two-thirds of the earned 2013 LTI awards to 2016 named executives vested one-third on the first day of January in each of 2016 and 2017, and the remaining one-third will vest on January 1, 2018. The one-third of 2013 LTI awards that vested January 2016 are reflected in the 2016 Vesting of Stock-Based Awards table below. |
Outstanding Equity Awards at December 31, 2016
| Messrs. Herzog and Schreiber and Ms. Macia became vested in their 2013 LTI, 2014 LTI, 2015 LTI and 2016 LTI awards, as applicable, upon their respective separation dates. For 2013 LTI and 2014 LTI awards, the number of earned shares were based on actual performance as determined by the Committee in the first quarter of 2016 and the first quarter of 2017, respectively, and are reflected in the 2016 Vesting of Stock-Based Awards table below. For 2015 LTI and 2016 LTI awards, the number of earned shares, if any, will be based on AIG performance over the applicable three-year performance period. These unearned awards are reflected in the table above, at target payout for 2016 LTI awards and at maximum payout for 2015 LTI awards. For all awards, any earned amounts will be paid on the normal payment schedule. |
Outstanding Equity Awards at December 31, 2016
| Prior to 2005, key employees participated in the SICO Plans. The original SICO plan came into being in 1975. Participation in the SICO Plans by any person, and the extent of such participation, was at the sole discretion of SICO’s Board of Directors. SICO is responsible for issuing cash or AIG Common Stock under the SICO Plans when required; AIG has made no payments under these plans, although AIG records the expense attributable to these plans in its financial statements. In 2005, AIG took steps to protect the interests of AIG’s current employees with respect to these benefits. AIG agreed, subject to certain conditions, to make any payment or delivery of AIG Common Stock that is not promptly made with respect to the benefits accrued by current employees of AIG and its subsidiaries under the SICO Plans.(3) |
Outstanding Equity Awards at December 31, 2016
| Shares that have been contingently allocated to a participating named executive under the SICO Plans will not be paid until age 65 and generally are subject to forfeiture on earlier termination of employment. AIG agreed to consider Mr. Herzog, upon his separation, an eligible employee for the purposes of the AIG agreement with SICO, and he remains entitled to his SICO plans benefits subject to certain conditions. SICO’s Board of Directors has the authority to reinstate a payout right and may permit early payout of shares. Before earning the right to payout, a participant is not entitled to any equity interest with respect to the contingently allocated shares. |
Outstanding Equity Awards at December 31, 2016
| Under certain of the SICO Plans, since Mr. Herzog continued to be employed by AIG at the end of the eighth year after units were granted and had not yet reached age 65, he was contingently allocated additional shares equal to 35 percent of the shares initially allocated. The contingent allocations are included in this table. |
Outstanding Equity Awards at December 31, 2016
| Market value is based on the closing sale price of AIG Common Stock on the NYSE on December 30, 2016 of $65.31 per share. |
Outstanding Equity Awards at December 31, 2016
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Pension Benefits
Pension Benefits AIG maintains tax-qualified and nonqualified defined benefit (pension) plans providing retirement benefits for employees. Participants in the tax-qualified pension plan vest in and receive their benefits based on length of service. Participants in the non-qualified pension plans vest in and receive these benefits based on their age and length of service. Employees of AIG and its subsidiaries who are paid on a U.S. dollar payroll and are citizens of the United States, or non-citizens working in the United States, are covered under the Qualified Retirement Plan. Participants whose formula benefit is restricted from being fully paid from the Qualified Retirement Plan due to
Pension Benefits
| | 59 |
Pension Benefits
IRS limits on compensation and benefits, including the named executives, are eligible to participate in the Non-Qualified Retirement Plan. Of the named executives, only Mr. Schreiber participated in and had a benefit under the SERP, and Mr. Herzog had a benefit under the American General Corporation Supplemental Executive Retirement Plan (AGC Retirement Plan). Effective January 1, 2016, benefit accruals under the Qualified Retirement Plan, the Non-Qualified Retirement Plan and the SERP were frozen. As a result, the Qualified Retirement Plan, the Non-Qualified Retirement Plan and the SERP were closed to new participants, and current participants can no longer accrue additional benefits after December 31, 2015. However, interest credits continue to accrue on existing cash balance accounts, and participants also continue to earn service credits for purposes of vesting and early retirement eligibility subsidies as they continue to work for AIG. In addition, Mr. Herzog’s benefit under the AGC Retirement Plan vested, and his age 65 accrued benefit was frozen, following the acquisition of the American General Corporation on August 29, 2001. His benefit under the AGC Retirement Plan is for service accrued to December 31, 2002. While AIG was subject to the TARP restrictions on executive compensation, benefit accruals in the Non-Qualified Retirement Plan ceased on October 22, 2009 for Mr. Herzog and on December 11, 2009 for Messrs. Schimek and Schreiber. Benefit accruals in the SERP ceased on December 11, 2009 for Mr. Schreiber. Because the TARP restrictions ceased to apply as of December 14, 2012, the freeze on benefit accruals in the Non-Qualified Retirement Plan and SERP ended and benefit accruals commenced again under these plans after this date. In addition, benefit accruals commenced for Messrs. Hancock and Sankaran under the Non-Qualified Retirement Plan, as they had not accrued any benefits under this plan prior to the TARP restrictions. We are not permitted to restore service for benefit accruals for the length of time during which these executives were subject to the freeze. Mr. Hogan was employed by AIG from September 4, 1984 to November 5, 2008 and accrued pension benefits under the Qualified Retirement Plan and the Non-Qualified Retirement Plan during this employment. Mr. Hogan did not receive a distribution from the Qualified Retirement Plan or the Non-Qualified Retirement Plan at the time of his resignation in 2008. Pursuant to the terms of these plans, prior service is recognized for vesting and eligibility to participate. Therefore, upon rejoining AIG in 2013, benefit accruals commenced immediately under the Qualified Retirement Plan and the Non-Qualified Retirement Plan for Mr. Hogan. Mr. Dachille was hired on September 15, 2015 and benefit accruals under the Qualified Retirement Plan and the Non-Qualified Retirement Plan commenced on September 15, 2015. Ms. Macia was hired on November 11, 2013, and benefit accruals under the Qualified Retirement Plan and the Non-Qualified Retirement Plan commenced on December 1, 2014, after she completed one year of service with AIG. The benefit formula under the Qualified Retirement Plan and the Non-Qualified Retirement Plan was converted effective April 1, 2012 from a final average pay formula to a cash balance formula comprised of pay credits, calculated based on 6 percent of a plan participant’s annual pensionable compensation. Pay credits under these plans accrued through 2015 (subject to the IRS limitation on qualified plans of $265,000 in 2015) and ceased on December 31, 2015. However, annual interest credits of 2.89 percent continued in 2016 (based upon the 30-year long-term Treasury rate). This rate is adjusted annually on January 1. The definition of pensionable compensation under the cash balance formula is different from the definition used in the final average pay formula. Prior to the January 1, 2016 freeze date, and effective April 1, 2012, pensionable compensation under the cash balance formula included base salary, commissions, overtime and annual short-term incentive awards. The Qualified Retirement Plan was subject to IRS compensation limits and the Non-Qualified Retirement Plan was subject to an annual compensation limit of $1,050,000 in 2015. The final average pay formula and definition of pensionable compensation did not change under the Qualified Retirement Plan or the Non-Qualified Retirement Plan for employees whose age plus credited service as of March 31, 2012 equaled 65 or greater and who had at least five years of credited service in the Qualified Retirement Plan as of that date. None of the named executives met these requirements. For purposes of the Qualified Retirement Plan, Non-Qualified Retirement Plan and the SERP, each final average pay formula has been based on the average pensionable compensation of a participant during those three consecutive years in the last ten years of credited service that afford the highest such average, not including amounts attributable to overtime pay, quarterly bonuses, annual cash bonuses or long-term incentive awards. However, as a result of the freeze to benefit accruals effective January 1, 2016 to the Qualified Retirement Plan, the Non-Qualified Retirement Plan and the SERP, each final average pay formula is based on the average pensionable compensation of a participant during those three consecutive years in the last ten years of credited service through December 31, 2015. These participants will receive a benefit under the Qualified Retirement Plan and the Non-Qualified Retirement Plan calculated using either the final average pay formula or the cash balance formula,
Pension Benefits
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Pension Benefits
whichever produces the greater benefit. The Non-Qualified Retirement Plan provides a benefit equal to the portion of the benefit that is not permitted to be paid from the Qualified Retirement Plan due to IRS limits on compensation and benefits. The Qualified Retirement Plan and Non-Qualified Retirement Plan final average pay formula ranges from 0.925 percent to 1.425 percent times average final salary for each year of credited service accrued since April 1, 1985 up to 44 years through December 31, 2015 and 1.25 percent to 1.75 percent times average final pay for each year of credited service accrued prior to April 1, 1985 up to 40 years. For participants who retire after the normal retirement age of 65, the retirement benefit is actuarially increased to reflect the later benefit commencement date. Participants in the Qualified Retirement Plan are vested after three years of service and participants in the Non-Qualified Retirement Plan are vested once they attain age 60 with five or more years of service or age 55 with ten or more years of service. Participants in the Qualified Retirement Plan can elect to receive their benefit in the form of an annuity or as a lump sum distribution. For Non-Qualified Retirement Plan participants, the benefit they accrued through March 31, 2012 can be paid only in the form of an annuity, and the benefit accrued on and after April 1, 2012 through December 31, 2015 can be paid only in a lump sum. The SERP continues to provide participants annuity options under its final average pay formula. The SERP’s final average pay formula provides a benefit equal to 2.4 percent times average final pay for each year of credited service up to 25 years through December 31, 2015, reduced by the monthly benefits payable from the Non-Qualified Retirement Plan, the Qualified Retirement Plan, Social Security and any predecessor plan or foreign deferred compensation plan sponsored by AIG. Early retirement benefits. Each of the domestic pension plans provides for reduced early retirement benefits. These benefits are available to all vested participants in the Qualified Retirement Plan. The Non-Qualified Retirement Plan provides reduced early retirement benefits to participants who have reached age 55 with ten or more years of service or to participants who have reached age 60 with five or more years of service. The early retirement reduction factors in the Non-Qualified Retirement Plan are based upon age as of the retirement date and years of credited service excluding the TARP-related freeze period. The SERP provides reduced early retirement benefits to participants beginning at age 60 with five or more years of service, or to participants who have reached age 55 with ten or more years of credited service, except that the Committee must approve payment for eligible participants retiring before age 60. In the case of early retirement, participants in the SERP will receive the SERP formula benefit reduced by 3, 4 or 5 percent (depending on age and years of credited service at retirement excluding the TARP-related freeze period) for each year that retirement precedes age 65. Participants in the Qualified Retirement Plan and the Non-Qualified Retirement Plan under the final average pay formula will receive the plan formula benefit projected to normal retirement at age 65 (using average final salary as of the date of early retirement), but prorated based on years of actual service, then reduced by a further amount in the same manner described with respect to the SERP except that there is no exclusion of service for the TARP-related freeze period under the Qualified Retirement Plan. Participants in the Qualified Retirement Plan, Non-Qualified Retirement Plan and the SERP will continue to receive service credit on and after the January 1, 2016 freeze date in determining age and length of service for early retirement subsidies and vesting purposes. Participants in the Qualified Retirement Plan with at least three years of service to AIG have a vested reduced retirement benefit pursuant to which, in the case of termination of employment prior to reaching age 65, such participants may elect to receive a reduced early retirement benefit commencing at any date between their date of termination and age 65. Participants in the Qualified Retirement Plan may choose to receive a lump sum payment or an annuity option upon normal or early retirement. Participants in the Non-Qualified Retirement Plan must receive the benefit accrued through March 31, 2012 in the form of an annuity and the benefit accrued on and after April 1, 2012 through December 31, 2015 in a lump sum. The SERP participants can elect an annuity option only and may not choose to receive the benefit in a lump sum. Death and disability benefits. Each of the domestic pension plans also provides for death and disability benefits. The death benefit payable to a participant’s designated beneficiary under the Qualified Retirement Plan and the Non-Qualified Retirement Plan will generally equal the participant’s lump sum benefit or cash balance account. In the case of death, the SERP provides a participant who has at least five years of service to AIG with a survivor annuity equal to 40 percent of the participant’s accumulated benefit, which may be reduced based on the age of the surviving spouse. Under the Qualified Retirement Plan and the Non-Qualified Retirement Plan, prior to the January 1, 2016 freeze date, participants who became disabled and received payments under AIG’s long-term disability plan, and
Pension Benefits
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Pension Benefits
whose benefit was determined under the final average pay formula, continued to accrue credited service, and participants whose benefit was determined under the cash balance formula continued to receive interest and pay credits to their cash balance account, for a maximum of three additional years. On and after the January 1, 2016 freeze date, participants who receive payments under AIG’s long-term disability plan continue to receive service credit in determining age and length of service for early retirement subsidies and vesting purposes, and participants whose benefit is determined under the cash balance formula continue to receive interest credits to their cash balance account, for a maximum of three additional years. Under the SERP, participants do not accrue credited service during that time. As with other retirement benefits, in the case of death and disability benefits, the formula benefit under the Non-Qualified Retirement Plan and the SERP is reduced by amounts payable under the Qualified Retirement Plan, and participants in both the Non-Qualified Retirement Plan and the SERP may receive the formula benefit from the SERP only to the extent that it exceeds the benefit payable from the Non-Qualified Retirement Plan and the Qualified Retirement Plan. 2016 pension benefits. The following table details the accumulated benefits under the pension plans in which each named executive participates. In accordance with SEC rules, these accumulated benefits are presented as if they were payable upon the named executive’s normal retirement at age 65. However, it is important to note that the benefits shown for the named executives are at least partially unvested and could be received at lower levels due to reduced benefits or forfeited entirely if the named executive does not continue to work at AIG for the next several years. As of year-end 2016, none of our 2016 named executives were eligible for early retirement benefits under the Non-Qualified Retirement Plan. Mr. Herzog was eligible for early retirement benefits under the Non-Qualified Retirement Plan and the AGC Retirement Plan upon his separation from employment on April 8, 2016, with commencement of his benefits delayed six months as required under Section 409A of the Code. Mr. Herzog elected to commence his early retirement benefits under the Qualified Retirement Plan effective May 1, 2016. Ms. Macia was not vested in or eligible for early retirement benefits under the Qualified or Non-Qualified Retirement Plans upon her separation from employment on March 31, 2016. Ms. Macia forfeited these benefits upon her separation from AIG. Mr. Schreiber was not vested in or eligible for early retirement benefits under the Non-Qualified Retirement Plan or the SERP upon his separation from employment on March 31, 2016. Mr. Schreiber forfeited these benefits upon his separation from AIG. Mr. Schreiber elected to receive his Qualified Retirement Plan benefit effective November 1, 2016 in the form of a lump sum payment. AIG has not granted extra years of credited service under the defined benefit plans described above to any named executive, other than credit for prior service by Mr. Herzog to American General Corporation (as required by Code regulations applicable to plans assumed in acquisitions) and, pursuant to the terms of AIG’s acquisition of First Principles, recognizing prior service by Mr. Dachille to First Principles for purposes of determining vesting and eligibility.
2016 Pension Benefits
2016 Pension Benefits
2016 Pension Benefits
| Name | Plan Name | Years of Credited Service(1) | Present Value of Accumulated Benefit(2) | Payments During 2016 | | Peter D. Hancock | Qualified Retirement Plan | 5.333 | $109,459 | $0 | | | Non-Qualified Retirement Plan | 3.000 | $139,133 | $0 | | | Total | | $248,592 | $0 | | Siddhartha Sankaran | Qualified Retirement Plan | 4.583 | $57,428 | $0 | | | Non-Qualified Retirement Plan | 3.000 | $97,667 | $0 | | | Total | | $155,095 | $0 | | Douglas A. Dachille | Qualified Retirement Plan | 0.333 | $14,181 | $0 | | | Non-Qualified Retirement Plan | 0.333 | $1,998 | $0 | | | Total | | $16,179 | $0 | | Kevin T. Hogan | Qualified Retirement Plan | 25.917 | $607,617 | $0 | | | Non-Qualified Retirement Plan | 25.917 | $768,948 | $0 | | | Total | | $1,376,565 | $0 | | Robert S. Schimek | Qualified Retirement Plan | 9.917 | $202,258 | $0 | | | Non-Qualified Retirement Plan | 6.917 | $274,981 | $0 | | | Total | | $477,239 | $0 |
2016 Pension Benefits
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2016 Pension Benefits
| Name | Plan Name | Years of Credited Service(1) | Present Value of Accumulated Benefit(2) | Payments During 2016 | | Separated during 2016 | | | | | | David L. Herzog | Qualified Retirement Plan | 15.917 | $0 | $385,616 | | | Non-Qualified Retirement Plan | 12.750 | $534,750 | $168,897 | | | AGC Retirement Plan | 2.917 | $0 | $231,269 | | | Total | | $534,750 | $785,782 | | Seraina Macia | Qualified Retirement Plan | 1.083 | $0 | $0 | | | Non-Qualified Retirement Plan | 1.083 | $0 | $0 | | | Total | | $0 | $0 | | Brian T. Schreiber | Qualified Retirement Plan | 18.083 | $0 | $328,651 | | | Non-Qualified Retirement Plan | 15.083 | $0 | $0 | | | SERP | 15.583 | $0 | $0 | | | Total | | $0 | $328,651 |
2016 Pension Benefits
| The 2016 named executives had the following years of service with AIG as of December 31, 2016: Mr. Hancock—6.917; Mr. Sankaran—6.167; Mr. Dachille—1.333; Mr. Hogan—27.5; and Mr. Schimek—11.5. As of their respective separation dates, the named executive officers who separated in 2016 had the following years of service with AIG: Mr. Herzog—14.75, Ms. Macia—2.417; and Mr. Schreiber—18.917.(1) |
2016 Pension Benefits
Mr. Hancock. Mr. Hancock had fewer years of credited service than actual service under the Qualified Retirement Plan because, at the time he was hired, employees were required to wait a year after commencing employment with AIG before becoming participants in this plan and received credit for service retroactive to six months of employment. Mr. Hancock became a participant in the Qualified Retirement Plan effective March 1, 2011 after he completed one year of service with AIG, with service credited retroactive to September 1, 2010. Mr. Hancock began accruing credited service under the Non-Qualified Retirement Plan on January 1, 2013, the first of the month following December 14, 2012, the end of AIG’s TARP restrictions period. He participates in the Qualified Retirement and Non-Qualified Retirement Plans under the cash balance formula. He began to accrue pay credits under the Non-Qualified Retirement Plan cash balance formula following December 14, 2012, the end of AIG’s TARP restrictions period. The Qualified and Non-Qualified Retirement Plans were frozen effective January 1, 2016 and credited service accruals ceased under these plans as of December 31, 2015. Mr. Sankaran. Mr. Sankaran had fewer years of credited service than actual service under the Qualified Retirement Plan because, at the time he was hired, employees were required to wait a year after commencing employment with AIG before becoming participants in this plan and received credit for service retroactive to six months of employment. Mr. Sankaran became a participant in the Qualified Retirement Plan effective December 1, 2011 after he completed one year of service with AIG, with service credited retroactive to June 1, 2011. Mr. Sankaran began accruing credited service under the Non-Qualified Retirement Plan on January 1, 2013, the first of the month following December 14, 2012, the end of AIG’s TARP restrictions period. He participates in the Qualified Retirement and Non-Qualified Retirement Plans under the cash balance formula. He began to accrue pay credits under the Non-Qualified Retirement Plan cash balance formula following December 14, 2012, the end of AIG’s TARP restrictions period. The Qualified and Non-Qualified Retirement Plans were frozen effective January 1, 2016 and credited service accruals ceased under these plans as of December 31, 2015. Mr. Dachille. Mr. Dachille had fewer years of credited service than actual service under the Qualified Retirement Plan and the Non-Qualified Retirement Plan because the plans were frozen effective January 1, 2016 and credited service accruals ceased under these plans as of December 31, 2015. Mr. Dachille became a participant in the Qualified Retirement Plan and the Non-Qualified Retirement Plan effective September 15, 2015, the date he joined AIG. He participates in the Qualified Retirement and Non-Qualified Retirement Plans under the cash balance formula. Mr. Hogan. Mr. Hogan had fewer years of credited service than actual service under the Qualified Retirement Plan and the Non-Qualified Retirement Plan because, at the time he was hired, employees were required to wait a year after commencing employment with AIG before becoming participants in these plans and received credit for service retroactive to six months of employment. Mr. Hogan was employed by AIG from
2016 Pension Benefits
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2016 Pension Benefits
September 4, 1984 to November 5, 2008 and accrued pension benefits under the Qualified Retirement Plan and the Non-Qualified Retirement Plan during this employment. Mr. Hogan did not receive a distribution from the Qualified Retirement Plan or the Non-Qualified Retirement Plan at the time of his initial resignation. Upon his rehire on October 14, 2013, benefit accruals commenced immediately under the Qualified and Non-Qualified Retirement Plans calculated under the cash balance formula, and prior service, pursuant to the terms of these Plans, was recognized for vesting and eligibility purposes. Mr. Hogan’s credited service under the Non-Qualified Retirement Plan is equal to his credited service under the Qualified Retirement Plan because he was not an employee during the time period in which the freeze on service accrual in the Non-Qualified Retirement Plan was applicable. The Qualified and Non-Qualified Retirement Plans were frozen effective January 1, 2016 and credited service accruals ceased under these plans as of December 31, 2015. Mr. Schimek. Mr. Schimek had fewer years of credited service than actual service under the Qualified Retirement Plan and Non-Qualified Retirement Plan because, at the time he was hired, employees were required to wait a year after commencing employment with AIG before becoming participants in these plans and received credit for service retroactive to six months of employment. Mr. Schimek became a participant in the Qualified Retirement Plan and Non-Qualified Retirement Plan effective August 1, 2006 after he completed one year of service with AIG, with service credited retroactive to February 1, 2006. Mr. Schimek’s credited service under the Non-Qualified Retirement Plan is less than his credited service under the Qualified Retirement Plan due to the freeze on service accruals in the Non-Qualified Retirement Plan. He participates in the Qualified Retirement Plan and Non-Qualified Retirement Plan under the cash balance formula. Mr. Schimek resumed accrual of pay credits under the Non-Qualified Retirement Plan cash balance formula following December 14, 2012, the end of AIG’s TARP restrictions period and resumed accruing credited service under the Non-Qualified Retirement Plan on January 1, 2013. The Qualified and Non-Qualified Retirement Plans were frozen effective January 1, 2016 and credited service accruals ceased under these plans as of December 31, 2015. Mr. Herzog. Under the Qualified Retirement and Non-Qualified Retirement Plans, Mr. Herzog received credit for his service retroactive to his date of hire at American General Corporation, which was acquired by AIG in August 2001. Under the Qualified Retirement Plan, Mr. Herzog had more years of credited service than actual service because that plan provided credit for years of employment with American General Corporation before its acquisition by AIG. Under the Non-Qualified Retirement Plan, Mr. Herzog’s credited service is less than his credited service under the Qualified Retirement Plan due to the freeze on service accruals in the Non-Qualified Retirement Plan. He participated in the Qualified Retirement and Non-Qualified Retirement Plans under the cash balance formula. Mr. Herzog began to accrue pay credits under the Non-Qualified Retirement Plan cash balance formula following December 14, 2012, the end of AIG’s TARP restrictions period, and resumed accruing credited service under the Non-Qualified Retirement Plan on January 1, 2013. Mr. Herzog’s benefit under the AGC Retirement Plan was frozen at December 31, 2002. The Qualified and Non-Qualified Retirement Plans were frozen effective January 1, 2016 and credited service accruals ceased under these plans as of December 31, 2015. For Mr. Herzog, years of credited service and pension values reflect the values as of his separation date of April 8, 2016. Ms. Macia. Ms. Macia had fewer years of credited service than actual service under the Qualified Retirement Plan and the Non-Qualified Retirement Plan because, at the time she was hired, employees were required to wait a year after commencing employment with AIG before becoming participants in these plans. Ms. Macia became a participant in the Qualified Retirement Plan and the Non-Qualified Retirement Plan effective December 1, 2014 after she completed one year of service with AIG. She participated in the Qualified Retirement and Non-Qualified Retirement Plans under the cash balance formula. The Qualified and Non-Qualified Retirement Plans were frozen effective January 1, 2016 and credited service accruals ceased under these plans as of December 31, 2015. For Ms. Macia, years of credited service and pension values reflect the values as of her separation date of March 31, 2016. Mr. Schreiber. Mr. Schreiber had fewer years of credited service than actual service under the Qualified Retirement Plan and Non-Qualified Retirement Plan because, at the time he was hired, employees were required to wait a year after commencing employment with AIG before becoming participants in these plans and received credit for service retroactive to six months of employment. Mr. Schreiber became a participant in the Qualified Retirement Plan and Non-Qualified Retirement Plan effective June 1, 1998 after he completed one year of service with AIG, with service credited retroactive to December 1, 1997. Mr. Schreiber’s credited service under the Non-Qualified Retirement Plan is less than his credited service under the Qualified Retirement Plan due to the freeze on service accrual in the Non-Qualified Retirement Plan. He participated in the Qualified Retirement Plan and Non-Qualified Retirement Plan under the cash balance formula.
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2016 Pension Benefits
Mr. Schreiber resumed accrual of pay credits under the Non-Qualified Retirement Plan cash balance formula following December 14, 2012, the end of AIG’s TARP restrictions period. The Qualified and Non-Qualified Retirement Plans were frozen effective January 1, 2016 and credited service accruals ceased under these plans as of December 31, 2015. For Mr. Schreiber, years of credited service and pension values reflect the values as of his separation date of March 31, 2016.
2016 Pension Benefits
| The actuarial present values of the accumulated benefits are based on service and earnings as of December 31, 2016 (the pension plan measurement date for purposes of AIG’s financial statement reporting), with the exception of Messrs. Herzog and Schreiber and Ms. Macia, whose values reflect their separation dates. The actuarial present values of the accumulated benefits under the Qualified Retirement Plan and the Non-Qualified Retirement Plan are calculated based on payment of a life annuity beginning at age 65, or current age if older, consistent with the assumptions described in Note 21 to the Consolidated Financial Statements included in AIG’s 2016 Annual Report on Form 10-K. As described in that Note, the discount rate assumption is 4.15 percent for the Qualified Retirement Plan. The discount rate assumption is 4.03 percent for the Non-Qualified Retirement Plan and 3.87 percent for the AGC Retirement Plan. The mortality assumptions are based on the RP-2014 annuitant white collar mortality table projected using the AIG improvement scale.(2) |
2016 Pension Benefits
As a result of the TARP restrictions on executive compensation, benefit accruals in the Non-Qualified Retirement Plan ceased on October 22, 2009 for Mr. Herzog and on December 11, 2009 for Messrs. Schimek and Schreiber. Benefit accruals in the SERP also ceased on December 11, 2009 for Mr. Schreiber. None of our other named executives participate in the SERP. The TARP-related freeze on benefit accruals in the Non-Qualified Retirement Plan and SERP ended on December 14, 2012. Messrs. Dachille and Hogan and Ms. Macia were not employed by AIG during the TARP-related freeze period, and Messrs. Hancock and Sankaran did not begin accruing pay credits under the Non-Qualified Retirement Plan until December 14, 2012. We are not permitted to restore service for benefit accruals for the length of time during which these executives were subject to the TARP-related freeze. The Non-Qualified Retirement Plan and SERP benefits for these participants, if eligible, are equal to the lesser of the frozen Non-Qualified Retirement Plan and SERP benefit (excluding service and earnings during the period in which benefit accruals were frozen due to the TARP restrictions) or the Non-Qualified Retirement Plan and SERP benefit without taking into account the TARP-related freeze on service accruals. Vesting is determined in the Non-Qualified Retirement Plan and the SERP based on age and years of service as of the executive’s actual retirement date. Early retirement reduction factors are based on age at the executive’s actual retirement date and years of credited service excluding credited service during the period in which benefit accruals were frozen due to the TARP restrictions. Participants will continue to receive service credit on and after the January 1, 2016 freeze date in determining age and length of service for both vesting and early retirement subsidies. Mr. Herzog. Mr. Herzog’s AGC Retirement Plan benefit was frozen as of December 31, 2002 following AIG’s acquisition of American General Corporation.
Nonqualified Deferred Compensation
Nonqualified Deferred Compensation In 2008, AIG paid out the entire account balances of most participants and terminated future participation in a number of its nonqualified deferred compensation plans, including the Executive Deferred Compensation Plan (EDCP), in which designated key employees were eligible to participate. However, for certain current and former employees on December 31, 2008, including Mr. Herzog, payments of account balances were not accelerated. Mr. Herzog participated in the EDCP. In addition, Mr. Herzog participated in the American General Supplemental Thrift Plan (AG Supplemental Thrift Plan) as a result of his employment by American General Corporation prior to its acquisition by AIG. Executive Deferred Compensation Plan. Participants in the EDCP were able to defer cash compensation up to a maximum of $300,000 per year. Amounts deferred under the EDCP were credited with earnings based on the returns of a small number of mutual funds. In 2016, based on the performance of these funds, Mr. Herzog experienced a return of approximately 7.85 percent. Amounts deferred during each year, and earnings thereon, will be distributed in accordance with a participant’s prior decision to receive installments over a period of five or ten years or in a lump sum payment following termination of employment after reaching age 60. A participant whose employment terminates before reaching age 60 must receive his or her account balance in a lump sum payment. Mr. Herzog’s separation from AIG occurred prior to his reaching age 60, and accordingly, he received his account balance in a lump sum payment, credited with earnings or losses based on the returns of the mutual
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funds, after a six-month delay required under Section 409A of the Code. Balances under the plans in which the named executives participated are detailed in the following table.
2016 Nonqualified Deferred Compensation
2016 Nonqualified Deferred Compensation
2016 Nonqualified Deferred Compensation
| Name | Executive Contributions | AIG Contributions | Aggregate Earnings | Distributions | Aggregate Balance at Year-End 2016 | | Peter D. Hancock | $0 | $0 | $0 | $0 | $0 | | Siddhartha Sankaran | $0 | $0 | $0 | $0 | $0 | | Douglas A. Dachille | $0 | $0 | $0 | $0 | $0 | | Kevin T. Hogan | $0 | $0 | $0 | $0 | $0 | | Robert S. Schimek | $0 | $0 | $0 | $0 | $0 | | Separated during 2016 | | | | | | | David L. Herzog | | | | | | | EDCP | $0 | $0 | $46,607 | $640,430 | $0 | | AG Supplemental Thrift Plan | $0 | $0 | $505 | $22,933 | $0(1) | | Total | | | $47,112 | $663,363 | $0 | | Seraina Macia | $0 | $0 | $0 | $0 | $0 | | Brian T. Schreiber | $0 | $0 | $0 | $0 | $0 |
2016 Nonqualified Deferred Compensation
| Represents Mr. Herzog’s balances under the AG Supplemental Thrift Plan and contributions made to this plan prior to AIG’s acquisition of American General Corporation. Mr. Herzog received a lump sum distribution from this plan after his separation from AIG and election to receive a lump sum distribution from AIG’s 401(k) plan. This plan provides a return based on Prime plus 1 percent, which resulted in a rate of return of approximately 2.25 percent in 2016.(1) |
POTENTIAL PAYMENTS ON TERMINATION
POTENTIAL PAYMENTS ON TERMINATION Executive Severance Plan. As previously discussed, AIG maintains the 2012 Executive Severance Plan (the 2012 ESP) for AIG executives in grade level 27 or above, including the 2016 named executives, and executives who participated in AIG’s prior executive severance plan (Prior Participants). Severance benefits. The 2012 ESP provides for severance payments and benefits upon a termination by AIG without “Cause” or by a qualifying executive (including Messrs. Hancock, Sankaran, Dachille, Hogan and Schimek) for “Good Reason,” including, for qualifying executives, after a “Change in Control.” In the event of a qualifying termination, subject to the participant’s execution of a release of claims and agreement to abide by certain restrictive covenants, a participant is generally eligible to receive:
POTENTIAL PAYMENTS ON TERMINATION
| • | For terminations on and after April 1 of the termination year, a pro-rata annual short-term incentive for the year of termination based on the participant’s target amount and actual company (and/or, if applicable, business unit or function) performance, paid at the same time as such short-term incentives are regularly paid to similarly situated active employees; and |
POTENTIAL PAYMENTS ON TERMINATION
| • | Severance in an amount equal to the product of a multiplier times the sum of base salary and the average amount of short-term incentive paid for the preceding three completed calendar years. The multiplier is either 1 or 1.5 depending on the executive’s grade level and increases to 1.5 or 2 for qualifying terminations within two years following a Change in Control. Each of Messrs. Hancock, Sankaran, Dachille, Hogan and Schimek is eligible for the higher multipliers. |
POTENTIAL PAYMENTS ON TERMINATION
If the qualifying termination occurs within twelve months after experiencing a reduction in base salary or annual short-term incentive, the payments described above are calculated as if the qualifying termination occurred immediately prior to the reduction. However, in any event, Prior Participants in grade level 27 or above, which includes Messrs. Hancock, Sankaran and Schimek, may not receive less than the severance they would have received under the prior plan. Severance generally will be paid in a lump sum. Participants are entitled to continued health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), a $40,000 payment that may be applied towards continued health coverage and life insurance and one year of additional age and service under AIG’s
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non-qualified pension plans and AIG Medical Plan solely for purposes of determining vesting and eligibility, not benefit accruals. The one year of additional age and service is also used for the purpose of determining eligibility to enroll in retiree medical coverage. Restrictive covenants. Pursuant to the release of claims that each participant must execute to receive benefits under the 2012 ESP, each participant is generally prohibited from:
POTENTIAL PAYMENTS ON TERMINATION
| • | Engaging in, being employed by, rendering services to or acquiring financial interests in certain businesses that are competitive with AIG for a period of six months after termination; |
POTENTIAL PAYMENTS ON TERMINATION
| • | Interfering with AIG’s business relationships with customers, suppliers or consultants for a period of six months after termination; |
POTENTIAL PAYMENTS ON TERMINATION
| • | Soliciting or hiring AIG employees for a period of one year after termination; and |
POTENTIAL PAYMENTS ON TERMINATION
| • | Disclosing AIG’s confidential information at any time following termination. |
POTENTIAL PAYMENTS ON TERMINATION
Definitions. Under the 2012 ESP:
POTENTIAL PAYMENTS ON TERMINATION
| • | “Cause” generally means |
POTENTIAL PAYMENTS ON TERMINATION
| • | the participant’s conviction, whether following trial or by plea of guilty or nolo contendere (or similar plea), in a criminal proceeding (A) on a misdemeanor charge involving fraud, false statements or misleading omissions, wrongful taking, embezzlement, bribery, forgery, counterfeiting or extortion, (B) on a felony charge or (C) on an equivalent charge to those in clauses (A) and (B) in jurisdictions which do not use those designations; |
POTENTIAL PAYMENTS ON TERMINATION
| • | the participant’s engagement in any conduct which constitutes an employment disqualification under applicable law (including statutory disqualification as defined under the Exchange Act); |
POTENTIAL PAYMENTS ON TERMINATION
| • | the participant’s violation of any securities or commodities laws, any rules or regulations issued pursuant to such laws, or the rules and regulations of any securities or commodities exchange or association of which AIG or any of its subsidiaries or affiliates is a member; or |
POTENTIAL PAYMENTS ON TERMINATION
| • | the participant’s material violation of AIG’s codes of conduct or any other AIG policy as in effect from time to time. |
POTENTIAL PAYMENTS ON TERMINATION
| • | “Change in Control” generally means |
POTENTIAL PAYMENTS ON TERMINATION
| • | individuals who, on the effective date of the 2012 ESP, constitute the Board of Directors of AIG (or subsequent directors whose election or nomination was approved by a vote of at least two-thirds of such directors, including by approval of the proxy statement in which such person is named as a nominee for director) cease for any reason to constitute at least a majority of the Board; |
POTENTIAL PAYMENTS ON TERMINATION
| • | any person is or becomes a beneficial owner of 50 percent or more of AIG’s voting securities (for this purpose, person is as defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act); |
POTENTIAL PAYMENTS ON TERMINATION
| • | consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving AIG that results in any person becoming the beneficial owner of 50 percent or more of the total voting power of the outstanding voting securities eligible to elect directors of the entity resulting from such transaction; |
POTENTIAL PAYMENTS ON TERMINATION
| • | a sale of all or substantially all of AIG’s assets; or |
POTENTIAL PAYMENTS ON TERMINATION
| • | AIG’s stockholders approve a plan of complete liquidation or dissolution of AIG. |
POTENTIAL PAYMENTS ON TERMINATION
| • | “Good Reason” generally means a reduction of more than 20 percent in the participant’s annual target direct compensation. |
POTENTIAL PAYMENTS ON TERMINATION
Treatment of LTI Awards. Since 2013, LTI awards have been issued under the 2013 Long Term Incentive Plan, which provides for accelerated vesting of outstanding PSUs in certain termination scenarios. In the case of a participant’s involuntary termination without Cause (defined in the same manner as in the 2012 ESP as set forth above), retirement or disability, or if the participant experiences a qualifying resignation after the first year of a performance period (e.g., on or after January 1, 2017 for the 2016—2018 performance period), the participant’s award will vest and earned PSUs (if any) will be determined based on actual performance for the whole performance period, and be delivered on the normal settlement schedule. Retirement requires attainment of age
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POTENTIAL PAYMENTS ON TERMINATION
60 with five years of service or attainment of age 55 with ten years of service, and a qualifying resignation requires attainment of both (1) age 50 with at least five years of service and (2) age plus years of service equal to at least 60. In the case of a participant’s death during or prior to adjudication for a performance period or involuntary termination without Cause within 24 months following a Change in Control (defined in the same manner as in the 2012 ESP as set forth above) during a performance period, an amount equal to the participant’s target amount of PSUs (unless the Committee determines to use actual performance through the date of the Change in Control) will vest and be delivered to the participant by the later of the end of the calendar year or two and a half months following death or termination. Quantification of Termination Payments and Benefits. Our named executive officers who separated in 2016 are not included in the Termination Payments and Benefits table below because they were not employed by us on December 31, 2016. Below are the benefits each of our named executive officers who separated in 2016 received upon his or her separation from employment. Mr. Herzog. Mr. Herzog separated from AIG on April 8, 2016, and was entitled to termination without cause benefits under the 2012 ESP. Upon separation, he received a lump sum severance payment of $6,173,333 and was entitled to a lump sum payment of $40,000 that may be applied towards continued health coverage and life insurance. For 2016, Mr. Herzog earned a pro-rata short-term incentive award of $200,000, 100 percent of which was vested and paid in March 2017. Mr. Herzog’s outstanding 2013 LTI, 2014 LTI, 2015 LTI and 2016 LTI awards vested upon his separation. Mr. Herzog’s earned but unpaid 2013 LTI and 2014 LTI awards will be paid on the normal payment schedule applicable to all 2013 and 2014 LTI award recipients. PSUs earned under the 2015 and 2016 LTI awards, if any, will be based on actual performance following the applicable performance period and paid on the normal payment schedule applicable to all 2015 and 2016 LTI award recipients. Mr. Herzog’s 2015 LTI and 2016 LTI award amounts also include additional PSUs accrued in respect of dividend equivalent rights, which are subject to the same vesting and performance conditions as the related PSUs and are paid when such related earned shares (if any) are delivered. Mr. Herzog’s severance payments and benefits are subject to his release of claims against AIG and restrictive covenants, as described above in “—Executive Severance Plan—Restrictive Covenants.” Ms. Macia. Ms. Macia separated from AIG on March 31, 2016, and was entitled to termination without cause benefits under the 2012 ESP. Upon separation, she received a lump sum severance payment of $3,000,000 and was entitled to a lump sum payment of $40,000 that may be applied towards continued health coverage and life insurance. For 2016, Ms. Macia earned a pro-rata short-term incentive award of $170,000, 100 percent of which was vested and paid in March 2017. Ms. Macia’s outstanding 2014 LTI and 2015 LTI awards vested upon her separation. Ms. Macia’s earned but unpaid 2014 awards will be paid on the normal payment schedule applicable to all 2014 LTI award recipients. PSUs earned under the 2015 LTI award, if any, will be based on actual performance following the performance period and paid on the normal payment schedule applicable to all 2015 LTI award recipients. Ms. Macia’s 2015 LTI award amount also includes additional PSUs accrued in respect of dividend equivalent rights, which are subject to the same vesting and performance conditions as the related PSUs and are paid when such related earned shares (if any) are delivered. In lieu of a 2016 LTI award, Ms. Macia received a lump sum payment of $1,800,000. Ms. Macia’s severance payments and benefits are subject to her release of claims against AIG and restrictive covenants, as described above in “—Executive Severance Plan—Restrictive Covenants.” Mr. Schreiber. Mr. Schreiber separated from AIG on March 31, 2016, and was entitled to termination without cause benefits under the 2012 ESP. Upon separation, he received a lump sum severance payment of $5,999,250 and was entitled to a lump sum payment of $40,000 that may be applied towards continued health coverage and life insurance. For 2016, Mr. Schreiber earned a pro-rata short-term incentive award of $175,000, 100 percent of which was vested and paid in March 2017. Mr. Schreiber’s outstanding 2013 LTI, 2014 LTI and 2015 LTI awards vested upon his separation. Mr. Schreiber’s earned but unpaid 2013 and 2014 awards will be paid on the normal payment schedule applicable to all 2013 and 2014 LTI award recipients. PSUs earned under the 2015 LTI award, if any, will be based on actual performance following the performance period and paid on the normal payment schedule applicable to all 2015 LTI award recipients. Mr. Schreiber’s 2015 LTI award amount also includes additional PSUs accrued in respect of dividend equivalent rights, which are subject to the same vesting and performance conditions as the related PSUs
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POTENTIAL PAYMENTS ON TERMINATION
and are paid when such related earned shares (if any) are delivered. In lieu of a 2016 LTI award, Mr. Schreiber received a lump sum payment of $3,300,000. Mr. Schreiber’s severance payments and benefits are subject to his release of claims against AIG and restrictive covenants, as described above in “—Executive Severance Plan—Restrictive Covenants.” The following table sets forth the compensation and benefits that would have been provided to each of the 2016 named executives if he had been terminated on December 31, 2016 under the circumstances indicated (including following a Change in Control).
Termination Payments and Benefits for the 2016 Named Executive Officers as of December 31, 2016
| The amount shown for all of the termination events is the increase, if any, above the accumulated value of pension benefits shown in the 2016 Pension Benefits table, calculated using the same assumptions. Where there is no increase in value, the amount shown in this column is zero.(4) |
V. SELECTION OF DIRECTORS
V. SELECTION OF DIRECTORS The Nominating and Corporate Governance Committee is responsible for recommending a slate of directors to the Board for election at the annual meeting of shareholders, for recommending candidates to fill vacancies occurring between annual meetings, for reviewing and making recommendations to the Board on the election of any director nominees nominated pursuant to AIG’s proxy access by-law and for periodically recommending candidates for election to the Board.
V. SELECTION OF DIRECTORS
| A. | Nominations. The Board, based on the recommendations of the Nominating and Corporate Governance Committee, will select nominees for the position of director considering the following criteria: |
V. SELECTION OF DIRECTORS
| • | High personal and professional ethics, values and integrity; |
V. SELECTION OF DIRECTORS
| • | Ability to work together as part of an effective, collegial group; |
V. SELECTION OF DIRECTORS
| • | Commitment to representing the long-term interests of AIG; |
V. SELECTION OF DIRECTORS
| • | Skill, expertise, diversity, background, and experience with businesses and other organizations that the Board deems relevant; |
V. SELECTION OF DIRECTORS
| • | The interplay of the individual’s experience with the experience of other Board members; the contribution represented by the individual’s skills and experience to ensuring that the Board has the necessary tools to perform its oversight function effectively; and the extent to which the individual would otherwise be a desirable addition to the Board and any committees of the Board; and |
V. SELECTION OF DIRECTORS
| • | Ability and willingness to commit adequate time to AIG over an extended period of time. |
V. SELECTION OF DIRECTORS
| B. | Evaluation of Nominees. The Nominating and Corporate Governance Committee will discuss and evaluate possible candidates in detail prior to recommending them to the Board. The Nominating and Corporate Governance Committee will also be responsible for initially assessing whether a candidate would be an Independent Director. The Board, taking into consideration the assessment of the Nominating and Corporate Governance Committee, will determine whether a nominee or appointee would be an Independent Director. The Board has adopted Director Independence Guidelines to assist in this process. A copy of those Guidelines is attached as Annex A to these Corporate Governance Guidelines. |
V. SELECTION OF DIRECTORS
| C. | Shareholder Nominations. The Nominating and Corporate Governance Committee will give appropriate consideration to candidates for Board membership proposed by shareholders, including pursuant to AIG’s proxy access by-law, and will evaluate such candidates in the same manner as other candidates identified by or submitted to the Nominating and Corporate Governance Committee. |
V. SELECTION OF DIRECTORS
| Shareholders may propose nominees for consideration by the Nominating and Corporate Governance Committee by complying with the procedures and requirements in AIG’s proxy access by-law or by submitting names and supporting information to: Chairman, Nominating and Corporate Governance Committee, c/o Vice President–Corporate Governance, American International Group, Inc., 175 Water Street, New York, NY 10038. All shareholder recommendations as to possible Board members must comply with the information and timing requirements set forth in AIG’s by-laws. |
V. SELECTION OF DIRECTORS
| D. | Orientation and Continuing Education. Management, working with the Board, will provide an orientation process for new directors, including background material on AIG, its business plan and its risk profile, and meetings with senior management. Management will also provide a continuing education program for directors regarding matters relevant to AIG, its business plan and risk profile, as well as other appropriate subjects. |

DEF 14A of American International Group, Inc.

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PROPOSAL 1—ELECTION OF DIRECTORS

PROPOSAL 1—ELECTION OF DIRECTORS

PROPOSAL 1—ELECTION OF DIRECTORS

PROPOSAL 1—ELECTION OF DIRECTORS

PROPOSAL 1—ELECTION OF DIRECTORS

PROPOSAL 1—ELECTION OF DIRECTORS

PROPOSAL 1—ELECTION OF DIRECTORS

COMMITTEES

COMMITTEES

COMMITTEES

COMMITTEES

COMMITTEES

COMPENSATION OF DIRECTORS

2016 Non-Management Director Compensation

2016 Non-Management Director Compensation

2016 Non-Management Director Compensation

2016 Non-Management Director Compensation

2016 Non-Management Director Compensation

2016 Non-Management Director Compensation

2016 Non-Management Director Compensation

Compensation Structure

Compensation Philosophy

Compensation Philosophy

Compensation Structure—Direct Compensation Components

Compensation Structure—Direct Compensation Components

Compensation Structure—Direct Compensation Components

Compensation Structure—Direct Compensation Components

Compensation Structure—Direct Compensation Components

Compensation Structure—Direct Compensation Components

Compensation Structure—Direct Compensation Components

Compensation Structure—Direct Compensation Components

Compensation Structure—Direct Compensation Components

Compensation Structure—Direct Compensation Components

Compensation Structure—Direct Compensation Components

2017 Short-Term and Long-Term Incentive Structure

2017 Short-Term and Long-Term Incentive Structure

2017 Short-Term and Long-Term Incentive Structure

2017 Short-Term and Long-Term Incentive Structure

2017 Short-Term and Long-Term Incentive Structure

2017 Short-Term and Long-Term Incentive Structure