16. EQUITY
Shares Outstanding
The following table presents a rollforward of outstanding shares:
| |
Preferred Stock | |
|
|
||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
Common Stock Issued |
Treasury Stock |
Common Stock Outstanding |
|||||||||||||||||||
| |
AIG Series E |
AIG Series F |
AIG Series C |
AIG Series G |
||||||||||||||||||
|
Year Ended December 31, 2011 |
||||||||||||||||||||||
|
Shares, beginning of year |
400,000 | 300,000 | 100,000 | – | 147,124,067 | (6,660,908 | ) | 140,463,159 | ||||||||||||||
|
Issuances |
– | – | – | 20,000 | 100,799,653 | – | 100,799,653 | |||||||||||||||
|
Settlement of equity unit stock purchase contracts |
– | – | – | – | 3,606,417 | – | 3,606,417 | |||||||||||||||
|
Shares exchanged |
(400,000 | ) | (300,000 | ) | (100,000 | ) | – | 1,655,037,962 | (11,678 | ) | 1,655,026,284 | |||||||||||
|
Shares purchased |
– | – | – | – | – | (3,074,031 | ) | (3,074,031 | ) | |||||||||||||
|
Shares cancelled |
– | – | – | (20,000 | ) | – | – | – | ||||||||||||||
|
Shares, end of year |
– | – | – | – | 1,906,568,099 | (9,746,617 | ) | 1,896,821,482 | ||||||||||||||
|
Year Ended December 31, 2012 |
||||||||||||||||||||||
|
Shares, beginning of year |
1,906,568,099 | (9,746,617 | ) | 1,896,821,482 | ||||||||||||||||||
|
Issuances |
43,581 | 685,727 | 729,308 | |||||||||||||||||||
|
Shares purchased |
– | (421,228,855 | ) | (421,228,855 | ) | |||||||||||||||||
|
Shares, end of year |
1,906,611,680 | (430,289,745 | ) | 1,476,321,935 | ||||||||||||||||||
|
Year Ended December 31, 2013 |
||||||||||||||||||||||
|
Shares, beginning of year |
1,906,611,680 | (430,289,745 | ) | 1,476,321,935 | ||||||||||||||||||
|
Shares issued |
34,009 | 24,778 | 58,787 | |||||||||||||||||||
|
Shares repurchased |
– | (12,317,399 | ) | (12,317,399 | ) | |||||||||||||||||
|
Shares, end of year |
1,906,645,689 | (442,582,366 | ) | 1,464,063,323 | ||||||||||||||||||
Preferred Stock and Recapitalization
On January 14, 2011, we completed the Recapitalization in which the Series C Perpetual, Convertible, Participating Preferred Stock, par value $5.00 per share (the Series C Preferred Stock), Series E Fixed Rate Non-Cumulative Perpetual Preferred Stock, par value $5.00 per share (the Series E Preferred Stock) and the Series F Preferred Stock were exchanged for AIG Common Stock and the Series G Cumulative Mandatory Convertible Preferred Stock, par value $5.00 per share (the Series G Preferred Stock) was issued. In connection with the Recapitalization, we repaid all amounts outstanding under the FRBNY Credit Facility. In connection with the May 2011 AIG Common Stock Offering (described below under AIG Common Stock Offerings by the Department of the Treasury and AIG Purchases of AIG Common Stock in 2012), the Series G Preferred Stock was cancelled.
The following table presents the principal Consolidated Balance Sheet line items affected by the Recapitalization on January 14, 2011, further described in Note 24 herein:
| |
Effect of Recapitalization | |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Increase (Decrease) (in millions) |
Repayment and Termination of FRBNY Credit Facility(a) |
Repurchase and Exchange of SPV Preferred Interests |
Exchange of Preferred Stock for Common Stock(c) |
Total Effect of Recapitalization |
|||||||||
|
Other assets |
$ | (24,297 | ) | $ | (6,140 | )(b) | $ | – | $ | (30,437 | ) | ||
|
Other liabilities |
(325 | ) | – | – | (325 | ) | |||||||
|
Federal Reserve Bank of New York credit facility |
(20,689 | ) | – | – | (20,689 | ) | |||||||
|
Redeemable noncontrolling nonvoting, callable, junior preferred interests held by Department of Treasury |
– | 20,292 |
– | 20,292 |
|||||||||
|
AIG shareholders' equity: |
|||||||||||||
|
Preferred stock |
|||||||||||||
|
Series C preferred stock |
– | – | (23,000 | ) | (23,000 | ) | |||||||
|
Series E preferred stock |
– | – | (41,605 | ) | (41,605 | ) | |||||||
|
Series F preferred stock |
– | 20,292 | (7,378 | ) | (7,378 | ) | |||||||
|
|
(20,292 | ) | |||||||||||
|
Series G preferred stock; 20,000 shares issued; liquidation value $0(d) |
– | – | – | – | |||||||||
|
Common stock |
– | – | 4,138 | 4,138 | |||||||||
|
Additional paid-in capital |
– | – | 67,845 | 67,845 | |||||||||
|
Retained Earnings |
(3,283 | ) | – | – | (3,283 | ) | |||||||
|
Noncontrolling nonvoting, callable, junior and senior preferred interests held by Federal Reserve Bank of New York |
– | (26,432 | ) | – | (26,432 | ) | |||||||
|
Shares outstanding |
1,655,037,962 | 1,655,037,962 | |||||||||||
(a) Repayment and Termination of the FRBNY Credit Facility — Funds held in escrow and included in Other assets from the AIA IPO and the ALICO sale were used to repay the FRBNY Credit Facility. The adjustments to Other assets and Accumulated deficit reflects the write-off of the unamortized portion of the net prepaid commitment fee asset.
(b) Repurchase and Exchange of SPV Preferred Interests — We used remaining net cash proceeds from the AIA IPO and the ALICO sale to pay down a portion of the liquidation preference on the SPV Preferred Interests held by the FRBNY and drew down approximately $20.3 billion under the Department of the Treasury Commitment (Series F) to repurchase the FRBNY's remaining SPV Preferred Interests, which we then transferred to the Department of the Treasury as part of the consideration for the exchange of the Series F Preferred Stock.
(c) Exchange of our Series C, E and F Preferred Stock for AIG Common Stock. The adjustments represent the exchange of Series C Preferred Stock, Series E Preferred Stock, and Series F Preferred Stock for AIG Common Stock. As a result of the Recapitalization, the Department of the Treasury acquired 1,655,037,962 shares of newly issued AIG Common Stock.
(d) In connection with the May 2011 AIG Common Stock offering and sale, the Series G Preferred Stock was cancelled.
The following table presents a rollforward of preferred stock:
| (in millions) |
AIG Series E |
AIG Series F |
AIG Series C |
Total Preferred Stock |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Balance, January 1, 2011 |
$ | 41,605 | $ | 7,378 | $ | 23,000 | $ | 71,983 | |||||
|
Shares Exchanged |
(41,605 | ) | (7,378 | ) | (23,000 | ) | (71,983 | ) | |||||
|
Balance, December 31, 2011 |
$ | – | $ | – | $ | – | $ | – | |||||
Dividends and Repurchase of AIG Common Stock
Payment of future dividends to our shareholders and repurchases of AIG Common Stock depends in part on the regulatory framework that we are currently subject to and that will ultimately be applicable to us, including as a savings and loan holding company, a systemically important financial institution under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) and a global systemically important insurer. In addition, dividends are payable on AIG Common Stock only when, as and if declared by our Board of Directors in its discretion, from funds legally available therefor. In considering whether to pay a dividend or purchase shares of AIG Common Stock, our Board of Directors considers such matters as the performance of our businesses, our consolidated financial condition, results of operations and liquidity, available capital, the existence of investment opportunities, contractual, legal and regulatory restrictions on the payment of dividends by our subsidiaries, rating agency considerations, including the potential effect on our debt ratings, and such other factors as our Board of Directors may deem relevant.
AIG paid a dividend of $0.10 per share on AIG Common Stock on each of September 26, 2013 and December 19, 2013.
On August 1, 2013, our Board of Directors authorized the repurchase of shares of AIG Common Stock, with an aggregate purchase price of up to $1.0 billion, from time to time in the open market, private purchases, through forward, derivative, accelerated repurchase or automatic repurchase transactions or otherwise. The timing of such repurchases will depend on market conditions, our financial condition, results of operations, liquidity and other factors. For the year ended December 31, 2013, we repurchased approximately 12 million shares of AIG Common Stock for an aggregate purchase price of approximately $597 million pursuant to this authorization.
Share Issuances and Purchases
AIG Common Stock Offerings by the Department of the Treasury and AIG Purchases of AIG Common Stock in 2012
Through registered public offerings, the Department of the Treasury has disposed of all of its ownership of AIG Common Stock as of December 31, 2012, from ownership of approximately 92 percent (1.7 billion shares) prior to the completion of the first registered public offering initiated by the Department of the Treasury as selling shareholder in May 2011. During 2012, the Department of the Treasury, as selling shareholder, completed registered public offerings of AIG Common Stock on March 13 (the March Offering), May 10 (the May Offering), August 8 (the August Offering), September 14 (the September Offering) and December 14 (the December Offering). We participated as a purchaser in the first four 2012 offerings. Each of these purchases was authorized by our Board of Directors.
The following table presents certain information relating to these offerings:
| |
|
U.S. Treasury | AIG* | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (dollars in millions, except share-price data) |
Price |
Shares Sold |
Amount |
Shares Purchased |
Amount |
|||||||||||
|
May 2011 Offering |
$ | 29.00 | 200,000,000 | $ | 5,800 | – | $ | – | ||||||||
|
2012 Offerings: |
||||||||||||||||
|
March Offering |
29.00 | 206,896,552 | 6,000 | 103,448,276 | 3,000 | |||||||||||
|
May Offering |
30.50 | 188,524,589 | 5,750 | 65,573,770 | 2,000 | |||||||||||
|
August Offering |
30.50 | 188,524,590 | 5,750 | 98,360,656 | 3,000 | |||||||||||
|
September Offering |
32.50 | 636,923,075 | 20,700 | 153,846,153 | 5,000 | |||||||||||
|
December Offering |
32.50 | 234,169,156 | 7,610 | – | – | |||||||||||
|
|
1,655,037,962 | $ | 51,610 | 421,228,855 | $ | 13,000 | ||||||||||
* Shares purchased by us in each of the 2012 offerings were purchased pursuant to AIG Board of Directors authorization. In connection with the May 2011 Offering, AIG issued and sold 100 million shares of AIG Common Stock for aggregate net proceeds of approximately $2.9 billion.
AIG Common Stock Purchases in 2011
In November 2011, our Board of Directors authorized the purchase of shares of AIG Common Stock, with an aggregate purchase amount of up to $1 billion from time to time in the open market, through derivative or automatic purchase contracts or otherwise. This authorization replaced all prior AIG Common Stock purchase authorizations. We purchased a total of 3,074,031 shares of AIG Common Stock for approximately $70 million in 2011.
Equity Units
In 2011, we remarketed the three series of debentures (the Series B-1, B-2 and B-3 junior subordinated debentures) included in the Equity Units. The Equity Units also included a stock purchase contract obligating the holder of an Equity Unit to purchase, and obligating AIG to sell, a variable number of shares of AIG Common Stock for $25 per share in cash. We purchased and retired all of the Series B-1, B-2 and B-3 junior subordinated debentures representing $2.2 billion in aggregate principal and as of December 31, 2011, we had issued approximately 1.8 billion shares of AIG Common Stock in connection with the settlement of the stock purchase contracts underlying the Equity Units.
Accumulated Other Comprehensive Income
The following table presents a rollforward of Accumulated other comprehensive income:
| (in millions) |
Unrealized Appreciation (Depreciation) of Fixed Maturity Investments on Which Other-Than- Temporary Credit Impairments Were Recognized |
Unrealized Appreciation (Depreciation) of All Other Investments |
Foreign Currency Translation Adjustments |
Net Derivative Gains (Losses) Arising from Cash Flow Hedging Activities |
Change in Retirement Plan Liabilities Adjustment |
Total |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Balance, January 1, 2011 |
$ | (634 | ) | $ | 9,855 | $ | 553 | $ | (34 | ) | $ | (869 | ) | $ | 8,871 | ||||
|
Change in unrealized appreciation of investments |
55 | 5,463 | – | – | – | 5,518 | |||||||||||||
|
Change in deferred policy acquisition costs adjustment and other |
11 | (641 | ) | – | – | – | (630 | ) | |||||||||||
|
Change in future policy benefits* |
– | (2,302 | ) | – | – | – | (2,302 | ) | |||||||||||
|
Change in foreign currency translation adjustments |
– | – | (97 | ) | – | – | (97 | ) | |||||||||||
|
Change in net derivative gains arising from cash flow hedging activities |
– | – | – | 51 | – | 51 | |||||||||||||
|
Net actuarial loss |
– | – | – | – | (752 | ) | (752 | ) | |||||||||||
|
Prior service credit |
– | – | – | – | 387 | 387 | |||||||||||||
|
Change attributable to divestitures and deconsolidations |
23 | (3,643 | ) | (1,681 | ) | – | 260 | (5,041 | ) | ||||||||||
|
Deferred tax asset (liability) |
(163 | ) | (362 | ) | 786 | (34 | ) | 35 | 262 | ||||||||||
|
Total other comprehensive income (loss) |
(74 | ) | (1,485 | ) | (992 | ) | 17 | (70 | ) | (2,604 | ) | ||||||||
|
Acquisition of noncontrolling interests |
– | 45 | 66 | – | (18 | ) | 93 | ||||||||||||
|
Noncontrolling interests |
3 | (160 | ) | 36 | – | – | (121 | ) | |||||||||||
|
Balance, December 31, 2011 |
$ | (711 | ) | $ | 8,575 | $ | (409 | ) | $ | (17 | ) | $ | (957 | ) | $ | 6,481 | |||
|
Change in unrealized appreciation of investments |
2,306 | 8,404 | – | – | – | 10,710 | |||||||||||||
|
Change in deferred policy acquisition costs adjustment and other |
(49 | ) | (840 | ) | – | – | – | (889 | ) | ||||||||||
|
Change in future policy benefits |
(85 | ) | (432 | ) | – | – | – | (517 | ) | ||||||||||
|
Change in foreign currency translation adjustments |
– | – | (33 | ) | – | – | (33 | ) | |||||||||||
|
Change in net derivative gains arising from cash flow hedging activities |
– | – | – | 33 | – | 33 | |||||||||||||
|
Net actuarial loss |
– | – | – | – | (273 | ) | (273 | ) | |||||||||||
|
Prior service credit |
– | – | – | – | (46 | ) | (46 | ) | |||||||||||
|
Deferred tax asset (liability) |
(886 | ) | (2,252 | ) | 33 | (16 | ) | 232 | (2,889 | ) | |||||||||
|
Total other comprehensive income (loss) |
1,286 | 4,880 | – | 17 | (87 | ) | 6,096 | ||||||||||||
|
Noncontrolling interests |
– | 9 | (6 | ) | – | – | 3 | ||||||||||||
|
Balance, December 31, 2012 |
$ | 575 | $ | 13,446 | $ | (403 | ) | $ | – | $ | (1,044 | ) | $ | 12,574 | |||||
|
Change in unrealized appreciation (depreciation) of investments |
464 | (14,069 | ) | – | – | – | (13,605 | ) | |||||||||||
|
Change in deferred policy acquisition costs adjustment and other |
(127 | ) | 1,000 | – | – | – | 873 | ||||||||||||
|
Change in future policy benefits |
79 | 2,658 | – | – | – | 2,737 | |||||||||||||
|
Change in foreign currency translation adjustments |
– | – | (454 | ) | – | – | (454 | ) | |||||||||||
|
Net actuarial gain |
– | – | – | – | 1,012 | 1,012 | |||||||||||||
|
Prior service cost |
– | – | – | – | (51 | ) | (51 | ) | |||||||||||
|
Deferred tax asset (liability) |
(55 | ) | 3,738 | (102 | ) | – | (330 | ) | 3,251 | ||||||||||
|
Total other comprehensive income (loss) |
361 | (6,673 | ) | (556 | ) | – | 631 | (6,237 | ) | ||||||||||
|
Noncontrolling interests |
– | (16 | ) | (7 | ) | – | – | (23 | ) | ||||||||||
|
Balance, December 31, 2013 |
$ | 936 | $ | 6,789 | $ | (952 | ) | $ | – | $ | (413 | ) | $ | 6,360 | |||||
* The adjustment to policyholder benefit reserves assumes that the unrealized appreciation on available for sale securities is actually realized and that the proceeds are reinvested at lower yields.
The following table presents the other comprehensive income (loss) reclassification adjustments for the years ended December 31, 2013, 2012 and 2011:
| (in millions) |
Unrealized Appreciation (Depreciation) of Fixed Maturity Investments on Which Other-Than- Temporary Credit Impairments Were Recognized |
Unrealized Appreciation (Depreciation) of All Other Investments |
Foreign Currency Translation Adjustments |
Net Derivative Gains (Losses) Arising from Cash Flow Hedging Activities |
Change in Retirement Plan Liabilities Adjustment |
Total |
|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
December 31, 2011 |
|||||||||||||||||||
|
Unrealized change arising during period |
$ | 84 | $ | 4,222 | $ | (97 | ) | $ | (5 | ) | $ | (440 | ) | $ | 3,764 | ||||
|
Less: Reclassification adjustments included in net income |
(5 | ) | 5,345 | 1,681 | (56 | ) | (335 | ) | 6,630 | ||||||||||
|
Total other comprehensive income |
89 | (1,123 | ) | (1,778 | ) | 51 | (105 | ) | (2,866 | ) | |||||||||
|
Less: Income tax expense (benefit) |
163 | 362 | (786 | ) | 34 | (35 | ) | (262 | ) | ||||||||||
|
Total other comprehensive income (loss), net of income tax expense (benefit) |
$ | (74 | ) | $ | (1,485 | ) | $ | (992 | ) | $ | 17 | $ | (70 | ) | $ | (2,604 | ) | ||
|
December 31, 2012 |
|||||||||||||||||||
|
Unrealized change arising during period |
$ | 2,236 | $ | 8,896 | $ | (33 | ) | $ | (2 | ) | $ | (406 | ) | $ | 10,691 | ||||
|
Less: Reclassification adjustments included in net income |
64 | 1,764 | – | (35 | ) | (87 | ) | 1,706 | |||||||||||
|
Total other comprehensive income (loss), before income tax expense (benefit) |
2,172 | 7,132 | (33 | ) | 33 | (319 | ) | 8,985 | |||||||||||
|
Less: Income tax expense (benefit) |
886 | 2,252 | (33 | ) | 16 | (232 | ) | 2,889 | |||||||||||
|
Total other comprehensive income (loss), net of income tax expense (benefit) |
$ | 1,286 | $ | 4,880 | $ | – | $ | 17 | $ | (87 | ) | $ | 6,096 | ||||||
|
December 31, 2013 |
|||||||||||||||||||
|
Unrealized change arising during period |
$ | 507 | $ | (9,556 | ) | $ | (454 | ) | $ | – | $ | 851 | $ | (8,652 | ) | ||||
|
Less: Reclassification adjustments included in net income |
91 | 855 | – | – | (110 | ) | 836 | ||||||||||||
|
Total other comprehensive income (loss), before income tax expense (benefit) |
416 | (10,411 | ) | (454 | ) | – | 961 | (9,488 | ) | ||||||||||
|
Less: Income tax expense (benefit) |
55 | (3,738 | ) | 102 | – | 330 | (3,251 | ) | |||||||||||
|
Total other comprehensive income (loss), net of income tax expense (benefit) |
$ | 361 | $ | (6,673 | ) | $ | (556 | ) | $ | – | $ | 631 | $ | (6,237 | ) | ||||
The following table presents the effect of the reclassification of significant items out of Accumulated other comprehensive income on the respective line items in the Consolidated Statements of Income:
| |
Amount Reclassified from Accumulated Other Comprehensive Income |
|
||||
|---|---|---|---|---|---|---|
| (in millions) |
Year Ended December 31, 2013 |
Affected Line Item in the Consolidated Statements of Income |
||||
|
Unrealized appreciation (depreciation) of fixed maturity investments on which other-than-temporary credit impairments were recognized |
||||||
|
Investments |
$ | 91 | Other realized capital gains | |||
|
Total |
91 | |||||
|
Unrealized appreciation (depreciation) of all other investments |
||||||
|
Investments |
2,452 | Other realized capital gains | ||||
|
Deferred acquisition costs adjustment |
(28 | ) | Amortization of deferred acquisition costs | |||
|
Future policy benefits |
(1,569 | ) | Policyholder benefits and claims incurred | |||
|
Total |
855 | |||||
|
Change in retirement plan liabilities adjustment |
||||||
|
Prior-service costs |
47 | * | ||||
|
Actuarial gains/(losses) |
(157 | ) | * | |||
|
Total |
(110 | ) | ||||
|
Deferred tax asset (liability) |
– | |||||
|
Total reclassifications for the period |
$ | 836 | ||||
* These Accumulated other comprehensive income components are included in the computation of net periodic pension cost. See Note 21 to the Consolidated Financial Statements.