AMERICAN INTERNATIONAL GROUP INC | 2013 | FY | 3

18. EARNINGS PER SHARE (EPS)

 

The basic EPS computation is based on the weighted average number of common shares outstanding, adjusted to reflect all stock dividends and stock splits. The diluted EPS computation is based on those shares used in the basic EPS computation plus shares that would have been outstanding assuming issuance of common shares for all dilutive potential common shares outstanding and adjusted to reflect all stock dividends and stock splits.

In connection with the issuance of the Series C Preferred Stock, we applied the two-class method for calculating EPS. The two-class method is an earnings allocation method for computing EPS when a company's capital structure includes either two or more classes of common stock or common stock and participating securities. This method determines EPS based on dividends declared on common stock and participating securities (i.e., distributed earnings), as well as participation rights of participating securities in any undistributed earnings. The Series C Preferred Stock was retired as part of the Recapitalization on January 14, 2011. Subsequent to January 14, 2011, we have not had any outstanding participating securities that would subject us to the two-class method.

The following table presents the computation of basic and diluted EPS:

 

 
  


   
    
  
   
Years Ended December 31,
(dollars in millions, except per share data)
  

2013

   2012
   2011
  
   

Numerator for EPS:

  
 
 
 
            

Income from continuing operations

  
$
9,008
 
 $ 3,699   $ 18,863  

Less: Net income from continuing operations attributable to noncontrolling interests:

  
 
 
 
            

Nonvoting, callable, junior and senior preferred interests

  
 
–
 
   208     634  

Other

  
 
7
 
   54     55
   

Total net income from continuing operations attributable to noncontrolling interests

  
 
7
 
   262     689
   

Deemed dividends to AIG Series E and F Preferred Stock

  
 
–
 
   –     (812 )
   

Income attributable to AIG common shareholders from continuing operations

  
 
9,001
 
   3,437     17,362
   

Income from discontinued operations

  
 
84
 
   1     2,467  

Less: Net income from discontinued operations attributable to noncontrolling interests

  
 
–
 
   –     19
   

Income attributable to AIG common shareholders from discontinued operations

  
 
84
 
   1     2,448
   

Net income attributable to AIG common shareholders

  
$
9,085
 
 $ 3,438   $ 19,810
   

Denominator for EPS:

  
 
 
 
            

Weighted average shares outstanding – basic

  
 
1,474,171,690
 
   1,687,197,038     1,799,385,757  

Dilutive shares

  
 
7,035,107
 
   29,603     72,740
   

Weighted average shares outstanding – diluted*

  
 
1,481,206,797
 
   1,687,226,641     1,799,458,497
   

Income per common share attributable to AIG:

  
 
 
 
            

Basic:

  
 
 
 
            

Income from continuing operations

  
$
6.11
 
 $ 2.04   $ 9.65  

Income from discontinued operations

  
$
0.05
 
 $ –   $ 1.36  

Net Income attributable to AIG

  
$
6.16
 
 $ 2.04   $ 11.01
   

Diluted:

  
 
 
 
            

Income from continuing operations

  
$
6.08
 
 $ 2.04   $ 9.65  

Income from discontinued operations

  
$
0.05
 
 $ –   $ 1.36  

Net Income attributable to AIG

  
$
6.13
 
 $ 2.04   $ 11.01
   

*     Dilutive shares are calculated using the treasury stock method and include dilutive shares from share-based employee compensation plans, a weighted average portion of the warrants issued to AIG shareholders as part of the recapitalization in January 2011 and a weighted average portion of the warrants issued to the Department of the Treasury in 2009 that we repurchased in the first quarter of 2013. The number of shares excluded from diluted shares outstanding were 38 million, 78 million and 76 million for the years ended December 31, 2013, 2012 and 2011, respectively, because the effect of including those shares in the calculation would have been anti-dilutive.

Deemed dividends resulted from the Recapitalization and represent the excess of:

•
the fair value of the consideration transferred to the Department of the Treasury, which consisted of 1,092,169,866 shares of AIG Common Stock, $20.2 billion of AIA SPV Preferred Interests and ALICO SPV Preferred Interests, and a liability for a commitment by us to pay the Department of the Treasury's costs to dispose of all of its shares, over

•
the carrying value of the Series E Preferred Stock and Series F Preferred Stock.

us-gaap:EarningsPerShareTextBlock