SHARE-BASED AND OTHER COMPENSATION PLANS (Tables)

12 Months Ended

Dec. 31, 2017

SHARE-BASED AND OTHER COMPENSATION PLANS

Schedule of share-based compensation expense recognized in Consolidated Statements of Income

Years Ended December 31,
(in millions)		2017		2016		2015
Share-based compensation expense - pre-tax^*	$	353	$	237	$	365
Share-based compensation expense - after tax		229		154		237

* We recognized $141 million, $105 million and $147 million for immediately vested stock-settled awards issued to retirement eligible employees in 2017, 2016 and 2015, respectively. We also recognized $40 million of excess tax benefits due to share settlements occurring in 2017.

Schedule of assumptions used to estimate the fair value of PSUs based on AIG's TSR

	2017		2016		2015
Expected dividend yield^(a)	2.37	%	2.17	%	1.78	%
Expected volatility^(b)	17.58	%	24.55	%	22.71	%
Risk-free interest rate^(c)	2.00	%	1.30	%	1.01	%

(a) The dividend yield is the projected annualized AIG dividend yield estimated by Bloomberg Professional service as of the valuation date.

(b) The expected volatility is based on the historical volatility of the stock price for the 360 most recent trading days prior to the valuation date estimated by Bloomberg Professional service.

(c) The risk-free interest rate is the continuously compounded interest rate for the term between the valuation date and the end of the performance period that is assumed to be constant and equal to the interpolated value between the closest data points on the U.S. dollar LIBOR-swap curve as of the valuation date

Summary of outstanding share-settled LTI awards

						Weighted Average
As of or for the Year	Number of Units					Grant-Date Fair Value
Ended December 31, 2017^(b)	2017 LTI	2016 LTI	2015 LTI	2014 LTI	2013 LTI	2017 LTI		2016 LTI		2015 LTI		2014 LTI		2013 LTI
Unvested, beginning of year	-	2,588,598	2,176,555	1,732,616	1,581,904	$	-	$	51.12	$	55.52	$	48.88	$	38.03
Granted	3,996,978	2,806	-	122,378	-		64.83		36.49		-		48.57		-
Vested^(c)	(971,945)	(182,938)	(201,256)	(957,045)	(968,930)		64.09		60.29		59.04		48.89		37.98
Forfeited	(84,987)	(138,263)	(121,456)	(74,638)	(36,764)		65.24		51.10		55.01		49.02		39.14
Unvested, at modification date	2,940,046	2,270,203	1,853,843	823,311	576,210	$	65.07	$	50.37	$	55.17	$	48.81	$	38.04
Cancelled at modification date	(1,082,417)	(2,951,417)	(2,229,873)	-	-		67.47		52.00		54.56		-		-
Granted at modification date	1,082,417	2,646,866	2,094,629	-	-		62.13		62.13		62.13		-		-
Sub-total, net impact of modification	-	(304,551)	(135,244)	-	-		-		55.01		56.33		-		-
Vested - post-modification^(c)	(766,931)	(495,222)	(424,788)	-	-		64.01		62.13		61.82		-		-
Forfeited - post-modification	-	(2,685)	(2,023)	-	-		-		62.13		62.13		-		-
Unvested, end of year^(d)	2,173,115	1,467,745	1,291,788	823,311	576,210	$	62.78	$	60.90	$	60.02	$	48.81	$	38.04

(a) Excludes stock options and DSUs, which are discussed under Stock Options and Non-Employee Plan, respectively.

(b) Except for the 2013 and 2014 LTI award, PSUs represent target amount granted, and does not reflect potential increases or decreases that could result from the final outcome of the performance goals for the respective awards, which is determined in the quarter after the applicable performance period ends.

(c) Also reflects units that vest as a result of an accelerated vesting event that occurred prior to the specified vesting date.

(d) At December 31, 2017, the total unrecognized compensation cost for outstanding LTI awards was $237 million and the weighted-average and expected period of years over which that cost is expected to be recognized are 1.02 years and 3 years.

Schedule of stock option activity

The following table provides a rollforward of stock option activity:

				Weighted Average			Aggregate
As of or for the Year		Weighted Average			Remaining		Intrinsic Values
Ended December 31, 2017	Units	Exercise Price		Contractual Life		(in millions)

Outstanding, beginning of year	-	$	-
Granted	2,500,000		62.90
Exercised	-		-
Forfeited or expired	-		-
Outstanding, end of year	2,500,000	$	62.90		6.48	$	-
Exercisable, end of year	-	$	-		-	$	-

Schedule of weighted-average assumptions

The following weighted-average assumptions were used for stock options granted:

	2017
Expected annual dividend yield^(a)	2.03	%
Expected volatility^(b)	20.96	%
Risk-free interest rate^(c)	1.94	%
Expected term^(d)	4.5	years

(a) The dividend yield is based on the current quarterly dividend payment of $0.32 and the Valuation Date stock price.

(b) The expected volatility is the 1080-day implied volatility as seen in the open marketplace on the Valuation Date.

(d) The contractual term of the option is 7 years from the grant date.