Total Equity and Earnings (Loss) Per Share

9 Months Ended

Sep. 30, 2011

Total Equity and Earnings (Loss) Per Share

Total Equity and Earnings (Loss) Per Share

12. Total Equity and Earnings (Loss) Per Share

Shares Outstanding

The following table presents a rollforward of outstanding shares:

		Preferred Stock


Nine Months Ended September 30, 2011		Preferred Stock												Common Stock		Treasury Stock
Nine Months Ended September 30, 2011		AIG Series E			AIG Series F			AIG Series C			AIG Series G			Common Stock		Treasury Stock

Shares issued, beginning of year			400,000			300,000			100,000			-			147,124,067		6,660,908
	Issuances		-			-			-			20,000			100,113,761		-
	Settlement of equity unit stock purchase contracts		-			-			-			-			3,606,417		-
	Shares exchanged		(400,000	)		(300,000	)		(100,000	)		-			1,655,037,962		11,678
	Shares cancelled		-			-			-			(20,000	)		-		-

Shares issued, end of period			-			-			-			-			1,905,882,207		6,672,586

See Note 1 herein for a discussion of the Recapitalization and the May 2011 Common Stock Offering and Sale.

Equity Units

In January, March and June 2011, AIG remarketed the three series of debentures included in the Equity Units. AIG purchased and retired all of the Series B-1, B-2 and B-3 Debentures representing $2.2 billion in aggregate principal and as a result, no Series B-1, B-2 or B-3 Debentures remain outstanding.

During the nine months ended September 30, 2011, AIG issued approximately 3.6 million shares of AIG Common Stock in connection with the settlement of the stock purchase contracts underlying its Equity Units in three tranches, the third of which was completed in the third quarter of 2011.

Accumulated Other Comprehensive Income

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

Nine Months Ended September 30, 2011 (in millions)		Unrealized Appreciation (Depreciation) of Fixed Maturity Investments on Which Other-Than- Temporary Credit Impairments Were Taken			Unrealized Appreciation (Depreciation) of All Other Investments			Foreign Currency Translation Adjustments			Net Derivative Gains (Losses) Arising from Cash Flow Hedging Activities			Change in Retirement Plan Liabilities Adjustment			Total



Balance, beginning of year, net of tax		$	(659	)	$	8,888		$	298		$	(34	)	$	(869	)	$	7,624

	Unrealized appreciation of investments		271			1,278			-			-			-			1,549
	Effect of unrealized investment appreciation on future policy benefits*		-			(1,665	)		-			-			-			(1,665	)
	Net changes in foreign currency translation adjustments		-			-			(1,347	)		-			-			(1,347	)
	Net gains on cash flow hedges		-			-			-			45			-			45
	Net actuarial loss		-			-			-			-			(667	)		(667	)
	Prior service credit		-			-			-			-			379			379
	Deferred tax asset (liability)		(166	)		(572	)		341			(31	)		98			(330	)

Total other comprehensive income (loss)			105			(959	)		(1,006	)		14			(190	)		(2,036	)
Acquisition of noncontrolling interest			-			43			62			-			(17	)		88
Noncontrolling interests			3			(160	)		4			-			-			(153	)

Balance, end of period, net of tax		$	(557	)	$	8,132		$	(650	)	$	(20	)	$	(1,076	)	$	5,829

*: Represents the pre-tax adjustment to Accumulated other comprehensive income as a consequence of the recognition of additional policyholder benefit reserves of approximately $1.6 billion and a related reduction of deferred acquisition costs (DAC) of approximately $110 million. 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.

Noncontrolling interests

In connection with the execution of its orderly asset disposition plan, as well as the repayment of the FRBNY Credit Facility, AIG transferred two of its wholly owned businesses, AIA and ALICO, to two newly created special purpose vehicles (SPVs) in exchange for all the common and preferred interests of those SPVs. On December 1, 2009, AIG transferred the preferred interests in the SPVs to the FRBNY in consideration for a $25 billion reduction of the outstanding loan balance and of the maximum amount of credit available under the FRBNY Credit Facility and amended the terms of the FRBNY Credit Facility. As part of the closing of the Recapitalization, the remaining preferred interests, with an aggregate liquidation preference of approximately $20.3 billion at January 14, 2011, were purchased from the FRBNY by AIG and transferred to the Department of the Treasury as part of the consideration for the exchange of the Series F Preferred Stock. Under the terms of the SPVs' limited liability company agreements, the SPVs generally may not distribute funds to AIG until the liquidation preferences and preferred returns on the preferred interests have been repaid in full and concurrent distributions have been made on certain participating returns attributable to the preferred interests.

The common interests, which were retained by AIG, entitle AIG to 100 percent of the voting power of the SPVs. The voting power allows AIG to elect the boards of managers of the SPVs, who oversee the management and operation of the SPVs. Primarily due to the substantive participation rights of the preferred interests, the SPVs were determined to be variable interest entities. As the primary beneficiary of the SPVs, AIG consolidates the SPVs.

The rights originally held by the FRBNY through its ownership of the preferred interests are now held by the Department of the Treasury. In connection with the Recapitalization, AIG agreed to cause the proceeds of certain asset dispositions to be used to redeem the remaining preferred interests.

As a result of the closing of the Recapitalization on January 14, 2011, the SPV Preferred Interests held by the Department of the Treasury are not considered permanent equity on AIG's Consolidated Balance Sheet, and were classified as redeemable non-controlling interests. As part of the Recapitalization, AIG used approximately $6.1 billion of the cash proceeds from the sale of ALICO to pay down a portion of the liquidation preference of the SPV Preferred Interests. The SPV Preferred Interests were further reduced by approximately $11.5 billion using proceeds from the sale of AIG Star, AIG Edison, Nan Shan, and MetLife securities received in the sale of ALICO. During the first quarter of 2011, the liquidation preference of the Preferred Interests in the ALICO SPV was paid in full.

The following table presents a rollforward of non-controlling interests:

				Redeemable Noncontrolling interests									Non-redeemable Noncontrolling interests


(in millions)				Held by Department of Treasury			Other			Total			Held by FRBNY			Other			Total

Nine Months Ended September 30, 2011
Balance, beginning of year				$	-		$	434		$	434		$	26,358		$	1,562		$	27,920

	Repurchase of SPV preferred interests in connection with Recapitalization				-			-			-			(26,432	)		-			(26,432	)
	Exchange of consideration for preferred stock in connection with Recapitalization				20,292			-			20,292			-			-			-
	Repayment to Department of the Treasury				(11,453	)		-			(11,453	)		-			-			-
	Net distributions				-			(16	)		(16	)		-			(34	)		(34	)
	Consolidation (deconsolidation)				-			(309	)		(309	)		-			(123	)		(123	)
	Acquisition of noncontrolling interest				-			-			-			-			(487	)		(487	)
	Comprehensive income:
		Net income (loss)			464			(4	)		460			74			51			125
		Accumulated other comprehensive loss, net of tax:
			Unrealized losses on investments		-			-			-			-			(157	)		(157	)
			Foreign currency translation adjustments		-			-			-			-			4			4

		Total accumulated other comprehensive loss, net of tax			-			-			-			-			(153	)		(153	)

	Total comprehensive income (loss)				464			(4	)		460			74			(102	)		(28	)

Other					-			-			-			-			(45	)		(45	)

Balance, end of period				$	9,303		$	105		$	9,408		$	-		$	771		$	771

				Redeemable Noncontrolling interests								Non-redeemable Noncontrolling interests


(in millions)				Held by Department of Treasury		Other			Total			Held by FRBNY		Other			Total

Nine Months Ended September 30, 2010
Balance, beginning of year				$	-	$	959		$	959		$	24,540	$	3,712		$	28,252

	Net contributions				-		305			305			-		74			74
	Consolidation (deconsolidation)				-		727			727			-		(2,261	)		(2,261	)
	Comprehensive income:
		Net income			-		90			90			1,415		188			1,603
		Accumulated other comprehensive income, net of tax:
			Unrealized gains on investments		-		10			10			-		104			104
			Foreign currency translation adjustments		-		(5	)		(5	)		-		(2	)		(2	)

		Total accumulated other comprehensive income, net of tax			-		5			5			-		102			102

	Total comprehensive income				-		95			95			1,415		290			1,705

Other					-		(59	)		(59	)		-		101			101

Balance, end of period				$	-	$	2,027		$	2,027		$	25,955	$	1,916		$	27,871

Earnings (Loss) Per Share (EPS)

Basic and diluted earnings (loss) per share are based on the weighted average number of common shares outstanding, adjusted to reflect all stock dividends and stock splits. Diluted earnings per share is based on those shares used in basic EPS plus shares that would have been outstanding assuming issuance of common shares for all dilutive potential common shares outstanding, adjusted to reflect all stock dividends and stock splits. Basic earnings (loss) per share was not affected by outstanding stock purchase contracts. Diluted earnings per share is determined considering the potential dilution from outstanding stock purchase contracts using the treasury stock method and was not affected by the previously outstanding stock purchase contracts because they were not dilutive.

In connection with the issuance of the Series C Preferred Stock, AIG 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.

AIG applied the two-class method due to the participation rights of the Series C Preferred Stock through January 14, 2011. However, application of the two-class method had no effect on earnings per share for the nine months ended September 30, 2011 because AIG recognized a net loss attributable to AIG common shareholders from continuing operations, which is not applicable to participating stock for EPS, for the nine months ended September 30, 2011. Subsequent to January 14, 2011, AIG did not have any outstanding participating securities that subjected AIG to the two-class method.

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

			Three Months Ended September 30,						Nine Months Ended September 30,


(dollars in millions, except per share data)			2011			2010			2011			2010

Numerator for EPS:
	Income (loss) from continuing operations		$	(3,724	)	$	(180	)	$	(2,810	)	$	2,404
	Net income from continuing operations attributable to noncontrolling interests:
		Nonvoting, callable, junior and senior preferred interests		145			388			538			1,415
		Other		19			104			28			243

	Total net income from continuing operations attributable to noncontrolling interests			164			492			566			1,658

	Net income (loss) attributable to AIG from continuing operations			(3,888	)		(672	)		(3,376	)		746

	Income (loss) from discontinued operations		$	(221	)	$	(1,833	)	$	1,395		$	(4,101	)
	Net income from discontinued operations attributable to noncontrolling interests			-			12			19			35

	Net income (loss) attributable to AIG from discontinued operations			(221	)		(1,845	)		1,376			(4,136	)

	Deemed dividends			-			-			(812	)		-
	(Income) loss allocated to the Series C Preferred Stock – continuing operations			-			-			-			(595	)

Net income (loss) attributable to AIG common shareholders from continuing operations, applicable to common stock for EPS				(3,888	)		(672	)		(4,188	)		151

	(Income) loss allocated to the Series C Preferred Stock – discontinued operations			-			-			-			3,299

Net income (loss) attributable to AIG common shareholders from discontinued operations, applicable to common stock for EPS			$	(221	)	$	(1,845	)	$	1,376		$	(837	)

Denominator for EPS:
	Weighted average shares outstanding – basic			1,899,500,628			135,879,125			1,765,905,779			135,788,053
	Dilutive shares			-			-			-			67,275

	Weighted average shares outstanding – diluted*			1,899,500,628			135,879,125			1,765,905,779			135,855,328

EPS attributable to AIG common shareholders:
Basic:
	Income (loss) from continuing operations		$	(2.05	)	$	(4.95	)	$	(2.37	)	$	1.11
	Income (loss) from discontinued operations		$	(0.11	)	$	(13.58	)	$	0.78		$	(6.16	)
Diluted:
	Income (loss) from continuing operations		$	(2.05	)	$	(4.95	)	$	(2.37	)	$	1.11
	Income (loss) from discontinued operations		$	(0.11	)	$	(13.58	)	$	0.78		$	(6.16	)

*: Dilutive shares are calculated using the treasury stock method and include dilutive shares from share-based employee compensation plans, and the warrant issued to the Department of the Treasury on April 17, 2009 to purchase up to 150 shares of AIG Common Stock (Series F Warrant). The number of shares excluded from diluted shares outstanding were 79 million and 75 million for the three- and nine-month periods ended September 30, 2011 and 12 million for the three- and nine-month periods ended September 30, 2010, respectively, because the effect would have been anti-dilutive. Shares excluded for the three- and nine-month periods ended September 30, 2011 include 75 million and 70 million shares, respectively, representing the weighted average number of warrants to purchase AIG Common Stock that were issued to shareholders on January 19, 2011.

Deemed dividends represent the excess of (i) the fair value of the consideration transferred to the Department of the Treasury, which consists of 1,092,169,866 shares of AIG Common Stock, $20.2 billion of redeemable SPV Preferred Interests, and a liability for a commitment by AIG to pay the Department of the Treasury's costs to dispose of all of its shares, over (ii) the carrying value of the Series E and F Preferred Stock. The fair value of the AIG Common Stock issued for the Series C Preferred Stock over the carrying value of the Series C Preferred Stock is not a deemed dividend because the Series C Preferred Stock was contingently convertible into the 562,868,096 shares of AIG Common Stock for which it was exchanged. See Note 1 herein for further discussion.

- Definition

Disclosure related to equity and earnings per share. Disclosure related to accounts comprising shareholders' equity, including other comprehensive income. Includes: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables; effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure. This element may be used to capture the complete disclosure pertaining to an entity's earnings per share.

+ Details