Business Context and Reporting Period
This Form 8-K filing by American International Group, Inc. (AIG) reports corporate governance and management events occurring on March 15, 2017, with additional CEO arrangements approved on March 17, 2017. The filing focuses on the adoption of a new Long Term Incentive Plan (LTI Plan), the determination of executive compensation for 2016 and 2017, and the formalization of the transition period for outgoing CEO Peter D. Hancock.
Key Financial Metrics
This filing does not report revenue, profit, cash flow, margins, debt, or liquidity metrics. It is a current report regarding executive compensation and governance rather than a financial results report.
Material Changes and Compensation Determinations
- New LTI Plan Adoption: On March 15, 2017, the Compensation Committee adopted the AIG Long Term Incentive Plan, replacing the 2013 plan for future awards. The new plan includes performance share units (0-200% of target) and restricted stock units, with vesting typically over a three-year period.
- 2016 Short-Term Incentives: The Committee determined that 2016 short-term incentive awards for the Executive Leadership Team (excluding the CEO) were earned at 40% of each member's individual target amount.
- CEO Compensation: The Board determined that CEO Peter D. Hancock would not earn a 2016 short-term incentive award. However, he received a 2017 LTI grant based on his previously disclosed long-term target (50% performance share units, 50% restricted stock units).
- Transition Grants: One-time restricted stock unit grants were made to the Executive Leadership Team (excluding the CEO) to ensure continuity during the transition. Specific grants included:
- Mr. Sid Sankaran (CFO): 93,414 units
- Mr. Doug Dachille (CIO): 108,983 units
- Mr. Kevin Hogan (EVP - Consumer): 101,198 units
- Mr. Robert Schimek (EVP - Commercial): 97,306 units
Outlook, Management Commentary, and Risks
CEO Transition Arrangements: A letter agreement approved on March 17, 2017, outlines the transition for CEO Peter D. Hancock. He will serve until a successor is named or December 31, 2017, whichever is earlier. Upon termination, he is eligible for a $5,000,000 cash payment for service during the transition period, in addition to his normal 2017 compensation and severance benefits consistent with a termination without cause.
Clawback Policy: All awards under the new LTI Plan are subject to forfeiture and repayment under the AIG Clawback Policy.
Voluntary Information: AIG notes that the information provided regarding compensation determinations is voluntary and does not create an obligation to update such information.
Investor Verification Checklist
- Verify the specific performance metrics and gating criteria (relative total shareholder return and relative option adjusted spread) for the new LTI Plan in Exhibit 10.1.
- Review the terms of the letter agreement with Peter D. Hancock (Exhibit 10.3) to confirm the exact conditions for the $5,000,000 transition payment and severance eligibility.
- Confirm the vesting schedules for the one-time restricted stock unit grants made to the Executive Leadership Team.
- Check the AIG 2016 Proxy Statement for details on the "Potential Payments on Termination" referenced for Mr. Hancock.