AIG: Expensing Options Has Small Impact

NU Online News Service, Aug. 12, 2:47 p.m. EST?American International Group in New York said that it will expense the fair value of all stock options granted beginning Jan. 1, 2003.

AIG said, in an announcement released by the insurer yesterday, that the impact in 2003 of adopting SFAS No. 123, Accounting for Stock-Based Compensation, is estimated at less than 1 penny per share.

The insurer added that, assuming it follows its historic practice as to the number and terms of the stock options it grants, at the current stock price AIG estimates an annual expense of approximately 5 cents per share by 2008.

As previously disclosed in the AIG 2001 Annual Report on Form 10-K, as well as in AIG's second-quarter 2002 earnings release, all applicable stock option compensation costs would have reduced AIG's 2001 net income by 5 cents per share had AIG been previously utilizing SFAS No. 123, AIG said.

In the statement, AIG Chairman Maurice "Hank" R. Greenberg said, "As we have disclosed for some time, the costs of our stock option plans are relatively modest."

"The compensation programs for AIG employees have contributed to our success by enabling us to attract, retain and motivate our employees," he said.

"The expensing of options is not an economic issue for AIG because it has never granted an excessive number of options, " Mr. Greenberg said.

He also opined that it would be unfortunate if the result of expensing options to address the abuses of some companies discourages their use as an incentive for management performance.

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AIG: Expensing Options Has Small Impact

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