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 itwill expense the fair value of all stock options granted beginningJan. 1, 2003.

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

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

As previously disclosed in the AIG 2001 Annual Report on Form10-K, as well as in AIG's second-quarter 2002 earnings release, allapplicable stock option compensation costs would have reduced AIG's2001 net income by 5 cents per share had AIG been previouslyutilizing 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 optionplans are relatively modest."

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

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

He also opined that it would be unfortunate if the result ofexpensing options to address the abuses of some companiesdiscourages their use as an incentive for managementperformance.