Well, good morning, everyone. My name is Steve Miller, and I am the Chairman of the Board of AIG, and I'm enormously proud to make that statement. When you consider where we've been the last few years, it's kind of the first time to really have the pride of saying it. I welcome you to this, our annual meeting of shareholders for 2011. Joining me here in the presentation will be AIG's President and Chief Executive Officer, Bob Benmosche. This meeting is being webcast, I also welcome all of you who are hearing us from beyond the offices here at 180 Maiden Lane in downtown New York. We're first going to be conducting the official business of the meeting, Bob is going to tell you more about recent important developments at AIG, and what he sees for AIG now going forward.
Following that, we're going to be welcoming questions and comments from the shareholders who are in attendance. I hereby call to order the 2011 annual meeting of shareholders of American International Group Incorporated. You've seen the procedures at your chairs that we are going to follow, I will be grateful if you work with us to adhere to those procedures. First off, I'd like to introduce the 14 nominees for director. That includes Bob and me for the AIG Board of Directors. 12 of the nominees are currently serving as directors, two have been nominated to serve as new members of the board effective today. The nominees are in the front row, I'd like to have them stand as I read out their names. Robert H. Benmosche, W. Don Cornwell, a new nominee, John H. Fitzpatrick, also a new nominee, Laurette T. Koellner, Donald H.
Layton, Christopher Lynch, Arthur C. Martinez, George L. Miles Jr., Henry S. Miller, Suzanne Nora Johnson, Morris W. Offit, Ronald A. Rittenmeyer, Douglas M. Steenland, and myself, Steve Miller. I would like to acknowledge the presence of Tom Casarella and his colleagues from the U.S. Department of the Treasury. Tom, there you are. An important shareholder. A certified list of shareholders is available for inspection. Copies of the AIG annual report, which includes Form 10-K for the year 2010, the proxy statement, the Form 10-Q for the first quarter of 2011, all are also available for you. I now call upon AIG's Secretary, Mr. Jeffrey A. Wellingham, to present the affidavit of notice of this meeting and other formalities. Mr. Wellingham.
Thank you. I submit an affidavit of AIG's transfer agent, Wells Fargo Shareowner Services , certifying that a 2010 annual report, a notice of meeting, a proxy statement, a proxy card, a shareholder letter, a return envelope were mailed commencing on April 4th, 2011, to each shareholder of record at the close of business on March 18th, 2011. I would like to remind everyone at this meeting that the remarks made today may contain forward-looking statements concerning future performance, events, plans, or objectives. These forward-looking statements are not guarantees of future performance or events. Actual results and events may differ, perhaps materially, from those anticipated in any such forward-looking statements. Factors that could cause such differences include the factors described in our 10-Q under Management's Discussion and Analysis and under Risk Factors, in our 10-K under Risk Factors.
AIG is not under any obligation, and expressly disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. The information provided today may include non-GAAP financial measures. The reconciliations of such measures to the comparable GAAP figures are included in our annual report to shareholders, our first quarter 10-Q, and our 2010 and first quarter 2011 financial supplement, which you can find on our website. Deborah O'Donnell and Suzanne Switz from Wells Fargo Shareowner Services have been sworn in as the independent inspectors of election, and they advise that a quorum is present. Mr. Chairman.
Well, thank you very much, Jeff. Before we begin the official business of today's meeting, I just wanted to say a few words. As you all know, we made tremendous progress during the year 2010, and we are continuing to build on that progress in 2011. The problems facing AIG were enormously complex. A big part of our strategy has been to simplify AIG's operations and our capital structure, in particular, to create a mechanism for the U.S. government to be able to exit the extraordinary investment that they made in AIG. As we have said many times, we are grateful to the U.S. taxpayers for their unprecedented support.
Every one of us at the board has fully committed us to paying back every dime and putting in place a management team and a structure so that AIG is never again in the position in which we found the company in September 2008. With a more focused AIG, we are well on our way to becoming a strong company, free of dependence on government support. I want to extend a thank you to all of our long-term shareholders, our customers, our partners, and the people of AIG for their commitment and dedication to the success of this great company. Proceeding to the official business of today's meeting, I will review the list of proposals under consideration today.
If any of you want to comment on any of these proposals, please raise your hand after the proposal so that a microphone can be brought up to you, and I will recognize you. The first proposal is the election to the AIG board of the 14 nominees I introduced at the start of the meeting and as set forth in the proxy statement to serve as directors until the next annual election and until their successors are elected and qualified. Are there any questions or comments on this proposal? If so, please wait for a microphone. Thank you. Yeah.
Mr. Chairman, my name is Kenneth Steiner. I'm a very long-term stockholder. I own currently 600 shares. I have a few comments, and/or questions with regard to the directors. First of all, I think it's very unfair that you make the announcement and the press release with regard to the stock offering after everybody has already voted one way or the other. It was really an incomplete process. We did not know that this offering was coming out and/or at what price and/or in what quantity. It was very hard to make an intelligent decision not knowing the facts of the most important thing that the company is going to do this year. Having said that, if you had no choice in the timing, I would like to know, I think it was very bad and unfair to the shareholders.
Secondly, I also think that the directors have mismanaged this sale process. You're now selling stock at one-half of what it sold for just a few months ago, anybody who wants to can look that up on any chart. Back in January, I believe the stock was at $60. You could have sold all you wanted at that price. Also, you're selling it, if I'm not mistaken, at two-thirds of book value, which is reported to be $47. You're selling stock way below what most other insurance companies would issue stock at. I think that's also terribly unfair and dilutive to the shareholders. I'd also like to point out that there's very minimal ownership by directors of the common stock. This is on page 28. I understand some are new to the board, others are not.
I think that if the directors have confidence in the company, they ought to go out onto the market and buy some stock and join the rest of us who have done so. One thing that would help, I see on page 26, three-quarters of the directors' fees are paid in cash and only one-quarter in stock. I believe that ratio should be reversed as it is at many other companies. Overall, Mr. Chairman, as I say, I'm very disappointed in the offering and the announcement that we saw today. It's really painful to those of us who have suffered terrible losses over the last five years, lost most of our money in this company's stock.
Thankfully, I own other stocks I survived, I can tell you that what happened here was a real shame and a real tragedy, it's only being made worse now by this dilutive offering. I think that's very disappointing I would like to hear any comments or explanations you might have. Thank you.
Well, thank you for your candid comments. We do take them to heart. Trying to recall all of the elements of what you said. We are continually in our governance committee work at the company, reviewing the compensation of directors. We look at other comparable companies and try to assure ourselves that the compensation of directors is at or below the median of what other similar companies pay their directors. I think you are well-served to have highly qualified directors on this board, and I would assert that this slate of nominees is just extraordinary in the dedication they have shown over the past couple of years and the work they continue to do. Nonetheless, everyone is free to have their own opinion as to what is the appropriate level. On the stock price, I can't say much.
The one technical thing I would point out is that the peak of $60 a share reached earlier in the spring included a very important piece of value, which was the warrants, which were then detached. A large part of the explanation of the stock price change is simply that what was one certificate was broken into two pieces, and you're now tracking the underlying stock without the warrant. That's one thing. As to the rest of it, I do not and cannot comment on the appropriateness of the stock price. The next point is that in going to market, the lion's share of what's going to market is not dilutive to the current shareholders. This is a transfer of ownership of existing shares from the U.S. government to the public.
We think that having a larger public float of this stock will ultimately be helpful in realizing the underlying value of this company. Right now, we are with 93% held by the U.S. government, the remainder being held in a few large blocks. You've got an extremely thin actual trading in the stock, very thin trading, and that tends to, in many cases, lead to volatility. I apologize, but that's as much as I can say about the stock price. Thank you for your comments. I appreciate your saying so. Are there any other comments on the election of directors? Hearing none. Excuse me. Excuse me. I think what you said is how many directors are still left from the time that the company went through the travail of the end of 2008.
We have of the 14 directors up for election today, only two were present at that time. This is largely an all-new board since the middle of 2009. I'm sorry, three? I apologize. The three who were here were. We were keeping one in May of 2005. Yeah. The implosion was February of 2005. Yes. Yeah. Okay. Question is, of course, if you go all the way back to 2005, there are no surviving directors, if you will. All are new from that point in time. And then from the 2008 time period, we have. We came on in May of 2005. Yeah. Go ahead.
You George.
Yeah.
I'm Morris Offit, speaking for both George Miles and myself. We were elected to the board in May of 2005. The so-called, I don't know what you would call it, I'll call it an implosion, was in February, March of 2005. We were post that period.
Thank you. Are there other comments or questions on the election of directors? Okay. Thank you. The second proposal is the approval of a non-binding shareholder resolution to approve executive compensation as set forth in the proxy statement. Are there any comments on this proposal? I don't see any. Okay. The third proposal is the amendment of AIG's amended and restated certificate of incorporation to restrict certain transfers of AIG common stock in order to protect AIG's tax attributes as set forth in the proxy statement. Are there any questions or comments on this proposal? Hearing none. The fourth proposal is the ratification of AIG's tax asset protection plan as set forth in the proxy statement. Are there any questions or comments on this proposal? Hearing none.
The fifth proposal is the ratification of the selection of PricewaterhouseCoopers LLP as AIG's independent registered public accounting firm for the year 2011, as set forth in the proxy statement. Are there any questions or comments on this proposal?
Yes. Is that accounting firm the firm that represented the company back in 2005?
Yes. Thank you. I would say there are new people on the account, but it is the same firm that represented us through the period. Okay. If there are no other comments on that one, I will now entertain a motion to act upon a shareholder proposal relating to restricting hedging transactions. Ken, you've already been up and speaking, welcome you to present your proposal. Thank you. Just one second while the mic comes up.
Okay. My proposal is on page 83. Resolved, the shareholders hereby ask the board of directors to adopt a bylaw for long-term purposes to promote responsible use of company stock by named executive officers and directors. Which policy would bar derivative or speculative transactions involving company stock, including but not limited to trading in puts, calls, covered calls, or other derivative products, engaging in hedging or monetization transactions with respect to company stock, holding company stock in a margin account, or pledging company stock as collateral for a loan. I understand that the company does have certain policies prohibiting many of these type of transactions already. I think it would be better served to include it in a bylaw to make it official and legal. Thank you.
Well, Ken, we very much respect your submission of that proposal and your concern for all the issues that are present there. For the reasons set forth in the proxy statement, after considerable deliberation, your board of directors does believe that the proposal is not necessary and indeed is not in the best interest of AIG and its shareholders. For the reason that you acknowledge that we do have existing policies already in place that restrict hedging transactions by any of our officers or directors. Are there any other comments or proposals or Yes, we have a question in the back here.
My name is Michael Meyers with New York Civil Rights Coalition. I want to oppose the resolution on the grounds that the management of the corporation is vested with the board of directors. Either the shareholders have confidence in that board or we don't. Every year since the financial collapse, I have voted against the board. Now that enough of them are now gone and Morris Offit is up for election or reelection, I have confidence in him, I will support the board's position on this resolution.
Thank you very much. Thank you for that vote of confidence. I do appreciate it. We will proceed to vote on the six proposals that have been properly presented to the meeting. The polls are now open. If anyone wants to vote now, please raise your hand and we will have a proxy card proxy. Of course, you had the opportunity to submit your proxy vote before this meeting. Has everyone voted who wishes to vote in this election? We have one back here. Is there anyone else who wishes to tender a ballot at this time? I see a couple more hands raised on the far side over here. Okay. Are there any others seeking the opportunity to cast a ballot? There we go. All righty.
Assuming you fill them out and get them passed in, I will declare the polls closed and ask that these ballots be delivered to the inspectors of election. I am now going to turn the floor over to Bob Benmosche for his remarks. We will follow with an opportunity for your questions and answers. I remind you of the procedures that we are going to follow in that Q&A period. Ask that you work with us to adhere to them. When we do get there, please raise your hand so we can have a microphone brought to you. You can direct your questions to me or Bob Benmosche. Please wait for the microphone as this meeting is being webcast.
We also do have members of the AIG management team here in the room today. If the question is better addressed to someone other than Bob or to me, I will have them join us up here to make sure that you are able to hear a response direct from the person most knowledgeable about it. With that, Bob, please come up here.
Good morning to everybody. It is great to be back here with everyone. If we think about where we were this time a year ago, we talked about we had stabilized the company, and that we are going to begin to build momentum as we focus on the most important effort, which is not only to serve our clients, but to pay back the United States government for their enormous support of our company. Our first priority, as you know, was to pay back the Federal Reserve, the debt. That was accomplished in January of this year, so the Federal Reserve has been completely repaid. Once we dealt with that debt, it put us in a position where today we were able to announce. I think that if you have not received it, there is a press release that is available to all of you.
It talks about our stock offering that is beginning today. You heard some comments about it. This will begin to allow the Treasury to begin to sell its AIG shares and begin to monetize their investment. That is the actual cash repayment for the American taxpayer for their tremendous support in our company. We are at a great point where we are building more momentum. You saw the first quarter results. Our top line continues to grow well. Our customers have stayed with us. Our employees have stayed with us. Our turnover is below normal level. Our retention of clients is better than normal because we are spending much more time with our clients. This is a great time to begin the monetization of those shares. We are pleased with the progress of the company.
What we felt at this point in time is it's better for me not to just talk about what you may have read in the annual report or talk about what you've seen in the first quarter, but actually make our time available for you to ask questions. We're ready to entertain some questions until we get the final vote in. Please raise your hand and go to a microphone so everyone can hear you on the webcast if there are any questions from the group that's here this morning.
My name is Atishimi. I am a shareholder. I was here last year, I asked, we heard about the fraud and the policies that have been made by AIG, I ask we can recoup some money.
We know now that you have a lawsuit to recoup this money, we thank you for that. My question now about the bailout by the federal government. AIG was a victim for the bailout. We know the financial crisis was a result of the government's deregulation of the safeguards put it after 1930 recession. Result regulation and the act of other institutions leave us in this situation. The government helped AIG, not because AIG. Because the collapse of AIG will result in the collapse of the financial system in U.S. and abroad. It's why they get in, it's why they let Lehman Brothers fail. In this case, this considered a national security matter, like the war and terrorists or in Iraq and Afghanistan. The government should bear this cost, not AIG shareholders. We are not responsible for that.
Another thing, we know that any lender, he receive back his money plus interest, or if he wants, he can take part of the equity of the corporation. Our case, the government get both. The money back with high interest at 8%, at the time the Federal Reserve make the funds available for other around 0%, they get, as we hear now, 92% equity. They have to get only one of them. This is unfair. There's article in The New York Times in December 1st, 2010, explaining that AIG was a victim for manipulation by the professional or speculator in the financial system. I have it written over here. I can give a copy of that. This is unfair and unjust to the shareholder of AIG, this is against the basics that our country is on. We need the company help to pursue and to correct this action. Thank you.
Want a response or?
Is that a question or?
I think it was.
I would just say that in my personal view, had we not had government assistance in September of 2008, we would not be sitting here in a meeting today. We would be in liquidation or beyond liquidation. Therefore, it's in the eye of the beholder what was a fair allocation of the value received back by the taxpayers for the considerable risk that was taken in September of 2008. Personally, I'm grateful they took the action they did to allow us to come back and fight another day. I really regret the damage that has been done to the common shareholders whose holdings go back before that period. We have elected to focus on the future to try and rebuild this company to greatness, to repay the taxpayers, and make everyone feel as good as possible about this whole experience.
I do not know what else we could be doing here as a board.
In the company? If they give us $100 billion, they get the money back, not equity in the company. They can get only one of it. Either the money back or take equity in the company, not both.
Okay.
This is unfair. This is the result of the government's deregulation of the rules. It's not the fault of AIG. All the evidence now shows that a lot of policies that have been paid by AIG was a result of fraud, and who pay the money for the banks like Goldman Sachs and other international banks.
If I could try to answer that for you. I understand your concern. The fact is, as the chairman just said, we were in a crisis. The fact is, there are a couple of other companies, which I won't name, but you can read about them, that had a crisis as well, and the shareholders were completely wiped out. At least the government, when they did a negotiation with us, left something for the shareholders and allowed us to continue to thrive. It's our job to return some of that value to you over time. A deal is a deal, and we're not going to be able to renegotiate what was done. Therefore, as the chairman said, we're looking forward, not backwards, because you're not going to redo the deal.
The fact is we're here, we survived, we're strong, we're vibrant, and that's the good news. We can't fix the past. One of the quotes, I think you heard me on television once say from my daughter, "I have given up all hope. I've given up all hope of a better past." I think you need to. We got to go forward. Thank you for your comment. We can talk later, if you like.
Actually, we made the history, and if the history was wrong, doesn't make it right.
I understand
look right in the future.
We can talk later. Thank you.
Question back here.
Dean, I'm happy to be here, and I'm even more happy to see Bob Benmosche as the leader. I worked for Bob at MetLife, and he's done some wonderful things there, and I think you're doing a great job here. I have two specific questions. One is, with Treasury rejecting your purchase of Maiden Lane II and III, what are your plans for the redeployment of that capital? Second, has Treasury limited your ability to repurchase stock or pay dividends while you hold any stake? Thank you.
First of all, it isn't Treasury. We desired to buy back from the Federal Reserve, Maiden Lane II. They've chosen to sell it off in pieces. We have an opportunity like everybody else to bid on that. Maiden Lane II is not the only opportunity. Therefore, the cash that was held up for that purchase, almost a third of that has been put to work already at interest rates between 8% and 9%, roughly in that range. That money is working for us and we're accomplishing getting that headwind to become a tailwind as we go forward. That, we're in pretty good shape. At Maiden Lane III, there was actually nothing intended to be done there. We have our interest in that.
We had $5 billion, which has grown to seven, and we get about a third of the upside over time that's just added to that position. I think net, we're in good shape in terms of that. Does that answer or? Yeah, the dividends and the Treasury has to be sold. That has to be done. Our anticipation as we look at our capital management program is that in the second half of 2012, depending upon how this offering goes and what happens later this year, our sense is you'll begin to see us do capital management because of, first of all, our tax benefit that we get because of the loss carry-forward we have, as well as earnings.
We anticipate later in 2012, possibly the earliest, and from 2013, we'll start doing some capital management, which would be clearly to deal with the dilution that we felt, and we'll begin to buy back some of those shares that were diluted at this point in time.
I think at the time of the federal assistance, much of it was in the form of loans or preferred stock or other things. Treasury did, as part of the restructuring we announced earlier this year, converted all of their interest into common stock. Part of that bargain and attitude is, if you will, is that until the taxpayers have gotten their money back first, will have to occur before we can start returning money to shareholders in the form of share buybacks or dividends. Like it or not, it's a policy I understand and I respect.
Question here.
I'm Israel Gitman, a shareholder. I understand that the company is going to sue some banks concerning misrepresentation about various instruments that were sold to the company. Can you comment on that?
You see, we've already went out with a lawsuit. We talked about it last year. We are in the process of preparing lawsuits where we feel we have a claim. We're in the process of dealing with those institutions that are involved. We will proceed. I think that once we have something we can go public with, we will. We are aggressively looking at what happened and where, again, the company was harmed, we'll go out after people for restitution. Any other questions? Yes.
My name is Lance Zone. I own 200 shares. I'd like to know the percentage of the company that is owned by management and employees total. I'd like to know the outside legal bill for 2010, if you have any, 2011.
Other than what we provide in terms of information in our K and our Q, in terms of details, we don't normally provide that. I don't have the employee ownership. I can tell you of the top 100 executives of the company, they are required to take a good portion of their pay in AIG stock. In fact, that stock is restricted from sale, as much as two to five years is the range. Therefore, they are getting paid today predominantly in AIG stock. I don't have the overall percentage of stock ownership. Keep in mind, over 92% of the company is owned by the U.S. Treasury at this point in time.
The second question was your outside legal bill for 2010.
As I said to you, we don't provide any of that detailed information on legal bills other than whatever we report in terms of our normal filings.
Some of these legal bills are getting to be outrageous. I think Citibank was $600 million. I think Goldman Sachs was $700 million. I mean, numbers like that. You don't even report a figure.
Well-
That's my comment.
Well, we may not report them, but we manage them. I can assure you that we're on top of it. We're doing a great deal of work to look at outside legal expenses, and we're driving those expenses down. Keep in mind, however, that a good part of our business, in terms of claims and claims management, does require legal support. That's the nature of what you're buying from the insurance company. To look at our legal bills, you'd have to begin to say how much of this belongs to our product, how much is related to litigation, and what kinds of litigation. I can only tell you that we're making tremendous strides in reducing the cost of legal bills, reducing the reliance on outside law firms as we deal with the legal function.
It is sizable in terms of your mind, but I can only assure you we're on top of it and managing it down.
Are there other questions?
I'll turn it back to you, Mr. Chair.
Okay, thank you. I do now have the report of the inspectors of election. They certify that each of the director nominees has been elected by a majority of the votes cast, and that all of the board-sponsored proposals were adopted, and that the sole shareholder proposal was not adopted. Now, later today, we'll be putting out a press release with the detailed results of these elections. Thank you very much for coming here today. This meeting is concluded, and I thank you all for your attendance.