AIG 2011 Annual Report Download - page 40

Additionally, the NAIC has undertaken the Solvency Modernization Initiative (SMI) which focuses on a review
of insurance solvency regulations throughout the U.S. financial regulatory system and will lead to a set of
long-term solvency modernization goals. SMI is broad in scope, but the NAIC has stated that its focus will include
the U.S. solvency framework, group solvency issues, capital requirements, international accounting and regulatory
standards, reinsurance and corporate governance.
AIG cannot predict the potential effect that any new regulations would have on AIG’s insurance subsidiaries or
on AIG’s business, results of operations, cash flows or financial condition.
A substantial portion of Chartis’ business is conducted in foreign countries. The degree of regulation and
supervision in foreign jurisdictions varies. Generally, AIG, as well as the underwriting companies operating in such
jurisdictions, must satisfy local regulatory requirements. Licenses issued by foreign authorities to AIG subsidiaries
are subject to modification or revocation by such authorities, and these subsidiaries could be prevented from
conducting business in certain of the jurisdictions where they currently operate.
In addition to licensing requirements, AIG’s foreign operations are also regulated in various jurisdictions with
respect to currency, policy language and terms, advertising, amount and type of security deposits, amount and type
of reserves, amount and type of capital to be held, amount and type of local investment and the share of profits to
be returned to policyholders on participating policies. Some foreign countries regulate rates on various types of
policies. Certain countries have established reinsurance institutions, wholly or partially owned by the local
government, to which admitted insurers are obligated to cede a portion of their business on terms that may not
always allow foreign insurers, including AIG subsidiaries, full compensation. In some countries, regulations
governing constitution of technical reserves and remittance balances may hinder remittance of profits and
repatriation of assets.
See Item 7. MD&A — Capital Resources and Liquidity — Regulation and Supervision and Note 18 to the
Consolidated Financial Statements.
AIG’s businesses operate in highly competitive environments, both domestically and overseas. Principal sources
of competition are insurance companies, banks, investment banks and other non-bank financial institutions. AIG
considers its principal competitors to be other large multi-national insurance organizations.
The insurance industry in particular is highly competitive. Within the United States, Chartis subsidiaries
compete with approximately 3,200 other stock companies, specialty insurance organizations, mutual companies and
other underwriting organizations. SunAmerica subsidiaries compete in the United States with approximately 2,000
life insurance companies and other participants in related financial services fields. Overseas, AIG’s subsidiaries
compete for business with the foreign insurance operations of large U.S. insurers and with global insurance groups
and local companies in particular areas in which they are active.
As a result of the reduction of the credit ratings of AIG and its subsidiaries, AIG’s businesses have faced and
continue to face intense competition to retain existing customers and to maintain business with existing customers
and counterparties at historical levels. General insurance and life insurance companies compete through a
combination of risk acceptance criteria, product pricing, and terms and conditions. Retirement services companies
compete through crediting rates and the issuance of guaranteed benefits.
For a further discussion of the risks relating to retaining existing customers, soliciting new customers and
retaining key employees, see Item 1A. Risk Factors — Competition.
At December 31, 2011, AIG and its subsidiaries had approximately 57,000 employees.
26 AIG 2011 Form 10-K
REGULATION OF DOMESTIC SUBSIDIARIES IN FOREIGN JURISDICTIONS
COMPETITION
OTHER INFORMATION ABOUT AIG