AIG 2011 Annual Report Download - page 43

ITEM 1A. RISK FACTORS
We were significantly and adversely affected by the market turmoil in late 2008 and early 2009. In addition, we
continued to experience a challenging business environment, as well as volatile market conditions, throughout
2011. As a result, our businesses, consolidated results of operations, financial conditions and liquidity are subject
to significant risks, as discussed below. This challenging environment and volatile market conditions may continue
in 2012.
The risks described below are not the only ones we face. Additional risks that are not currently known to us or
that we currently believe are immaterial may also adversely affect our businesses, results of operations, financial
condition or liquidity. Many of these risks are interrelated and occur under similar business and economic
conditions, and the occurrence of certain of them may in turn cause the emergence, or exacerbate the effect, of
others. Such a combination could materially increase the severity of the impact on our operations, liquidity and
financial condition.
Our businesses, consolidated results of operations and financial condition have been, and may continue to be,
materially and adversely affected by market conditions. Our businesses are highly dependent on the business
environment in which they operate. In 2008 and through early 2009, the significant deterioration in worldwide
economic conditions materially and adversely affected our businesses. The global financial crisis resulted in a
serious lack of liquidity, highly volatile markets, a steep depreciation in asset values across all classes, an erosion
of investor and public confidence, a widening of credit spreads, a lack of price transparency in many markets, and
the collapse or merger of several prominent financial institutions. Difficult economic conditions also resulted in
increased unemployment and a severe decline in business activity across a wide range of industries and regions. A
challenging business environment and volatile markets persisted through 2011 and may continue in 2012. As a
result, asset values for many asset classes have not returned to previous levels, and business, financial and
economic conditions continue to be negatively affected, particularly in light of high unemployment levels. Revenue
and budget constraints affecting U.S. municipalities, lending activities and the housing and commercial property
markets also continue to have a negative effect on asset values. Further, the adverse European economic and
financial conditions related to sovereign debt issues in certain countries and concerns regarding the European
Union have contributed to increased instability in global credit markets. If such conditions persist, we may be
negatively affected in a number of ways, including, but not limited to:
• declines in the valuation and performance of our investment portfolio;
• declines in the value of our remaining shares in AIA;
• an inability to monetize our interest in ILFC;
• increased credit losses;
• impairments of goodwill, aircraft and other long-lived assets;
• additional statutory capital requirements;
• limitations on our ability to recover deferred tax assets;
• a decline in new business levels;
• a decline in insured values caused by a decrease in activity at client organizations;
• an increase in liability for future policy benefits due to loss recognition on certain long-duration insurance
contracts;
• higher borrowing costs and more limited availability of credit for AIG Parent and our subsidiaries;
• an increase in policy surrenders and cancellations; and
• a writeoff of deferred policy acquisition costs (DAC).
AIG 2011 Form 10-K 29
MARKET CONDITIONS