AIG 2011 Annual Report Download - page 49

institution, we might still be subject to additional capital and quantitative limitations under the Volcker Rule as a
SIFI.
In addition, Dodd-Frank establishes a new framework for regulation of over the counter (OTC) derivatives
under which we may have to collateralize previously uncollateralized swaps. These additional obligations to post
collateral or the costs of assignment, termination or obtaining alternative credit could have a material adverse
effect on us. This new framework may also increase the cost of conducting a hedging program or have other
effects materially adverse to us.
We cannot predict the requirements of the regulations ultimately adopted, the level and magnitude of
supervision we may become subject to, or how Dodd-Frank and such regulations will affect the financial markets
generally or our businesses, results of operations, cash flows or financial condition. It is possible that the
regulations adopted under Dodd-Frank could significantly alter our business practices, require us to raise
additional capital, impose burdensome and costly requirements and add additional costs. Some of the regulations
may also affect the perceptions of regulators, rating agencies, customers, counterparties, creditors or investors
about our financial strength and could potentially affect our financing costs or result in a ratings downgrade.
We are subject to extensive regulation in the jurisdictions in which we conduct our businesses, including with respect
to the pricing of policies that we write, and regulatory actions could make it challenging for us to continue to engage in
business in the ordinary course. Our operations around the world are subject to regulation by different types of
regulatory authorities, including insurance, securities, investment advisory, banking and thrift regulators in the
United States and abroad. Regulators have the ability to take various steps to protect the businesses of the entities
they regulate. These steps could include, and in the past have included:
• restricting or prohibiting the payment of dividends to AIG Parent and its subsidiaries;
• restricting or prohibiting other payments to AIG Parent and its subsidiaries;
• requesting additional capital contributions from AIG Parent;
• requesting that intercompany reinsurance reserves be covered by assets locally;
• restricting the business in which the subsidiaries may engage;
• requiring pre-approval of all proposed transactions between the regulated subsidiaries and AIG Parent or
any affiliate; and
• requiring more frequent reporting, including with respect to capital and liquidity positions.
In addition, the premium rates that we are able to charge and the profits that we are able to obtain are affected
by the actions of state and foreign insurance departments that regulate our businesses. In addition to this
regulation, our insurance subsidiaries are subject to laws that require insurers to participate in assigned risk plans,
or to offer coverage to all consumers or at prices that we might not otherwise offer. Any of these actions could
have an adverse effect on our consolidated results of operations.
Requirements of the USA PATRIOT Act, the Office of Foreign Assets Control and similar laws that apply to us may
expose us to significant penalties. The operations of certain of our subsidiaries are subject to laws and regulations,
including the USA PATRIOT Act of 2001, which requires companies to know certain information about their
clients and to monitor their transactions for suspicious activities. In addition, the Department of the Treasury’s
Office of Foreign Assets Control administers regulations requiring U.S. persons to refrain from doing business, or
allowing their clients to do business through them, with certain organizations or individuals on a prohibited list
maintained by the U.S. government or with certain countries. The United Kingdom, the European Union and
other jurisdictions maintain similar laws and regulations. Although we have instituted compliance programs to
address these requirements, there are inherent risks in global transactions.
Attempts to mitigate the impact of Regulation XXX and Actuarial Guideline AXXX may fail in whole or in part
resulting in an adverse effect on our financial condition and results of operations. The Model Regulation entitled
‘‘Valuation of Life Insurance Policies’’, commonly known as ‘‘Regulation XXX’’, requires insurers to establish
additional statutory reserves for term life insurance policies with long-term premium guarantees and universal life
AIG 2011 Form 10-K 35