AIG 2011 Annual Report Download - page 51

50 percent, it is possible for us to experience an ownership change as a result of purchases of AIG Common Stock
by ‘‘5-percent shareholders’’. For the purpose of determining whether there has been an ‘‘ownership change’’, the
change in ownership as a result of purchases by ‘‘5-percent shareholders’’ will be aggregated with certain changes
in ownership that occurred over the three-year period ending on the date of such purchases, including, for
example, the sale of AIG Common Stock that was issued in exchange for the shares of AIG’s Series C Perpetual,
Convertible, Participating Preferred Stock, par value $5.00 per share (the Series C Preferred Stock), but excluding
the issuance of the AIG Common Stock that was issued in exchange for the shares of AIG’s Series E Fixed Rate
Non-Cumulative Perpetual Preferred Stock, par value $5.00 per share (the Series E Preferred Stock), and the
shares of AIG’s Series F Fixed Rate Non-Cumulative Perpetual Preferred Stock, par value $5.00 per share (the
Series F Preferred Stock), both of which were issued under the Emergency Economic Stabilization Act of 2008
and to which Notice 2010-2 applies. Any repurchases of AIG Common Stock by AIG will be taken into account in
determining whether there has been an ‘‘ownership change’’. If we were to experience an ‘‘ownership change’’, it
is possible that a significant portion of our tax losses and credits carryforwards could expire before we would be
able to use them to offset future taxable income.
On March 9, 2011, AIG’s Board of Directors adopted a Tax Asset Protection Plan (the Plan) to help protect
our ability to recognize tax benefits from certain tax attributes in order to reduce our potential future income tax
liability. At our 2011 Annual Meeting of Shareholders, shareholders ratified the Plan and also adopted a
protective amendment (the Protective Amendment) to our Restated Certificate of Incorporation, which is
designed to prevent certain transfers of AIG Common Stock that could result in an ‘‘ownership change’’. The Plan
is designed to reduce the likelihood that AIG will experience an ‘‘ownership change’’ by (i) discouraging any
person or group from becoming a 4.99 percent shareholder and (ii) discouraging any existing 4.99 percent
shareholder from acquiring additional shares of AIG Common Stock. The Protective Amendment generally
restricts any transfer of AIG Common Stock if the effect would be to (i) increase the ownership by any person to
4.99 percent or more of AIG stock then outstanding (Five Percent Stockholder) or (ii) increase the percentage of
AIG stock owned by a Five Percent Stockholder. While the Plan and the Protective Amendment are intended to
deter and prevent acquisitions of AIG Common Stock that may result in an ‘‘ownership change’’, such acquisitions
may still occur. In addition, the Plan and the Protective Amendment may make it more difficult and more
expensive to acquire us, and may discourage open market purchases of AIG Common Stock or a non-negotiated
tender or exchange offer for AIG Common Stock. Accordingly, the Plan and the Protective Amendment may limit
a shareholder’s ability to realize a premium over the market price of AIG Common Stock in connection with any
stock transaction.
Our foreign operations expose us to risks that may affect our operations, liquidity and financial condition. We
provide insurance, investment and other financial products and services to both businesses and individuals in more
than 130 countries. A substantial portion of our Chartis business is conducted outside the United States, and our
intention is to continue to grow this business. Operations outside the United States, particularly those in
developing nations, may be affected by regional economic downturns, changes in foreign currency exchange rates,
political upheaval, nationalization and other restrictive government actions, which could also affect our other
operations.
The degree of regulation and supervision in foreign jurisdictions varies. Generally, AIG Parent, as well as its
subsidiaries operating in such jurisdictions, must satisfy local regulatory requirements. Licenses issued by foreign
authorities to our subsidiaries are subject to modification and revocation. Thus, our insurance subsidiaries could
be prevented from conducting future business in certain of the jurisdictions where they currently operate. Adverse
actions from any single country could adversely affect our results of operations, liquidity and financial condition
depending on the magnitude of the event and our financial exposure at that time in that country.
Significant legal proceedings may adversely affect our results of operations or financial condition. We are party to
numerous legal proceedings, including securities class actions and regulatory and governmental investigations. Due
AIG 2011 Form 10-K 37
FOREIGN OPERATIONS
LEGAL PROCEEDINGS