AIG 2009 Annual Report Download - page 23

American International Group, Inc., and Subsidiaries
To the extent that any of AIG’s insurance entities would fall below prescribed levels of statutory surplus, it would be
AIG’s intention, subject to FRBNY approval, to provide appropriate capital or other types of support to that entity.
A substantial portion of AIG’s general insurance business and a majority of its life insurance 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 Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Resources
and Liquidity — Regulation and Supervision and Note 17 to Consolidated Financial Statements.
Competition
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.
The insurance industry in particular is highly competitive. Within the United States, Chartis subsidiaries compete
with approximately 3,300 other stock companies, specialty insurance organizations, mutual companies and other
underwriting organizations. AIG’s Domestic Life Insurance & Retirement Services subsidiaries compete in the United
States with approximately 1,900 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, uncertainty relating to AIG’s financial
condition and AIG’s asset disposition plan, 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.
Further, AIG has been and continues to be at a significant disadvantage in certain markets in soliciting new
customers. Although surrender rates have begun to stabilize, AIG expects these difficult conditions to continue for the
foreseeable future.
Competition is also intense for key employees. The announced asset dispositions, limitations placed by the
American Recovery and Reinvestment Act of 2009 and the Special Master for Troubled Asset Relief Program (TARP)
Executive Compensation on compensation arrangements and programs, decline in AIG’s common stock price and
uncertainty surrounding AIG’s financial condition have adversely affected AIG’s ability to retain and motivate key
employees and to attract new employees. It is unclear whether, for the foreseeable future, AIG will be able to create a
compensation structure that permits AIG to retain and motivate key employees.
For a further discussion of the risks relating to retaining existing customers, soliciting new customers and retaining
key employees, see item 1A. Risk Factors.
Other Information about AIG
At December 31, 2009, AIG and its subsidiaries had approximately 96,000 employees.
15 AIG 2009 Form 10-K