AIG 2009 Annual Report Download - page 31

American International Group, Inc., and Subsidiaries
environment have generally stabilized and improved in mid and late 2009, asset values for many asset classes have not
returned to previous levels and business, and financial and economic conditions, particularly unemployment levels,
lending activities and the housing markets, continue to be negatively affected. There can be no assurance that the
conditions supporting the recent recovery will continue in the near or long term. If they do not, AIG may be
negatively affected in a number of ways, including:
• declines in the valuation and performance of its investment portfolio;
• unrealized market valuation losses on its super senior credit default swap portfolio;
• an inability to implement its asset disposition program, as discussed in Management’s Discussion and Analysis of
Financial Condition and Results of Operations — Capital Resources and Liquidity — AIG’s Strategy for
Stabilization and Repayment of its Obligations as They Come Due — Asset Disposition Plan;
• increased credit losses;
• impairments of goodwill and other long-lived assets;
• an increase in the valuation allowance relating to its deferred tax asset;
• a decline in new business levels;
• an increase in policy surrenders and cancellations;
• a writeoff of deferred policy acquisition costs (DAC); and
• the ability of current or potential contractual counterparties to execute transactions that are part of AIG’s asset
disposition plans.
Reputational Harm
Adverse publicity and public reaction to events concerning AIG has had and may continue to have a material adverse
effect on AIG. Since September 2008, AIG has been the subject of intense scrutiny and extensive comment by the
global news media and segments of the public at large in the communities that AIG serves. At times, there has been
strong criticism of actions taken by AIG, its management and its employees and of transactions in which AIG has
engaged. In a few instances, such as the public reaction over the payment of retention awards to AIGFP employees,
this criticism has included harassment of individual AIG employees and public protest affecting AIG facilities.
This scrutiny and extensive commentary have adversely affected AIG by damaging AIG’s business, reputation and
brand among current and potential customers, agents and other distributors of AIG products and services, thereby
reducing sales of AIG products and services, and resulting in an increase in AIG policyholder surrenders and
non-renewals of AIG policies. This scrutiny and commentary have also undermined employee morale and AIG’s
ability to motivate and retain its employees. If this level of criticism continues or increases, AIG’s business may be
further adversely affected and its ability to retain and motivate employees further harmed.
Employees
The limitations on incentive compensation contained in the American Recovery and Reinvestment Act of 2009, and the
restrictions placed on compensation by the Special Master for TARP Executive Compensation, may adversely affect AIG’s
ability to retain and motivate its highest performing employees. The American Recovery and Reinvestment Act of 2009
(Recovery Act) contains restrictions on bonus and other incentive compensation payable to the five executives named
in a company’s proxy statement and the next twenty highest paid employees of companies receiving TARP funds.
Pursuant to the Recovery Act, the Office of the Special Master for TARP Executive Compensation (Special Master)
issued Determination Memorandum with respect to AIG’s named executive officers (except for the Chief Executive
Officer) and twenty highest paid employees, and reviewed AIG’s compensation arrangements for its next 75 most
highly compensated employees and issued a Determination Memorandum on their compensation structures, which
23 AIG 2009 Form 10-K