AIG 2012 Annual Report Download - page 55

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unauthorized access, systems failures and disruptions. AIG maintains cyber risk insurance, but this insurance may
not cover all costs associated with the consequences of personal, confidential or proprietary information being
compromised. In some cases, such unauthorized access may not be immediately detected. This may impede or
interrupt our business operations and could adversely affect our consolidated financial condition or results of
operations.
In addition, we routinely transmit, receive and store personal, confidential and proprietary information by email and
other electronic means. Although we attempt to keep such information confidential, we may be unable to do so in all
events, especially with clients, vendors, service providers, counterparties and other third parties who may not have or
use appropriate controls to protect confidential information. Furthermore, certain of our businesses are subject to
compliance with laws and regulations enacted by U.S. federal and state governments, the European Union or other
jurisdictions or enacted by various regulatory organizations or exchanges relating to the privacy and security of the
information of clients, employees or others. The compromise of personal, confidential or proprietary information could
result in remediation costs, legal liability, regulatory action and reputational harm.
BUSINESS AND OPERATIONS OF ILFC PRIOR TO COMPLETION OF THE ILFC TRANSACTION
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We will be subject to the following risks until we complete the ILFC Transaction:
Our aircraft leasing business depends on lease revenues and exposes us to the risk of lessee
nonperformance. A decrease in ILFC’s customers’ ability to meet their obligations to ILFC under their leases may
negatively affect our business, results of operations and cash flows.
ILFC’s aircraft may become obsolete over time. Aircraft are long-lived assets requiring long lead times to develop
and manufacture. Particular models and types of aircraft may become obsolete and less in demand over time, when
newer, more advanced and efficient aircraft or aircraft engines are manufactured. This life cycle, however, can be
shortened by world events, government regulation or customer preferences. As aircraft in ILFC’s fleet approach
obsolescence, demand for particular models and types may decrease. This may result in declining lease rates,
losses on sales, impairment charges or fair value adjustments and may adversely affect ILFC’s business and our
consolidated financial condition, results of operations and cash flows.
The residual value of ILFC’s aircraft is subject to a number of risks and uncertainties. Technological
developments, macro-economic conditions, availability and cost of funding for aviation, and the overall health of the
airline industry impact the residual values of ILFC’s aircraft. If challenging economic conditions persist for extended
periods, the residual values of ILFC’s aircraft could be negatively impacted, which could result in future impairments.
COMPETITION AND EMPLOYEES
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We face intense competition in each of our businesses. Our businesses operate in highly competitive
environments, both domestically and overseas. Our principal competitors are other large multinational insurance
organizations, as well as banks, investment banks and other non-bank financial institutions. The insurance industry in
particular is highly competitive. Within the U.S., AIG Property Casualty subsidiaries compete with approximately
3,300 other stock companies, specialty insurance organizations, mutual insurance companies and other underwriting
organizations. AIG Life and Retirement subsidiaries compete in the U.S. with approximately 1,800 life insurance
companies and other participants in related financial services fields. Overseas, our subsidiaries compete for business
with the foreign insurance operations of large U.S. insurers and with global insurance groups and local companies.
The past reduction of our credit ratings and the lingering effects of AIG’s negative publicity have made, and may
continue to make, it more difficult to compete to retain existing customers and to maintain our historical levels of
business with existing customers and counterparties. General insurance and life insurance companies compete
through a combination of risk acceptance criteria, product pricing, and terms and conditions. Retirement services
companies compete through crediting rates and the issuance of guaranteed benefits. A decline in our position as to
any one or more of these factors could adversely affect our profitability.
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AIG 2012 Form 10-K38
ITEM 1A / RISK FACTORS