AIG 2013 Annual Report Download - page 51

Investing in AIG involves risk. In deciding whether to invest in AIG, you should carefully consider the following risk
factors. Any of these risk factors could have a significant or material adverse effect on our businesses, results of
operations, financial condition or liquidity. They could also cause significant fluctuations and volatility in the trading
price of our securities. Readers should not consider any descriptions of these factors to be a complete set of all
potential risks that could affect AIG. These factors should be considered carefully together with the other information
contained in this report and the other reports and materials filed by us with the Securities and Exchange Commission
(SEC). Further, many of these risks are interrelated and could occur under similar business and economic conditions,
and the occurrence of certain of them may in turn cause the emergence or exacerbate the effect of others. Such a
combination could materially increase the severity of the impact of these risks on our businesses, results of
operations, financial condition and liquidity.
Difficult conditions in the global capital markets and the economy may materially and adversely affect our
businesses, results of operations, financial condition and liquidity. Our businesses are highly dependent on the
economic environment, both in the U.S. and around the world. Extreme market events, such as the global financial
crisis during 2008 and 2009, have at times led, and could in the future lead, to a lack of liquidity, highly volatile
markets, a steep depreciation in asset values across all classes, an erosion of investor and public confidence, and a
widening of credit spreads. Concerns and events beyond our control, such as uncertainty as to the U.S. debt ceiling,
the continued funding of the U.S. government, U.S. fiscal and monetary policy, the U.S. housing market, and
concerns about European sovereign debt risk and the European banking industry, have in the past, and may in the
future, adversely affect liquidity, increase volatility, decrease asset prices, erode confidence and lead to wider credit
spreads. Difficult economic conditions could also result in increased unemployment and a severe decline in business
across a wide range of industries and regions. These market and economic factors could have a material adverse
effect on our businesses, results of operations, financial condition and liquidity.
Under difficult economic or market conditions, we could experience reduced demand for our products and an
elevated incidence of claims and lapses or surrenders of policies. Contract holders may choose to defer or cease
paying insurance premiums. Other ways in which we could be negatively affected by economic conditions include,
but are not limited to:
• declines in the valuation and performance of our investment portfolio, including declines attributable to rapid
increases in interest rates;
• increased credit losses;
• declines in the value of other assets;
• impairments of goodwill and other long-lived assets;
• additional statutory capital requirements;
• limitations on our ability to recover deferred tax assets;
• a decline in new business levels and renewals;
• a decline in insured values caused by a decrease in activity at client organizations;
• an increase in liability for future policy benefits due to loss recognition on certain long-duration insurance contracts;
• higher borrowing costs and more limited availability of credit;
• an increase in policy surrenders and cancellations; and
• a write-off of deferred policy acquisition costs (DAC).
Sustained low interest rates may materially and adversely affect our profitability. Recent periods have been
characterized by low interest rates relative to historical levels. Sustained low interest rates can negatively affect the
performance of our investment securities and reduce the level of investment income earned on our investment
MARKET CONDITIONS
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AIG 2013 Form 10-K 33
ITEM 1A / RISK FACTORS
ITEM 1A / RISK FACTORS
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