AIG 2015 Annual Report Download - page 32

ITEM 1A / RISK FACTORS

32
ITEM 1A / RISK FACTORS
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.
MARKET CONDITIONS
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 U.S. fiscal and monetary policy, the U.S. housing market, oil prices, slowing
growth in China and the Euro-Zone economies, concerns about European sovereign debt risk and the European banking
industry and declines in prices in the high yield market and the resultant impact on certain funds 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, increased policy cancellations 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