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ITEM 1 / BUSINESS.....................................................................................................................................................................................If any of our insurance entities fell below prescribed levels of statutory surplus, it would be our intention to provideappropriate capital or other types of support to that entity, under formal support agreements or capital maintenanceagreements (CMAs) or otherwise. For additional details regarding CMAs that we have entered into with our insurancesubsidiaries, see Item 7. MD&A – Liquidity and Capital Resources – Liquidity and Capital Resources of AIG Parentand Subsidiaries – AIG Property Casualty and – AIG Life and Retirement.The National Association of Insurance Commissioners (NAIC) has undertaken the Solvency Modernization Initiative(SMI) which focuses on a review of insurance solvency regulations throughout the U.S. financial regulatory systemand is expected to lead to a set of long-term solvency modernization goals. SMI is broad in scope, but the NAIC hasstated that its focus will include the U.S. solvency framework, group solvency issues, capital requirements,international accounting and regulatory standards, reinsurance and corporate governance.A substantial portion of AIG Property Casualty’s business is conducted in foreign countries. The degree of regulationand supervision in foreign jurisdictions varies. Generally, we must satisfy local regulatory requirements, licensesissued by foreign authorities to our subsidiaries are subject to modification or revocation by such authorities, andtherefore these subsidiaries could be prevented from conducting business in certain of the jurisdictions where theycurrently operate.In addition to licensing requirements, our foreign operations are also regulated in various jurisdictions with respect tocurrency, 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 topolicyholders on participating policies. Some foreign countries regulate rates on various types of policies. Certaincountries have established reinsurance institutions, wholly or partially owned by the local government, to whichadmitted insurers are obligated to cede a portion of their business on terms that may not always allow foreigninsurers, including our subsidiaries, full compensation. In some countries, regulations governing constitution oftechnical reserves and remittance balances may hinder remittance of profits and repatriation of assets.See Item 7. MD&A – Liquidity and Capital Resources – Regulation and Supervision and Note 20 to the ConsolidatedFinancial Statements.OUR COMPETITIVE ENVIRONMENT..............................................................................................................................................................................................AIG’s businesses operate in a highly competitive global environment. Principal sources of competition are insurancecompanies, banks, and other non-bank financial institutions. AIG considers its principal competitors to be other largemultinational insurance organizations. We describe our competitive strengths, our strategies to retain existingcustomers and attract new customers within each of our operating business segment descriptions.OUR EMPLOYEES..............................................................................................................................................................................................At December 31, 2012, AIG and its subsidiaries had approximately 63,000 employees. We believe that our relationswith our employees are satisfactory.AIG LIFE ANDRETIREMENTAIG PropertyCasualtyDomesticAIG PropertyCasualtyInternational15,00030,000AIGPROPERTYCASUALTY45,00012,0006,000* Includes approximately 500 employees of ILFC, which was held for sale at December 31, 2012.OTHER OPERATIONS*15FEB201315344305..................................................................................................................................................................................................................................AIG 2012 Form 10-K 29