Bring on tomorrow - AIG.com

ITEM 1A / RISK FACTORS.....................................................................................................................................................................................Competition for employees in our industry is intense, and we may not be able to attract and retain the highlyskilled people we need to support our business. Our success depends, in large part, on our ability to attract andretain key people. Due to the intense competition in our industry for key employees with demonstrated ability, wemay be unable to hire or retain such employees. Losing any of our key people also could have a material adverseeffect on our operations given their skills, knowledge of our business, years of industry experience and the potentialdifficulty of promptly finding qualified replacement employees. Our results of operations and financial condition couldbe materially adversely affected if we are unsuccessful in attracting and retaining key employees.Mr. Benmosche may be unable to continue to provide services to AIG due to his health. Robert Benmosche,our President and Chief Executive Officer, was diagnosed with cancer and has been undergoing treatment for hisdisease. He continues to fulfill all of his responsibilities and has stated his desire to continue in such roles beyond2013. However, his condition may change and prevent him from continuing to perform these roles.Employee error and misconduct may be difficult to detect and prevent and may result in significant losses.There have been a number of cases involving fraud or other misconduct by employees in the financial servicesindustry in recent years and we run the risk that employee misconduct could occur. Instances of fraud, illegal acts,errors, failure to document transactions properly or to obtain proper internal authorization, or failure to comply withregulatory requirements or our internal policies may result in losses. It is not always possible to deter or preventemployee misconduct, and the controls that we have in place to prevent and detect this activity may not be effectivein all cases.REGULATION..............................................................................................................................................................................................Our businesses are heavily regulated and changes in regulation may affect our operations, increase ourinsurance subsidiary capital requirements or reduce our profitability. Our operations generally, and ourinsurance subsidiaries, in particular, are subject to extensive supervision and regulation by national authorities and bythe various jurisdictions in which we do business. Supervision and regulation relate to numerous aspects of ourbusiness and financial condition. The primary purpose of insurance regulation is the protection of our insurancecontract holders, and not our investors. The extent of domestic regulation varies, but generally is governed by statestatutes. These statutes delegate regulatory, supervisory and administrative authority to state insurance departments.We strive to maintain all required licenses and approvals. However, our businesses may not fully comply with thewide variety of applicable laws and regulations. The relevant authority’s interpretation of the laws and regulationsalso may change from time to time. Regulatory authorities have relatively broad discretion to grant, renew or revokelicenses and approvals. If we do not have the required licenses and approvals or do not comply with applicableregulatory requirements, these authorities could preclude or temporarily suspend us from carrying on some or all ofour activities or impose substantial fines. Further, insurance regulatory authorities have relatively broad discretion toissue orders of supervision, which permit them to supervise the business and operations of an insurance company.In the U.S., the risk based capital (RBC) formula is designed to measure the adequacy of an insurer’s statutorysurplus in relation to the risks inherent in its business. Virtually every state has adopted, in substantial part, the RBCModel Law promulgated by the National Association of Insurance Commissioners (NAIC), which specifies theregulatory actions the insurance regulator may take if an insurer’s RBC calculations fall below specific thresholds.Those actions range from requiring an insurer to submit a plan describing how it would regain a specified RBC ratio,to a mandatory regulatory takeover of the company.The degree of regulation and supervision in foreign jurisdictions varies. Generally, AIG Parent, as well as itssubsidiaries operating in such jurisdictions, must satisfy local regulatory requirements. Licenses issued by foreignauthorities to our subsidiaries are subject to modification and revocation. Thus, our insurance subsidiaries could beprevented from conducting future business in certain of the jurisdictions where they currently operate. Adverseactions from any single country could adversely affect our results of operations, liquidity and financial condition,depending on the magnitude of the event and our financial exposure at that time in that country.Our status as a savings and loan holding company and the enactment of the Dodd-Frank Wall Street Reformand Consumer Protection Act (Dodd-Frank) will subject us to substantial additional federal regulation, eitheror both of which may materially and adversely affect our businesses, results of operations and cash flows.On July 21, 2010, Dodd-Frank, which effects comprehensive changes to the regulation of financial services in theUnited States, was signed into law. Dodd-Frank directs existing and newly created government agencies and bodies..................................................................................................................................................................................................................................AIG 2012 Form 10-K 39