Business Strategy

Commercial Insurance Operating Segments

Commercial Insurance’s operating segments consist of Property Casualty, Mortgage Guaranty and Institutional Markets.

A Look at Commercial Insurance

Property Casualty conducts its business primarily through our Non-Life Insurance Companies, which include National Union; American Home; Lexington; Fuji Fire; American Home Japan; AIG Asia Pacific Insurance, Pte, Ltd. and AIG Europe Limited.

Mortgage Guaranty conducts its business primarily through UGRIC.

Institutional Markets conducts its business primarily through our Life Insurance Companies, which include American General Life, VALIC and U.S. Life.

Commercial Insurance Distribution Network

Business Strategy

Consumer Insurance Operating Segments

Consumer Insurance’s operating segments consist of Retirement, Life, and Personal Insurance. 

A Look at Consumer Insurance

The Retirement and Life operating segments conduct their business primarily through our Life Insurance Companies, which include American General Life, VALIC, U.S. Life, and Fuji Life. 

The Personal Insurance operating segment conducts its business primarily through our Non-Life Insurance Companies, which include Fuji Fire, AIU Insurance Company, Ltd., American Home, National Union, Lexington, American Home Japan, AIG Asia Pacific Insurance, Pte, Ltd. and AIG Europe Limited.

Consumer Insurance Distribution Network

Retirement

Life

Personal Insurance

Consumer Insurance Competition

Consumer Insurance operates in the highly competitive insurance and financial services industry in the U.S. and select international markets and competes against various financial services companies, including mutual funds, banks and other life and property casualty insurance companies.  Competition is primarily based on product pricing and design, distribution, financial strength, customer service and ease of doing business.

Consumer Insurance competes based on its long‑standing market leading positions, innovative products, strong distribution relationships across multiple channels, customer-focused service and strong financial ratings.

Corporate and Other includes:

Direct Investment book(DIB) consists of a portfolio of assets and liabilities held directly by AIG Parent in the Matched Investment Program (MIP) and certain non-derivative assets and liabilities of AIG Financial Products Corp. and related subsidiaries (collectively AIGFP). The DIB portfolio is being wound down and is managed with the objective of ensuring that at all times it maintains the liquidity we believe is necessary to meet all of its liabilities as they come due, even under stress scenarios, and to maximize returns consistent with our risk management objectives. 

Global Capital Markets (GCM)consists of the operations ofAIG Markets, Inc. (AIG Markets) and the remaining derivatives portfolio of AIGFP. AIG Markets acts as the derivatives intermediary between our subsidiaries and third parties to provide hedging services. The AIGFP portfolio continues to be wound down and is managed consistently with our risk management objectives. Although the portfolio may experience periodic fair value volatility, it consists predominantly of transactions that we believe are of low complexity, low risk or currently not economically appropriate to unwind based on a cost versus benefit analysis.

AIG Parent and Other consists primarily of interest expense, consolidation and eliminations, expenses of corporate staff not attributable to specific reportable segments, certain expenses related to internal controls and the financial and operating

platforms, corporate initiatives, certain compensation plan expenses, corporate level net realized capital gains and losses, certain litigation‑related charges and credits, net gain (loss) on sale of divested businesses that did not meet the criteria for discontinued operations accounting treatment, and equity in the earnings of AerCap.

Run-off Insurance Businessconsists primarily of run-off lines of business, including excess workers’ compensation, asbestos and legacy environmental (1986 and prior); certain environmental liability businesses written prior to 2004 and certain long-duration business, primarily in Japan and the U.S.

Other Businessesinclude investments in life settlements, real estate investment operations, institutional asset management operations, equipment financing operations and our remaining consumer finance business.

Aircraft Leasing consists of ILFC. On May 14, 2014, we completed the sale of 100 percent of the common stock of ILFC to AerCap Ireland Limited, a wholly owned subsidiary of AerCap, in exchange for total consideration of approximately $7.6 billion, including cash and 97.6 million newly issued AerCap common shares (the AerCap Transaction). benefits. As a result, we generate significant revenues from insurance investment activities.

Our worldwide insurance investment policy places primary emphasis on investments in corporate bonds, municipal bonds and government bonds in all of our portfolios, and, to a lesser extent, investments in high yield bonds, common stock, real estate, hedge funds and other alternative investments. Our fundamental strategy across all of our investment portfolios is to optimize the duration characteristics of the AerCap Transaction, we own approximately 46 percent of the outstanding common stock of AerCap. We account for our interest in AerCap using the equity method of accounting.  See Note 4assets within a target range based on comparable liability characteristics, to the Consolidated Financial Statementsextent practicable.

See Item 7. MD&A — Investments for additional information on the AerCap Transaction.

Retained Interestsincludes fair value gains and losses on (i) AIA ordinary shares retained following the AIA initial public offering  prior to their sale in 2012 and (ii) Maiden Lane III LLC (ML III) assets prior to their liquidation in 2012.

OUR EMPLOYEESdiscussion of investment strategies.

At December 31, 2014, we had approximately 65,000 employees. We believe that our relations with our employees are satisfactory.

A Review of Liability for Unpaid LOSSES and loss Adjustment Expenses

The liability for unpaid losses and loss adjustment expenses (also referred to as loss(loss reserves) represents the accumulation of estimates for unpaid reported losses (case reserves) and losses that have beenclaims, including estimates for claims incurred but not reported (IBNR) for our property and casualty insurance companies, including the Non-Life Insurance Companies.

We recognize as assets the portionrelated expenses of this liability that is expected to be recovered from reinsurers. Loss reserves are discounted, where permitted, in accordance with U.S. GAAP.

The Loss Reserve Development Processsettling those losses.

The process of establishing the liability for unpaid losses and loss adjustment expensesreserves is complex and imprecise because it must take into consideration many variables that are subject to the outcome of future events. As a result, informed subjective estimates and judgments about our ultimate exposure to losses are an integral component of our loss reserving process.

A significant portion of the Non-Life Insurance Companies’ reserves are for the U.S. commercial casualty class, including excess casualty, asbestos and environmental, which tends to involve longer periods of time for the reporting and settlement of claims than other types of insurance and therefore may increase the inherent risk and uncertainty with respect to our loss reserve development.

Analysis of Consolidated Loss Reserve Development

The “Analysis of Consolidated Loss Reserve Development” table presents the development of prior year net loss reserves for calendar years 2004 through 2014 for each balance sheet in that period. The informationestimates are unavoidable in the table is presented in accordance with reporting requirements of the Securitiesinsurance industry. These changes are sometimes referred to as “prior year loss development” or “reserve development.”

See Item 7. MD&A — Critical Accounting Estimates — Insurance Liabilities — Loss Reserves, Item 7. MD&A — Insurance Reserves — Loss Reserves, and Exchange Commission (SEC). This table should be interpreted with care by those not familiar with its format or those who are familiar with other loss development analyses arranged in an accident year or underwriting year basis rather than the balance sheet, as shown below. See Note 13 to the Consolidated Financial Statements.

Statements for further discussion onThe top row loss reserves and of prior year loss development.

At AIG, we believe that a major strength of ours is the table shows Net Reserves Held (the net liability for unpaid lossesquality and loss adjustment expenses) at each balance sheet date, netdedication of discount. This liability represents the estimated amount of losses and loss adjustment expenses for claims arising in all years prior to the balance sheet date that were unpaid as of that balance sheet date, including estimates for IBNR claims. The amount of loss reserve discount included in the net reserves at each date is shown immediately below the net reserves held. The undiscounted reserve at each date is equal to the sum of the discount and the net reserves held. For example, Net Reserves Held (Undiscounted) was $48.8 billion atour people. At December 31, 2004.2016 and 2015, we had approximately 56,400 and 66,400 employees, respectively. We believe that our relations with our employees are satisfactory.

(a) During 2009, we deconsolidated Transatlantic Holdings, Inc. and sold 21st Century Insurance Group and HSB Group, Inc. The sales and deconsolidation are reflected in the table above as a reduction in December 31, 2009 net reserves of $9.7 billion and as an $8.6 billion increase in paid losses for the years 2000 through 2008 to remove the reserves for these divested entities from the ending balance.

(b) The increase in Net Reserves Held from 2009 to 2010 is partially due to the $1.7 billion in Net Reserves Held by Fuji Fire, which was acquired in 2010.  The decrease in 2011 is due to the cession of asbestos reserves described in Item 7. MD&A — Insurance Reserves – Non-Life Insurance Companies— Asbestos and Environmental Reserves.

The Liability for unpaid losses and loss adjustment expenses as reported in our Consolidated Balance Sheet at December 31, 2014 differs from the total reserves reported in the annual statements filed with state insurance departments and, when applicable, with foreign regulatory authorities primarily for the following reasons:

•Reserves for certain foreign operations are not required or permitted to be reported in the United States for statutory reporting purposes, including contingency reserves for catastrophic events;

•Statutory practices in the United States require reserves to be shown net of applicable reinsurance recoverable; and

•Unlike statutory financial statements, our consolidated liability for unpaid losses and loss adjustment expenses excludes the effect of intercompany transactions.

Gross loss reserves are calculated without reduction for reinsurance recoverable and represent the accumulation of estimates for reported losses and IBNR, net of estimated salvage and subrogation. We review the adequacy of established gross loss reserves in the manner previously described for net loss reserves. A reconciliation of activity in the Liability for unpaid losses and loss adjustment expenses is included in Note 13 to the Consolidated Financial Statements.

For further discussion of asbestos and environmental reserves, see Item 7. MD&A — Insurance Reserves – Non-Life Insurance Companies— Asbestos and Environmental Reserves.

Reinsurance Activities

Reinsurance is used primarily to manage overall capital adequacy and mitigate the insurance loss exposure related to certain events such as natural and man-made catastrophes.

Our subsidiaries operate worldwide primarily by underwriting and accepting risks for their direct account on a gross basis and reinsuring a portion of the exposure on either an individual risk or an aggregate basis to the extent those risks exceed the desired retention level.In addition, as a condition of certain direct underwriting transactions, we are required by clients, agents or regulation to cede all or a portion of risks to specified reinsurance entities, such as captives, other insurers, local reinsurers and compulsory pools.

Over the last several years, the Non-Life Insurance Companies revised the ceded reinsurance framework and strategy to improve capital management and support our global product line risk and profitability objectives.  As a result of adopting the revised framework and strategy, many individual reinsurance contracts were consolidated into more efficient global programs and reinsurance ceded to third parties in support of risk and capital management objectives has decreased for the full year

2014 compared to 2013. We continually evaluate the relative attractiveness of different forms of reinsurance contracts and different markets that may be used to achieve our risk and profitability objectives.

Reinsurance markets include:

•Traditional local and global reinsurance markets including those in the United States, Bermuda, London and Europe, accessed directly and through reinsurance intermediaries;

•Capital markets through insurance-linked securities and collateralized reinsurance transactions, such as catastrophe bonds, sidecars and similar vehicles; and

•Other insurers that engage in both direct and assumed reinsurance.

The form of reinsurance that we may choose from time to time will generally depend on whether we are seeking:

•proportional reinsurance, whereby we cede a specified percentage of premium and losses to reinsurers;

•non-proportional or excess of loss reinsurance, whereby we cede all or a specified portion of losses in excess of a specified amount on a per risk, per occurrence (including catastrophe reinsurance) or aggregate basis; or

•facultative contracts that reinsure individual policies.

Reinsurance contracts do not relieve our subsidiaries from their direct obligations to insureds. However, an effective reinsurance program substantially mitigates our exposure to potentially significant losses.

In certain markets, we are required to participate on a proportional basis in reinsurance pools based on our relative share of direct writings in those markets.  Such mandatory reinsurance generally covers higher-risk consumer exposures such as assigned-risk automobile and earthquake, as well as certain commercial exposures such as workers’ compensation.

In 2014, we continued our strategy to take advantage of the pricing differential between traditional reinsurance markets and capital markets. In December 2014, we entered into capital markets reinsurance transactions, effective as of January 1, 2015, with Tradewynd Re Ltd., which will provide $500 million of indemnity reinsurance protection against U.S., Caribbean, Canadian, Mexican and Gulf of Mexico named storms and U.S., Caribbean, Mexican and Canadian earthquakes.  To fund its potential obligations to AIG, Tradewynd Re Ltd. issued three tranches of notes, one with a one-year term and two with three-year terms.  The transaction provides fully collateralized coverage against losses from the events described above on a per-occurrence basis through December 2015 (on the one-year tranche) and December 2017 (on the three-year tranches). As of January 2015, our outstanding catastrophe bond issuances result in us having $925 million of indemnity reinsurance protection outstanding in the capital markets.

See Item 7. MD&A – Enterprise Risk Management – Insurance Operations Risks – Non-Life Insurance Companies Key Insurance Risks – Reinsurance Recoverable for a summary of significant reinsurers.

REGULATion

Our operations around the world are subject to regulation by many different types of regulatory authorities, including insurance, securities, derivatives, investment advisory and thrift regulators in the United States and abroad.

Our insurance subsidiaries are subject to regulation and supervision by the states and jurisdictions in which they do business.  The insurance and financial services industries generally have been subject to heightened regulatory scrutiny and supervision in recent years.

The following table provides a general overview of our primary regulators and related bodies and a brief description of their oversight with respect to us and our subsidiaries, including key regulations or initiatives that we are currently, or may in the future be, subject to. Such regulations and initiatives, both in the United States and abroad, are discussed in more detail following the table.

Federal Reserve REGULATION AND Supervision

Due to the determination of the Financial Stability Oversight Council (Council) that weAIG should be regulated by the FRB as a nonbank SIFI, pursuant to Section 113 of Dodd-Frank, we have been since July 2013 subject to the FRB’s examination, supervision and enforcement authority, and certain reporting requirements as a nonbank SIFI.requirements. Dodd-Frank requires that the Council reevaluate its determination annually; however, theannually. The Council’s 2014 annual reevaluation didreevaluations to date have not resultresulted in a change to our nonbank SIFI status, and we remain regulated by the FRB.

Dodd-Frank has effected comprehensive changes to However, in light of the regulation of financial servicesrecent change in administration in the United States, there is considerable uncertainty as to the future of federal regulation of nonbank SIFIs. Depending on developments, important elements of AIG’s supervision at the federal level, including those described in this section and subjects us to substantial additional federal regulation.the following section, Other Effects of Dodd-Frank, directs existing and newly-created government agencies and oversight bodies to promulgate regulations implementing the law, an ongoing process that is under way and is anticipated to continue over the next few years.may change significantly.

As a nonbank SIFI, we anticipate we may be subject to:

As required by Dodd-Frank,•stress tests to determine whether, on a consolidated basis, we have the FRB has adopted capital necessary to absorb losses due to adverse economic conditions;

•enhanced prudential standards, (including minimum leverage andincluding new group-wide requirements relating to risk-based capital, requirements, requirementsleverage, liquidity and credit exposure, as well as overall risk management requirements; and

•an early remediation regime process to submit annual capital plans tobe administered by the FRB.

On June 3, 2016, the FRB demonstratingissued for public comment a notice of proposed rulemaking (NPR) on enhanced prudential standards that would require insurer nonbank SIFIs to comply with corporate governance and risk-management standards and liquidity risk management standards.  These proposed standards build on the abilityFRB’s current guidance for large financial institutions supervised by the FRB and have been tailored to satisfyinsurance companies.  The comment period has closed, and we anticipate that the requiredFRB will adopt a final rule in the future after evaluating all comments received. Under the proposal, the insurer nonbank SIFIs would have at least twelve months to comply. 

On June 3, 2016, the FRB released for public comment an advance notice of proposed rulemaking (ANPR) outlining two conceptual insurance group capital ratios under baselineframeworks that could apply to insurance groups supervised by the FRB - a building block approach, proposed for insurance institutions that are savings and stressed conditions, and stress-testing requirements) forloan holding companies or bank holding companies with $50 billion (and in some cases, $10 billion) or more in total consolidated assets and certain foreign banking organizations. The FRBby virtue of owning

•     As a nonbank SIFI, we are currently required to provide on an annual basis (or more frequently, if required) to the FRB and FDICFederal Deposit Insurance Corporation (FDIC) a plan for our rapid and orderly resolution in the event of material financial distress or failure, which must among other things, provide a detailed resolution strategy and analyses of our material entities, organizational structure, interconnections and interdependencies, and management information systems.  We continue to update and refine our resolution plan, which was originally submitted to regulators on July 1, 2014. Our next resolution plan is required to be submitted toIn accordance with an extension of the annual deadline provided by the FRB and FDIC to 38 firms including AIG in 2016, we plan to submit our next resolution plan to regulators on July 1, 2015.December 31, 2017.  If the FRB and FDIC jointly were to determine, based on their review of the plan, that it is not credible or would not facilitate our orderly resolution under Title 11 of the bankruptcy code, theyUnited States Code (the Bankruptcy Code), the FRB and FDIC may require us to re-submit an amended plan.  If the re-submitted plan also failswere to fail to meet regulatory expectations, the FRB and FDIC may exercise their authority under Dodd-Frank to impose more stringent capital, leverage, or liquidity requirements, restrict our growth, activities, or operations, require us to divest assets and operations, or otherwise increase their level of supervision of us.

•     The Council may recommend that state insurance regulators or other regulators apply new or heightened standards and safeguards for activities or practices that we and other insurers or other financial services companies engage in.

•     Title II of Dodd-Frank (Orderly Liquidation Authority) provides that a financial company whose largest United States subsidiary is an insurer (such as us) may be subject to a special resolutionorderly liquidation process outside the federal bankruptcy code.Bankruptcy Code. That process is to be administered by the FDIC upon a coordinated determination bythat the director of the Federal Insurance Office and the FRB, either at the request of the Secretary of the Treasury or on their own initiative, and in consultation with the FDIC, that such a financial company is in default or in danger of default, is not likely to attract private sector alternatives to default and presents a systemic riskis not suitable for resolution under the Bankruptcy Code. Our U.S. insurance subsidiaries, however, would be subject to U.S. financial stability.rehabilitation and liquidation proceedings under state insurance law.

•     Title VII of Dodd-Frank provides for significantly increased regulation of and restrictions on derivatives markets and transactions that have affected and, as additional regulations come into effect, could affect various activities of AIG and its insurance and financial services subsidiaries, including (i) regulatory reporting for swaps (which are regulated by the CFTC) and security-based swaps, (which are regulated by the SEC), (ii) mandated clearing through central counterparties and execution through regulated exchanges or electronicswap execution facilities for certain swaps and security-based swaps and (iii) margin and collateral requirements.  Although the CFTC has not yet finalized certainmany of its requirements, many other requirements have taken effect, such as swap reporting, the mandatory clearing of certain interest rate swaps and credit default swaps, and the mandatory trading of certain swaps on swap execution facilities or exchanges. The SEC has proposed, but not yet finalized,to finalize the majority of rules with respect to certain of the regulations and restrictions noted above governingcomprising its security-based swaps. These regulations have affected and may further affect various activities of AIG and its insurance and financial services subsidiaries as rules are finalized to implement additional elements of theswap regulatory regime.

•Similar regulations have been proposed or adopted outside the United States.  For instance, the EU has also established a set of new regulatory requirements for EU derivatives activities under EMIR. These requirements include, among other things, various risk mitigation, risk management, margin posting and regulatory reporting requirements that have already become effective and clearing requirements that were outlined in EU delegated legislation at the end of 2015 and are expected to become effectivephased in 2015.over three years. These requirements could result in increased administrative costs with respect to our EU derivatives activities and overlapping or inconsistent regulation depending on the ultimate application of cross-border regulatory requirements between and among U.S. and non-U.S. jurisdictions.

•     Dodd-Frank mandated a study to determine whether stable value contracts should be included in the definition of "swap." If that study concludes that stable value contracts are swaps, Dodd-Frank authorizes certain federal regulators to determine whether an exemption from the definition of a swap for stable value contracts is appropriate and in the public interest. Certain of our affiliates

Development has since transferred authority to the CFPB to investigate mortgage insurance practices.jurisdiction. Broker-dealers and investment advisers are not subject to the CFPB's jurisdiction when acting in their registered capacity.

•Title XIV of Dodd-Frank also restricts certain terms for mortgage loans, such as loan fees, prepayment fees and other charges, and imposes certain duties on a lender to ensure that a borrower can afford to repay the loan.

Dodd-Frank imposesauthorizes various assessments on financial companies, including, as applicable to us, fees for our supervision by the FRB and possible assessments to cover the costs of any special resolution of a financial company conducted under Title II (although the regulatory authority would have to take account of the amounts paid by us into state guaranty funds).II.

We cannot predict whether all these actions will become effective or the effect they may have on the financial markets or on our business, results of operations, cash flows, financial condition and credit ratings. However, it is possible that such effect could be materially adverse. See Item 1A. Risk Factors — Regulation for additional information.

Other Regulatory Developments

As described below, AIG has been designated as a Global Systemically Important Insurer (G-SII). 

In addition to the adoption of Dodd-Frank in the United States, regulators and lawmakers around the world are continuing to review the causes of the financial crisis and taking steps to avoid similar problems in the future. In the past few years, a number of jurisdictions in which our subsidiaries conduct business have implemented legislative and regulatory changes consistent with recommendations of the International Monetary Fund and the World Bank, which conduct periodic Financial Sector Assessment Program (FSAP) reviews to measure local regulatory regimes against the standards set by the IAIS. Examples include updated Insurance Company Ordinances in Hong Kong and consolidated regulation of insurance holding companies by the Financial Services Agency in Japan.

The FSB, consisting of representatives of national financial authorities of the G20 nations,countries, has issued a series of frameworks and recommendations intended to produce significant changes in how financial companies, particularly global systemically important financial institutions, should be regulated. These frameworks and recommendations address such issues as systemic financial risk, financial group supervision, capital and solvency standards, systemic economic risk, corporate governance including compensation, and a number of related issues associated with responses to the financial crisis. The FSB has directed the International Association of Insurance Supervisors (the IAIS headquartered in Basel, Switzerland) to create standards relative to many of these areas, and incorporate them within that body’swhich go beyond the IAIS’ basic Insurance Core Principles (ICPs). IAIS’s ICPs form the baseline threshold against which countries’ financial services regulatory efforts in the insurance sector are measured. That measurement is made by periodic Financial Sector Assessment Program (FSAP) reviews conducted by the World Bank and the International Monetary Fund and the reports thereon spur the development of country-specific additional or amended regulatory changes. Lawmakers and regulatory authorities in a number of jurisdictions in which our subsidiaries conduct business have already begun implementing legislative and regulatory changes consistent with these recommendations, including proposals governing consolidated regulation of insurance holding companies by the Financial Services Agency in Japan, financial and banking regulation adopted in France and compensation regulations proposed or adopted by the financial regulators in Germany and the United Kingdom Prudential Regulation Authority.

The FSB has also charged the IAIS with developing a template for measuring systemic risks posed by insurer groups. The IAIS has requested data from selected insurers around the world to determine which elements of the insurance sector, if any, could materially and adversely impact other parts of the global financial services sector (e.g., commercial and investment banking, securities trading, etc.).  The IAIS has provided its assessment template to the FSB.  Based on this assessment template, on July 18, 2013, the FSB, in consultation with the IAIS and national authorities, identified an initial list of G-SIIs, which includes AIG.  G-SIIs will be designated on an annual basis, and AIG was redesignated as a G-SII by the FSB on November 6, 2014.  The IAIS intends G-SIIs to be subject to a policy framework that includes recovery and resolution planning requirements, enhanced group-wide supervision, enhanced liquidity and strategic risk management planning; basic capital requirements and higher loss absorbency (HLA) capital requirements. The IAIS finalized its basic capital requirement (BCR) in October 2014.  The BCR covers all group activities and is required to be reported to national authorities on a confidential basis beginning in 2015.  The BCR will serve as the initial foundation for the application of HLA capital requirements, which the IAIS intends to be calculated in part based on engagement in non-traditional and non-insurance activities. It is expected that the IAIS will develop HLA capital requirements by the end of 2015 and the G-SII policy framework will be fully implemented by 2019.

The IAIS is also developing ComFrame, a Common Framework for the Supervision of Internationally Active Insurance Groups (IAIGs), which includes additional. ComFrame sets out qualitative and quantitative standards in order to assist supervisors in collectively addressing an IAIG’s activities and risks, identifying and avoiding regulatory gaps and coordinating supervisory oversight based on its ICPs but also adds requirements and supervisory processes pertaining to the international business activities of IAIGs.activities.  In connection with ComFrame, the IAIS is in the process of developing a risk-based global insurance capital standard (ICS) applicable to IAIGs.  AsWe currently delineated under ComFrame, AIG meetsmeet the parameters set forth to define an IAIG.  ComFrame requirementsstandards are expected to be finalized in

2018,2019, and the IAIS is conducting a field testing of ComFrame, including the ICS, ahead of that deadline.  It is expected that implementation ofthe ComFrame and ICS standards finally adopted by the ICSIAIS would beginbe ready for adoption by implementing member jurisdictions beginning in 2020.

The IAIS intends G-SIIs to be subject to a policy framework that includes recovery and resolution planning, enhanced group-wide supervision, enhanced liquidity and systemic risk management planning; and group-wide capital standards, including HLA capital. The IAIS’ basic capital requirement (BCR) was endorsed by the FSB in October 2014 and by the G20 countries in November 2014.  The BCR covers all group activities, and we reported our BCR ratios to national authorities on a confidential basis in 2015 and 2016.  The BCR serves as the initial foundation for the application of HLA requirements.  In October 2015, the IAIS announced that it had concluded initial development of the HLA requirements, according to which we reported on a confidential basis to supervisors in 2016. HLA requirements were endorsed by the FSB in September 2015 and by the G20 countries in November 2015. Both the BCR and HLA requirements are calculated for insurance and non-insurance activities.  Ultimately, the G-SII policy framework is expected to be fully implemented by the IAIS by 2019.

The standards discussed above, issued by the FSB and/or the IAIS, are not binding on the United States or other jurisdictions around the world unless and until the appropriate local governmental bodies or regulators adopt appropriate laws and regulations.  At this time it is not known how the IAIS’ frameworks and/or standards might be implemented in the United States and other jurisdictions around the world, or how they might apply to us.