AIG - American International Group

[krazeenyc]

what did buffett say about reputations?

 

http://www.rollingstone.com/politics/blogs/taibblog/aig-ceo-robert-benmosche-compares-bonus-criticism-to-lynch-mobs-20130924

 

It's not politically correct and it's in bad taste (and I think a bad decision).  But if you read the actual interview -- his point was that politicians were trying to put the blame AIG -- and led AIG employees to be unfairly targeted by the public. He was referring to AIG employees getting death threats and in one case he told the story of how a moronic teacher attempted to shame a little girl in front of her peers by saying her father worked at AIG.  Yes it's in poor taste.

[Liberty]

what did buffett say about reputations?

 

http://www.rollingstone.com/politics/blogs/taibblog/aig-ceo-robert-benmosche-compares-bonus-criticism-to-lynch-mobs-20130924

 

It's not politically correct and it's in bad taste (and I think a bad decision).  But if you read the actual interview -- his point was that politicians were trying to put the blame AIG -- and led AIG employees to be unfairly targeted by the public. He was referring to AIG employees getting death threats and in one case he told the story of how a moronic teacher attempted to shame a little girl in front of her peers by saying her father worked at AIG.  Yes it's in poor taste.

 

Indeed, two wrongs don't make a right. 99% of the employees at the company probably had ziltch to do with the financial products unit, and certainly didn't deserve to be treated like criminals for doing their vanilla insurance jobs.

[fareastwarriors]

woo got my dividends today! all these years. wow

[cogitator99]

woo got my dividends today! all these years. wow

 

hahaha

[fareastwarriors]

AIG Talks to Sell ILFC Leasing Unit Said to Be Continuing

 

Discussions Surround Sale of 90% in ILFC for $4.7 Billion

 

http://online.wsj.com/news/articles/SB10001424052702303382004579127221083221930?mod=WSJ_hp_LEFTWhatsNewsCollection

[BargainValueHunter]

http://finance.yahoo.com/news/sterne-agee-analysts-aigs-stock-191141002.html

 

Shares of American International Group Inc. jumped to their highest trading levels since 1985 on Tuesday after The Travelers Companies Inc. reported a better-than-expected third-quarter profits.

[nkp007]

http://finance.yahoo.com/news/sterne-agee-analysts-aigs-stock-191141002.html

 

Shares of American International Group Inc. jumped to their highest trading levels since 1985 on Tuesday after The Travelers Companies Inc. reported a better-than-expected third-quarter profits.

 

That doesn't sound right  :D

[cubsfan]

http://finance.yahoo.com/news/sterne-agee-analysts-aigs-stock-191141002.html

 

Shares of American International Group Inc. jumped to their highest trading levels since 1985 on Tuesday after The Travelers Companies Inc. reported a better-than-expected third-quarter profits.

 

That doesn't sound right  :D

 

It's right if you don't count the 1:20 reverse split..

 

My god, what kind of idiot writes these articles...

 

 

[Guest wellmont]

what he meant to say is AIG is now trading where it traded 28 years ago. the all time high in the shares is somewhere between $2,000 and $2,100.

[Uccmal]

I was just doing some very quick comparisons across the industry. 

 

i.e. Chubb, Markel, Ffh, Mfc, trv, trade in the range of 1.2 -1.5 book

 

Aig could/should be at a minimum of 72 based on peer to peer comparisons. 

[ourkid8]

We still need AIG to spin-off or sell ILFC to improve its credit rating before we will sell at that multiple. This should happen in early 2014!!! I have warrants / options in AIG and it's a fairly large position which has been performing exceedingly well.  Once that is complete, we should see an additional $4-$5B in share repurchase + a further dividendincrease.  lets hope the stock is selling below TBV or book at that time which I doubt it will!

 

Tks,

S

 

I was just doing some very quick comparisons across the industry. 

 

i.e. Chubb, Markel, Ffh, Mfc, trv, trade in the range of 1.2 -1.5 book

 

Aig could/should be at a minimum of 72 based on peer to peer comparisons.

[benchmark]

Any guess? In the mean time, put option expires tomorrow @51 is selling at 50cents, which is tempting....

[fareastwarriors]

3Q

http://www.aig.com/financial-reports_3171_451485.html

 

 

American International Group, Inc. (NYSE: AIG) today

reported net income attributable to AIG of $2.2 billion for the quarter ended September 30,

2013, compared to $1.9 billion for the third quarter of 2012. After-tax operating income

attributable to AIG was $1.4 billion for the third quarter of 2013, compared to $1.6 billion for

the prior-year third quarter. Net income attributable to AIG for the quarter exceeded after-tax

operating income attributable to AIG largely due to valuation allowance releases associated with

deferred tax assets from capital loss carryforwards, partially offset by a $260 million after-tax

increase to litigation reserves related to legacy crisis matters.

 

Diluted earnings per share attributable to AIG were $1.46 for the third quarter of 2013,

compared to $1.13 for the third quarter of 2012. After-tax operating income per share

attributable to AIG was $0.96 for the third quarter of 2013, compared to $0.99 in the third

quarter of 2012.

 

 

Issued $1 billion of senior debt in each of August 2013 and October 2013; redeemed $500

million of debt and repurchased approximately 4 million common shares for an aggregate

purchase price of approximately $192 million in the third quarter of 2013

[zippy1]

declared Dividend $0.1/sh

http://finance.yahoo.com/news/aig-declares-common-stock-dividend-200200329.html

American International Group, Inc. (AIG) today announced that its Board of Directors declared a dividend of $0.10 per share on AIG common stock, par value $2.50 per share. The dividend is payable on Thursday, December 19, 2013, to stockholders of record at the close of business on Thursday, December 5, 2013.

[Cardboard]

Sadly, time for Bob to go...

 

Despite my admiration for the guy and being very grateful for everything he did for AIG, things have deteriorated a fair bit recently.

 

I think it is time for someone to bring AIG to its next phase, a leader that will focus entirely on the future and put its past where it belongs. Bob making the rounds at CNBC and other places following quarterly results and discussing about the last 5 years is no longer helpful. The comment about lynching certainly didn't help his reputation and this Q&A with analyst seemed tense at times.

 

Although, I am sure that he can continue and will drive AIG essentially to the same destination over time, a new leader would change the tone which would improve perception with regulators, politicians and ratings agencies which is crucial in this business. Reflexivity as Soros would say. It would help people forget about AIG's troubled past since that leader would simply stop talking and being asked about it.

 

While I was accused of being "influenced" by share price movements in a previous call for a management change regarding Level 3, in the end I think that I was right. The new leader is entirely focused on driving the business and its showing in results, share price, analyst questions, ratings, etc.

 

Cardboard

[finetrader]

On a day like today it is not a bad idea to add to your position.

 

Insurance (maybe banking also) is the only sector I have find that will thrive in this environment we will be in the next 10 years, which will be one caracterised by rising interest rate. So my plan is to configure my portfolio with a big weighting in insurance stocks and AIG FFH and MFC surely are the ones I'm focused on right now.

 

[racemize]

I just posted this in the other thread, but it seems like it should be in here.  The rising interest rate may change the hopefully conservative assumptions from the below, but I'd be interested in any criticisms of the thought process.

 

At this point, it has to show some decent ROE and earnings--the market is pricing based on earnings power and not multiple of book, which basically means that CR needs to get down to 95% or below to get a premium to book (at least in my opinion). 

 

I still see upside here, but it is no longer the deal that it was--before (similar to BAC) the bet was that they could go from a underperforming/restructuring company to a mediocre company.  We are getting closer to mediocre--now we have to start betting that they can be better than mediocre to have a lot of upside.  That is certainly possible, but it will be difficult for them to have outstanding CRs given their size (perhaps I am wrong here, as I'm not an insurance expert, but it seems reasonable).

 

The bonus here (and this is true for BAC and LUK) is that they won't be paying much taxes, so earnings flow to book value at near pre-tax rates, although this is offset by the fact that the book value already includes DTAs, so one disappears while the other accrues.  In that respect, it is both a headwind and a tailwind!

 

All that said, I'd hope for book value to increase 6-8% a year and that we eventually get to book in a few years.  By 2018 that would be a book value around ~90, from current price of $48, which is ~13% per year.  Unless your assumptions are 1) better or 2) sooner, the expected returns are getting lower than they used to be.  The large margin of safety is starting to deteriorate.

 

As a side note, the returns could be much better if you go with the warrants, using the same assumptions.

 

Edit: There's also of course buy-backs, so if they turn into a good cannibal, and prices stay low, that would be very nice.

[nkp007]

Sadly, time for Bob to go...

 

Despite my admiration for the guy and being very grateful for everything he did for AIG, things have deteriorated a fair bit recently.

 

I think it is time for someone to bring AIG to its next phase, a leader that will focus erntirely on the future and put its past where it belongs. Bob making the rounds at CNBC and other places following quarterly results and discussing about the last 5 years is no longer helpful. The comment about lynching certainly didn't help his reputation and this Q&A with analyst seemed tense at times.

 

Although, I am sure that he can continue and will drive AIG essentially to the same destination over time, a new leader would change the tone which would improve perception with regulators, politicians and ratings agencies which is crucial in this business. Reflexivity as Soros would say. It would help people forget about AIG's troubled past since that leader would simply stop talking and being asked about it.

 

While I was accused of being "influenced" by share price movements in a previous call for a management change regarding Level 3, in the end I think that I was right. The new leader is entirely focused on driving the business and its showing in results, share price, analyst questions, ratings, etc.

 

Cardboard

 

I always thought Bob has a fantastic reputation within the insurance community. I wouldn't want to see him gone.

[krazeenyc]

Sadly, time for Bob to go...

 

Despite my admiration for the guy and being very grateful for everything he did for AIG, things have deteriorated a fair bit recently.

 

I think it is time for someone to bring AIG to its next phase, a leader that will focus entirely on the future and put its past where it belongs. Bob making the rounds at CNBC and other places following quarterly results and discussing about the last 5 years is no longer helpful. The comment about lynching certainly didn't help his reputation and this Q&A with analyst seemed tense at times.

 

Although, I am sure that he can continue and will drive AIG essentially to the same destination over time, a new leader would change the tone which would improve perception with regulators, politicians and ratings agencies which is crucial in this business. Reflexivity as Soros would say. It would help people forget about AIG's troubled past since that leader would simply stop talking and being asked about it.

 

While I was accused of being "influenced" by share price movements in a previous call for a management change regarding Level 3, in the end I think that I was right. The new leader is entirely focused on driving the business and its showing in results, share price, analyst questions, ratings, etc.

 

Cardboard

 

I don't really see what you do. (You very well might be right). I look at insurance companies as having small ups and downs all the time due to the nature of their business -- hard to see most short term results as a big plus or negative. As far as I'm concerned, Bob has done an excellent job turning around AIG (since we have a few years of data).  The only thing that has irked me somewhat is how slow the ILFC sale has gone -- though I'm not sure that is really in anyone's control. But I'd like a resolution soon (wishful thinking).  AIG has been on of my largest positions -- after the previous earnings I've started selling though -- and I've sold 30% of my position at an avg price of appx $51 (i've only sold within non-taxable accts as the taxes would be large due the large gain).  I don't mind slow growth in an insurance company -- in fact -- what scares me is when an insurance company is growing too fast.

[returnonmycapital]

Sadly, time for Bob to go...

 

Despite my admiration for the guy and being very grateful for everything he did for AIG, things have deteriorated a fair bit recently.

 

I think it is time for someone to bring AIG to its next phase, a leader that will focus erntirely on the future and put its past where it belongs. Bob making the rounds at CNBC and other places following quarterly results and discussing about the last 5 years is no longer helpful. The comment about lynching certainly didn't help his reputation and this Q&A with analyst seemed tense at times.

 

Although, I am sure that he can continue and will drive AIG essentially to the same destination over time, a new leader would change the tone which would improve perception with regulators, politicians and ratings agencies which is crucial in this business. Reflexivity as Soros would say. It would help people forget about AIG's troubled past since that leader would simply stop talking and being asked about it.

 

While I was accused of being "influenced" by share price movements in a previous call for a management change regarding Level 3, in the end I think that I was right. The new leader is entirely focused on driving the business and its showing in results, share price, analyst questions, ratings, etc.

 

Cardboard

 

I always thought Bob has a fantastic reputation within the insurance community. I wouldn't want to see him gone.

 

I think Cardboard's comments are more towards perception of the business; more about votes.

 

With regard to weight, the only deterioration that I see is in the returns on the investment book and that is going to remain a problem for all insurers whose investment book is fixed income heavy. Insurance pricing continues to improve, year over year, as it should in a low interest rate environment. And although investments per share and float continue to decline, float is declining faster than investments. I have float at about $39/sh (down $4/sh ytd) and net investments at approx. $89/sh (down $3/sh ytd). Assuming I have done my maths correctly, investments per dollar of equity has increased. It's a small thing but not unwelcome.

 

One would hope that once underwriting gets to a certain level of profitability, AIG can find ways to start growing float. One would also hope that Benmosche has some plans with this in mind. Otherwise, Cardboard's comments do have some weight.

[Guest wellmont]

inclusive of today's drop the stock is up 37% this year. that apparently isn't "enough" in this day and age.

[Guest wellmont]

I just posted this in the other thread, but it seems like it should be in here.  The rising interest rate may change the hopefully conservative assumptions from the below, but I'd be interested in any criticisms of the thought process.

 

At this point, it has to show some decent ROE and earnings--the market is pricing based on earnings power and not multiple of book, which basically means that CR needs to get down to 95% or below to get a premium to book (at least in my opinion). 

 

I still see upside here, but it is no longer the deal that it was--before (similar to BAC) the bet was that they could go from a underperforming/restructuring company to a mediocre company.  We are getting closer to mediocre--now we have to start betting that they can be better than mediocre to have a lot of upside.  That is certainly possible, but it will be difficult for them to have outstanding CRs given their size (perhaps I am wrong here, as I'm not an insurance expert, but it seems reasonable).

 

The bonus here (and this is true for BAC and LUK) is that they won't be paying much taxes, so earnings flow to book value at near pre-tax rates, although this is offset by the fact that the book value already includes DTAs, so one disappears while the other accrues.  In that respect, it is both a headwind and a tailwind!

 

All that said, I'd hope for book value to increase 6-8% a year and that we eventually get to book in a few years.  By 2018 that would be a book value around ~90, from current price of $48, which is ~13% per year.  Unless your assumptions are 1) better or 2) sooner, the expected returns are getting lower than they used to be.  The large margin of safety is starting to deteriorate.

 

As a side note, the returns could be much better if you go with the warrants, using the same assumptions.

 

Edit: There's also of course buy-backs, so if they turn into a good cannibal, and prices stay low, that would be very nice.

 

I see your assumptions that aig would only trade at book value in 4 years and that book will only grow 7% a year as quite pessimistic. This would be my pessimistic case. My base case would be faster bv growth and trading at a premium to book in 5 years. This is a world class insurance company. what you are seeing today is hot money leaving the stock. and that's good. hot money should leave this stock imo. I expect BB to become more vocal about his holding of aig in the coming months.

[plato1976]

The improvement of their casualty insurance business is weaker than I expected

 

I just posted this in the other thread, but it seems like it should be in here.  The rising interest rate may change the hopefully conservative assumptions from the below, but I'd be interested in any criticisms of the thought process.

 

At this point, it has to show some decent ROE and earnings--the market is pricing based on earnings power and not multiple of book, which basically means that CR needs to get down to 95% or below to get a premium to book (at least in my opinion). 

 

I still see upside here, but it is no longer the deal that it was--before (similar to BAC) the bet was that they could go from a underperforming/restructuring company to a mediocre company.  We are getting closer to mediocre--now we have to start betting that they can be better than mediocre to have a lot of upside.  That is certainly possible, but it will be difficult for them to have outstanding CRs given their size (perhaps I am wrong here, as I'm not an insurance expert, but it seems reasonable).

 

The bonus here (and this is true for BAC and LUK) is that they won't be paying much taxes, so earnings flow to book value at near pre-tax rates, although this is offset by the fact that the book value already includes DTAs, so one disappears while the other accrues.  In that respect, it is both a headwind and a tailwind!

 

All that said, I'd hope for book value to increase 6-8% a year and that we eventually get to book in a few years.  By 2018 that would be a book value around ~90, from current price of $48, which is ~13% per year.  Unless your assumptions are 1) better or 2) sooner, the expected returns are getting lower than they used to be.  The large margin of safety is starting to deteriorate.

 

As a side note, the returns could be much better if you go with the warrants, using the same assumptions.

 

Edit: There's also of course buy-backs, so if they turn into a good cannibal, and prices stay low, that would be very nice.

 

I see your assumptions that aig would only trade at book value in 4 years and that book will only grow 7% a year as quite pessimistic. This would be my pessimistic case. My base case would be faster bv growth and trading at a premium to book in 5 years. This is a world class insurance company. what you are seeing today is hot money leaving the stock. and that's good. hot money should leave this stock imo. I expect BB to become more vocal about his holding of aig in the coming months.

[racemize]

I see your assumptions that aig would only trade at book value in 4 years and that book will only grow 7% a year as quite pessimistic. This would be my pessimistic case. My base case would be faster bv growth and trading at a premium to book in 5 years. This is a world class insurance company. what you are seeing today is hot money leaving the stock. and that's good. hot money should leave this stock imo. I expect BB to become more vocal about his holding of aig in the coming months.

 

I agree--if they do return to a world class insurance company (I certainly hope so), then my assumptions would be very pessimistic.  However, I guess my main point is that the requirement for high returns has changed from what it was on the past--when I first invested (apparently at $27, looking back at my records), we just needed to trim the fat, get reserves up, and go from a horrible position, to simply mediocre insurance company. 

 

Now, we can still get adequate returns on the mediocre result (my assumptions above), but the thesis will need to become that they are indeed "world class" to get a lot higher.  At these prices, I still think the optionality is nice, but, say the price was currently 0.8-1.0 of book, it becomes a lot more important to improve beyond mediocre, and that becomes less certain (i.e., we need the CRs to drop significantly in the current rate environment).

 

As disclosure, I still have 19% in common/warrants and am not selling them, so I'm still on board.  However, as the price rises, we lose our margin of safety, and our  requirements for the company's performance will have to increase correspondingly to keep holding. 

[racemize]

The improvement of their casualty insurance business is weaker than I expected

 

Yes, this is my main concern (well P&C lines in general), and why I gave the "pessimistic" assumptions above.  It is easier for me to see how BAC cuts its expenses to get to a decent level of earnings at this point than AIG's need to get the CRs down, particularly given the history of "average" insurers over the past decades.