AIG - American International Group

[goldfinger]

Anyone with an FT subscription that can summarize this article? Mine expired. A shame, considering the FT is the best paper in the world.

 

AIG exploring ways back into mortgage market

http://link.ft.com/r/VKY5JJ/WTK7UL/YHFZN/L9L6JI/ZGE8V5/6C/h?a1=2012&a2=4&a3=1

 

“We’re now thinking about maybe we should try to find a way to buy the mortgages that we’re insuring,” said Robert Benmosche, AIG chief executive.

 

The programme and its details are still under consideration, and it would not begin until at least the fourth quarter of this year. AIG would use underwriting tools developed by one of the group’s subsidiaries, United Guaranty Corp, a mortgage insurer, to facilitate investments by other units of the company.

 

“[uGC] not only gives us some nice profit, but it gives us some incredible insight into a major asset,” said Mr Benmosche. “If we’re insuring a first-dollar loss, and we know the quality of what we’re doing, maybe there’s a way of expanding that.”

[Kiltacular]

PlanMaestro,

 

You should be able to view a few articles free every month.  I think the limit is 5.  Not sure.

 

I used to subscribe online.  I still use my old login when asked and have no problem.  When / if I hit the limit, it just lets me know. 

 

Give it a try.

[gokou3]

Anyone with an FT subscription that can summarize this article? Mine expired. A shame, considering the FT is the best paper in the world.

 

AIG exploring ways back into mortgage market

http://link.ft.com/r/VKY5JJ/WTK7UL/YHFZN/L9L6JI/ZGE8V5/6C/h?a1=2012&a2=4&a3=1

 

Is this real or is this one of those April fool's day thing?

 

There's no good or bad asset.  Just good or bad price.  8)

[PlanMaestro]

Rumors about ILFC IPOing in the next few months

 

http://www.reuters.com/article/2012/04/04/aig-ilfc-idUSL2E8F43AF20120404?type=companyNews&feedType=RSS&feedName=companyNews&rpc=43

[gokou3]

Rumors about ILFC IPOing in the next few months

 

http://www.reuters.com/article/2012/04/04/aig-ilfc-idUSL2E8F43AF20120404?type=companyNews&feedType=RSS&feedName=companyNews&rpc=43

 

Another deal in the aircraft leasing business was done earlier this year at 1.04x BV.  Given IFLC's BV of $7.5B, the $8B valuation stated by Bensmoche for ILFC seems not totally out of the ball park.  Perhaps the losing bidders in that deal would be interested in ILFC.

 

http://www.thedeal.com/content/restructuring/sumitomo-mitsui-wins-rbs-aviation-capital.php

[Uccmal]

ILFC

 

I am still trying to figure out how on earth AIG wound up with this business.  Must of been during Greenberg's Buffett phase.  The other thing I cant figure out is how you lose Billions running a leasing business.  Probably best that AIG gets rid of this diworsification.  You would think that the managers would build into their pricing the probability of planes aging and carriers going bankrupt.  They are actuaries after all.

 

 

[txlaw]

ILFC

 

I am still trying to figure out how on earth AIG wound up with this business.  Must of been during Greenberg's Buffett phase.  The other thing I cant figure out is how you lose Billions running a leasing business.  Probably best that AIG gets rid of this diworsification.  You would think that the managers would build into their pricing the probability of planes aging and carriers going bankrupt.  They are actuaries after all.

 

ILFC was a great business over the years.  Al, didn't you work at GE at some point?  They own GECAS because it's a great finance business.  Wilbur Ross is a major shareholder of Air Lease Corp.  I even suggested last year that WEB should consider buying ILFC. 

 

But I'm very happy with AIG spinning off ILFC or selling it outright because I see a more undervalued opportunity right now: AIG common.

[bmichaud]

Perhaps I've missed the explanation, but why the IPO over a tax-free spin?

[PlanMaestro]

ILFC

 

I am still trying to figure out how on earth AIG wound up with this business.  Must of been during Greenberg's Buffett phase.

 

"Fallen Giant" provides a good explanation of what Greenberg liked about ILFC. Excellent book with excellent sources.

[PlanMaestro]

Perhaps I've missed the explanation, but why the IPO over a tax-free spin?

 

Compared to a spin:

 

Cash + tax benefits + well below BV = Treasury common buyback

[PlanMaestro]

"Fallen Giant" provides a good explanation of what Greenberg liked about ILFC. Excellent book with excellent sources.

 

Mistake. The story is in "Fatal Risk". (Tremendous book, very highly recommended)

 

The very opposite of their initial experience with Financial Products in many ways—for starters, Udvar-​Hazy was both courteous and open—there was one area in which ILFC’s business model overlapped. Without an AIG guarantee, business would be much tougher. Granted, ILFC’s leadership had made a handsome go of it without AIG, but funding the business on their own, after the debt-​market tremors in 1989 and 1990, as first Drexel, then the savings-​and-​loan crisis, and finally wide swaths of the commercial real estate market collapsed, proved pretty alarming. Buying $5 billion of aircraft at a clip is not without its risks and Udvar-​Hazy had watched his rivals at GE Aircraft, backed by GE’s triple-​A rating, get leases done on terms that ILFC just couldn’t match.

 

ILFC’s management takeaway was correct: even a well-​run, profitable business like theirs had no guarantee that they could sell debt at the prices where profits could be locked in, or even that they could sell debt at all if markets became troubled. No debt at an aircraft lessor meant little business getting done. The debt markets were not a cruel mistress; they were a bitch. To have to fund a business on debt meant planning for stretches when that funding went away. Selling out was a no-​brainer.

 

AIG couldn’t control the debt markets or what happened to interest rates, but when it wanted money, it got it. Under AIG’s umbrella, Udvar-​Hazy could ensure that business would always get done.

 

In one big area, however, Udvar-​Hazy’s plans put him on an annual collision course with AIG’s financial management. In his perfect world, he would borrow a large percentage of his capital expenditures in the commercial paper market or other short-​term credit markets and pay a sharply lower interest rate, thus ensuring that his spread (what ILFC paid out versus what it charged the airlines they leased to) was maximized. AIG had two beefs with this: The first was that it kept ILFC permanently in the market issuing debt, captive to the appetite of other banks for its obligations. The second was that while funding short worked wonderfully for ILFC as long as rates stayed low, if they went higher they would be forced to scramble to issue debt at higher and higher rates, with no assurance that they could sell the amount they need.

 

AIG counseled (and, occasionally, when the objections got louder, demanded) issuing a larger percentage of ILFC’s funding needs in longer-​maturity obligations to standardize their interest rate expense, in other words, a trade-​off between fatter profits and a more stable funding stream. Udvar-Hazy lost every funding duration battle for the 15 years he dealt with Greenberg, Matthews, and Smith, but as Matthews noted, he was “a smart operator and a very good businessman. By yielding to us, he was putting more in his pocket over the long run.”

 

The only other issue IFLC ran into with AIG was the classic asset-​financing conundrum: with (implied) access to one of the world’s great balance sheets, Udvar-​Hazy felt it was time to get a lot bigger and make up for the contracts they had lost out on. Ed and Hank saw it a little differently. As Ed Matthews recalls it, he would have a conversation every so often with Udvar-​Hazy to the effect of, “If you want to buy more planes, Steve, you’ll have to sell some first.” And he would.

[bmichaud]

Perhaps I've missed the explanation, but why the IPO over a tax-free spin?

 

Compared to a spin:

 

Cash + tax benefits + well below BV = Treasury common buyback

 

I just would think that you could do as follows:

 

1. spin ILFC and avoid the tax hit

2. issue debt under spinco

3. transfer the cash to parent

4. use cash to buyback stock

5. investors now have the option of keeping spinco or selling it and using the proceeds to buy more cheap AIG stock

6. DTAs are preserved for future parent profitability

 

.....

[PlanMaestro]

I just would think that you could do as follows:

 

1. spin ILFC and avoid the tax hit

2. issue debt under spinco

3. transfer the cash to parent

4. use cash to buyback stock

5. investors now have the option of keeping spinco or selling it and using the proceeds to buy more cheap AIG stock

6. DTAs are preserved for future parent profitability

 

.....

 

ILFC is already highly indebted. Not an expert but debt capacity would be one of my concerns.

[mankap]

 

Fed Exploring Sales of Maiden Lane III Assets From AIG Rescue

 

http://www.bloomberg.com/news/2012-04-04/fed-exploring-sales-of-maiden-lane-iii-assets-from-aig-rescue.html

 

Fed has started the process.Let us see what price can they get and how much money AIG will get beyond 7B.

 

The DB analyst had said that he does not think AIG will be able to get IPO for ILFC in 2012.If AIG is able to get the IPO and do some share buyback, the no, of shares can down even less than DB analyst had predicted.

[PlanMaestro]

 

Fed Exploring Sales of Maiden Lane III Assets From AIG Rescue

 

http://www.bloomberg.com/news/2012-04-04/fed-exploring-sales-of-maiden-lane-iii-assets-from-aig-rescue.html

 

Faber on CNBC after breaking the story

http://video.cnbc.com/gallery/?video=3000082433&play=1

 

Everything looks like if the US Treasury wants out before the election

[bmichaud]

I just would think that you could do as follows:

 

1. spin ILFC and avoid the tax hit

2. issue debt under spinco

3. transfer the cash to parent

4. use cash to buyback stock

5. investors now have the option of keeping spinco or selling it and using the proceeds to buy more cheap AIG stock

6. DTAs are preserved for future parent profitability

 

.....

 

ILFC is already highly indebted. Not an expert but debt capacity would be one of my concerns.

 

Makes sense if that's the case then.

[gokou3]

Everything looks like if the US Treasury wants out before the election

 

Looks like that's the case from the recent actions.  With ~$22B of proceeds (est. $8B from AIA, $7.5B from ILFC, and $6.5B from ML3), and not considering this year's $3-4B dividends from the OpCos, they could buy at least half of Treasury's 1.2B shares.

 

Hypothetical example: Current book value is $105B with 1.8B shares.  Assume they get rid of the $22B in assets at BV and buy back 600M shares from UST (@$36.6 /share; being conservative here).  The new book value becomes 105-22 = 83B and the new OS is 1.2B shares.  BVPS = 83/1.2 = $69, a 23% increase from the current $56.

 

Any comments on my calculation?

[treasurehunt]

Looks like that's the case from the recent actions.  With ~$22B of proceeds (est. $8B from AIA, $7.5B from ILFC, and $6.5B from ML3), and not considering this year's $3-4B dividends from the OpCos, they could buy at least half of Treasury's 1.2B shares.

 

Hypothetical example: Current book value is $105B with 1.8B shares.  Assume they get rid of the $22B in assets at BV and buy back 600M shares from UST (@$36.6 /share; being conservative here).  The new book value becomes 105-22 = 83B and the new OS is 1.2B shares.  BVPS = 83/1.2 = $69, a 23% increase from the current $56.

 

Any comments on my calculation?

Book value as of Dec 31 was $105B with 1.9B shares. Since AIG paid 3B to retire 100 million shares, current book value and share count should be $102B and 1.8B. Also, I don't think $36.6 per share for the buyback is conservative. If the market sees a lot of repurchases under book, the share price could easily go over $40. Regardless, book value should be over $65 if AIG manages to use $22B for buybacks.

[berkshiremystery]

 

Federal Reserve Bank of N.Y. Seeks Starr Lawsuit Dismissal

http://www.bloomberg.com/news/2012-04-03/federal-reserve-bank-of-n-y-seeks-starr-lawsuit-dismissal-1-.html

 

Fed Seeks Dismissal of Greenberg's AIG Lawsuit

http://online.wsj.com/article/SB10001424052702304750404577322012572249088.html?mod=googlenews_wsj

 

 

[gokou3]

Looks like that's the case from the recent actions.  With ~$22B of proceeds (est. $8B from AIA, $7.5B from ILFC, and $6.5B from ML3), and not considering this year's $3-4B dividends from the OpCos, they could buy at least half of Treasury's 1.2B shares.

 

Hypothetical example: Current book value is $105B with 1.8B shares.  Assume they get rid of the $22B in assets at BV and buy back 600M shares from UST (@$36.6 /share; being conservative here).  The new book value becomes 105-22 = 83B and the new OS is 1.2B shares.  BVPS = 83/1.2 = $69, a 23% increase from the current $56.

 

Any comments on my calculation?

Book value as of Dec 31 was $105B with 1.9B shares. Since AIG paid 3B to retire 100 million shares, current book value and share count should be $102B and 1.8B. Also, I don't think $36.6 per share for the buyback is conservative. If the market sees a lot of repurchases under book, the share price could easily go over $40. Regardless, book value should be over $65 if AIG manages to use $22B for buybacks.

 

Thanks for the $3B adjustment.  This is one of those times that the longer the stock price stays unchanged, the more it will spring up later.

[PlanMaestro]

Tilson.

 

http://video.cnbc.com/gallery/?video=3000082677&play=1

[txlaw]

Tilson.

 

http://video.cnbc.com/gallery/?video=3000082677&play=1

 

"Playing the theme of the rebound of US financials."  Sigh.

 

What was it that mpauls once said about wanting to throw a shoe at the guy?

[mankap]

Wells Fargo is also raising the earning estimate to 3.38 for 2012.

 

(Once independent from the government), we expect AIG to become an increasingly active capital manager, which could be accretive to its earnings per share and return on equity," Hall said.

According to Thomson Reuters' Starmine data, John Hall is a three-star rated analyst for the accuracy of his earnings estimates on AIG.

Wells Fargo raised its earnings per share estimate for the insurer for 2012 and 2013 to $3.38 and $3.06 respectively.

 

[mankap]

Here is the link

 

http://finance.yahoo.com/news/wells-fargo-upgrades-aig-likely-120258426.html

 

[berkshiremystery]

Wells Fargo upgrades AIG on likely bailout exit

April 10, 2012

 

http://finance.yahoo.com/news/wells-fargo-upgrades-aig-likely-120258426.html