AIG - American International Group

[MrB]

I think other  reasons for low price is the uncertainty arising from Fed oversight.Once treasury's ownership falls below 50% , Fed oversight will kick in.They will need Fed's approval for buyback and/or dividend.

 

Ben's view - basically just a rehash of info from the CC

http://www.propertycasualty360.com/2012/08/06/aig-says-it-is-preparing-for-regulation?utm_source=PC360DailyeNews&utm_medium=eNL&utm_campaign=PC360_eNLs

[PlanMaestro]

American International Group, Inc. (NYSE: AIG) today announced that the U.S. Department of the Treasury (Treasury) expects to receive an additional $750 million from its underwritten public offering of AIG common stock. The underwriters have exercised their over-allotment option in full to purchase 24,590,164 additional shares of AIG common stock at the public offering price of $30.50 per share.

 

On August 3, 2012, Treasury had priced an offering of 163,934,426 shares of its AIG common stock at the public offering price of $30.50 per share. In connection with Treasurys offering, AIG agreed to purchase 98,360,656 shares of AIG common stock in the offering at the public offering price for an aggregate purchase amount of approximately $3.0 billion. Combined with the exercise of the over-allotment option, Treasurys proceeds from the public offering are expected to be approximately $5.75 billion and the total number of shares sold in the offering is expected to be approximately 188.5 million.

 

The offering is expected to reduce Treasurys remaining investment in AIG to approximately 871.1 million shares of common stock; and reduce Treasurys percentage ownership of AIGs outstanding shares of common stock from 61 percent to approximately 53 percent. When this offering is completed, it is anticipated that Treasury will have sold approximately 784 million shares of AIG common stock since May 2011 for total proceeds of approximately $23.3 billion. Treasury also announced that in addition to principal repayments, the Federal Reserve and Treasury have also received additional income beyond that from interest, fees, and other gains. That additional income beyond principal repayments totals $14 billion, including approximately $13 billion from the Federal Reserves investment and approximately $1 billion from Treasurys investment.

[MrB]

American International Group, Inc. (NYSE: AIG) today announced that the U.S. Department of the Treasury (Treasury) expects to receive an additional $750 million from its underwritten public offering of AIG common stock. The underwriters have exercised their over-allotment option in full to purchase 24,590,164 additional shares of AIG common stock at the public offering price of $30.50 per share.

 

On August 3, 2012, Treasury had priced an offering of 163,934,426 shares of its AIG common stock at the public offering price of $30.50 per share. In connection with Treasurys offering, AIG agreed to purchase 98,360,656 shares of AIG common stock in the offering at the public offering price for an aggregate purchase amount of approximately $3.0 billion. Combined with the exercise of the over-allotment option, Treasurys proceeds from the public offering are expected to be approximately $5.75 billion and the total number of shares sold in the offering is expected to be approximately 188.5 million.

 

The offering is expected to reduce Treasurys remaining investment in AIG to approximately 871.1 million shares of common stock; and reduce Treasurys percentage ownership of AIGs outstanding shares of common stock from 61 percent to approximately 53 percent. When this offering is completed, it is anticipated that Treasury will have sold approximately 784 million shares of AIG common stock since May 2011 for total proceeds of approximately $23.3 billion. Treasury also announced that in addition to principal repayments, the Federal Reserve and Treasury have also received additional income beyond that from interest, fees, and other gains. That additional income beyond principal repayments totals $14 billion, including approximately $13 billion from the Federal Reserves investment and approximately $1 billion from Treasurys investment.

 

AIG participation 52% (3/5.75) which is inline with historical at about 50%. So AIG needs around $13.1Bn to take out government at current prices. From mem...30 lockup for government (early Sep) and AIA lockup expires Sep 4.

[mankap]

Mr B

I agree that AIG may have sufficient capital to buy back 50% of treasury stake.But will the treasury feel confident that they can offload 50% stake in one go in the market.Will the market absorb 50% of treasury stake in one go.If treasury does not feel confident , they may not offload in one step.

[sswan11]

May, 12 Fairholme report is out:

 

http://www.fairholmefunds.com/sites/default/files/352975_051.pdf

 

Our best idea remains AIG common (35% of the Fund) with a reported book value of $57 per share. There are few

occasions when systemically important franchises sell for half of book value and are profitable. This is one of those

times. AIG warrants held by the Fund (another 3% of the Fund) provide the right to 21+ million shares at $45, or

maybe more shares at lower strike prices for the next 34 quarters if dividends above $0.675 per trailing 12-month

period are paid.

Bank of America is the Fund’s next largest financial holding (9% of the Fund) affected by the great housing price

collapse. The company’s reported book value is over $20 per share. We believe that America’s bank is returning to

its retail roots (think of Wells Fargo) with a $1 trillion deposit franchise and that bank profits will skyrocket as

legacy real estate loans burn-off.

 

Long-dated warrants on AIG, Bank of America, Wells Fargo, J.P. Morgan, and Hartford Financial held by the Fund

(in total 16% of the Fund) are unique in that strike prices decline and conversion share amounts increase with

dividends paid above threshold levels. The following table summarizes each warrant’s current strike price and

conversion ratio, expiration date, and quarterly dividend threshold. Estimated returns are attractive, if as assumed

below, underlying common share prices meet book values growing at 10% per annum and exercised shares can be

sold at such prices.

 

Warrant Summary Strike

Shares/

Warrant Expiration

Dividend

Threshold

Theoretical

Return**

 

American International Group $45.00 1.000 1/19/2021 $0.17* 752%

Bank of America Class A $13.30 1.000 1/16/2019 $0.01 592%

Hartford Financial Services Group $ 9.65 1.015 6/26/2019 $0.05 750%

JP Morgan $42.42 1.000 10/28/2018 $0.38 368%

Wells Fargo $34.01 1.000 10/28/2018 $0.34 48%

* Assumes trailing 4-quarter cumulative dividends of 67.5 cents.

 

** There can be no guarantee that these assumptions will occur.

[mysticdrew]

Mr B

I agree that AIG may have sufficient capital to buy back 50% of treasury stake.But will the treasury feel confident that they can offload 50% stake in one go in the market.Will the market absorb 50% of treasury stake in one go.If treasury does not feel confident , they may not offload in one step.

 

I don't think he was implying it to be one step?  Just a matter of how much AIG might likely spend at current prices and current buyback rate and that the next buyback would be soon.

[MrB]

Mr B

I agree that AIG may have sufficient capital to buy back 50% of treasury stake.But will the treasury feel confident that they can offload 50% stake in one go in the market.Will the market absorb 50% of treasury stake in one go.If treasury does not feel confident , they may not offload in one step.

 

I don't think he was implying it to be one step?  Just a matter of how much AIG might likely spend at current prices and current buyback rate and that the next buyback would be soon.

 

Correct, but mankap raises a good point. Probably the most compelling reason Ben has to push for one big buyback is that below 50% he will have to deal with the Fed. Does the election play into it? Maybe. Does it pave the way for Ben to bow out on a high note? Speculative.

 

Not sure if anything else plays into it?

[rranjan]

Mr B

I agree that AIG may have sufficient capital to buy back 50% of treasury stake.But will the treasury feel confident that they can offload 50% stake in one go in the market.Will the market absorb 50% of treasury stake in one go.If treasury does not feel confident , they may not offload in one step.

 

I don't think he was implying it to be one step?  Just a matter of how much AIG might likely spend at current prices and current buyback rate and that the next buyback would be soon.

 

Correct, but mankap raises a good point. Probably the most compelling reason Ben has to push for one big buyback is that below 50% he will have to deal with the Fed. Does the election play into it? Maybe. Does it pave the way for Ben to bow out on a high note? Speculative.

 

Not sure if anything else plays into it?

 

I think before election, we will see a huge offering and big size buyback from AIG. I don't think Government will be totally out but they will have substantially reduced ownership.

[mankap]

I want the next offering to be atleast $10B and not $5B so that AIG can avoid Fed oversight for as long as they can.

AIG has the cash to buy back $5B and market can absorb another $5B .

AIG stock price is way above the treasury's break even threshhold.

We will know at the end of 30 day expiry.

[gokou3]

Another bunch of ML3 assets up for grabs:

http://www.newyorkfed.org/markets/ml3_sec_offerings.html

 

I have been tracking the sales through the NYFed announcements.  After this latest auction, there will be only 4 CDOs remaining with a total face value of $350M.  Anyone else also tracking this can confirm?

 

[PlanMaestro]

Aviva has been looking to sell its US business as part of a broad disposal plan announced last month. At least one large US insurer has been approached on the deal, but declined to make an offer.

 

The US business is valued at £2.4bn on Aviva’s balance sheet after the writedown, although the company would be likely to accept a significantly lower sale price, according to a person familiar with the process.

 

The unit’s strength in annuities - products which can provide retirees with annual cash payments for life regardless of investment performance - may prove a stumbling block to a sale. An executive of the US insurer approached on the deal said: “We don’t like the idea of guaranteeing stock market returns.”

 

The writedown of all goodwill and other intangibles at the US arm “suggests a sale sooner rather than later, which should be viewed as positive”, said Kevin Ryan, an analyst at Investec Securities who has a “buy” recommendation on Aviva shares.

[mankap]

I will prefer AIG buyback shares rather than expand balance sheet.AIG stock is trading at 50% of the book .

Can they buy AVIA assets at 50% of book , probably not

[kevin4u2]

Why is the US government unloading their interest in AIG at ~$30/shr?  I just don't know why they are selling at half of book.  They know the business better than me so what I don't understand is why they would sell at such apparent low prices.  Any help would be appreciated. 

 

Count me late to the party.  I just started reviewing their financials.  I just reviewed their latest 10Q and was impressed with their level of disclosure, particularly on the level 3 assets. 

 

AIG looks interesting but my biggest worry is the fact level 3 assets make up about half of the equity.  Any thoughts?

 

Thanks,

Kevin

[racemize]

As to the 30 dollar buyback, I think they want out as fast as possible, or at least close.  They still have a lot to unload.

[PlanMaestro]

Barron's: The Man Who Saved AIG

http://online.barrons.com/article/SB50001424053111904239304577575214205090528.html?mod=BOL_hpp_mag#articleTabs_article%3D1

 

Jim Millstein, Treasury's Chief Reconstructing Officer: "He fought with me, he fought with Ken. He was the right combination of bull in the china shop and crazy like a fox. Once I sensed he was the right guy, he tortured me. Bob's emotional intelligence is unrivaled, He is by no means short on analytical strengths, but he's a very shrewd evaluator of people."

....

 

Benmosche's personal life remains as complex as his professional one, and he handles both with aplomb. The only sign of anger arises when Barron's asks about a longtime romantic relationship with a former employee, pre-AIG, given the concerns that boards of directors have about executives engaging in inappropriate relationships. Such a relationship "never" affected his work performance, he says, adding, "My personal life is my personal life. I have no further comments to make."

....

 

"This is a growth company," Benmosche asserts. In May of last year, he articulated some "aspirational goals" for AIG: He wants to boost return on equity to 10% by the year ending 2015, from 4.7% now, and get EPS growth into the midteens, from a normalized level of $2.62. Those metrics assume normalized pretax operating income of $4 billion to $5 billion, cost cuts of $1 billion through 2015, and improvements in growth at the Chartis property and casualty and SunAmerica units.

 

 

 

 

 

[mankap]

There is a interview with Benmoche in today's Barron's.Benmoche says that he believes that Govt's full exit is possible by end of 2013.I think he is being conservative .Govt will be out probably much more before end of 2013.

 

These are good times for Benmosche, 68. He recently marked his third anniversary as CEO of AIG. Second-quarter earnings jumped 27%, and last week, the company's largest shareholder, the U.S. government, whittled its stake down to 53%. Benmosche says he believes that a full exit might be possible by the end of 2013. That's an especially impressive feat given that the company was considered toxic as recently as two years ago.

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/aig-american-international-group/640/?action=post;last_msg=82658

[PlanMaestro]

I don't remember seeing this before, Barron's interview with Mark Tucker

 

Barrron's The Striker Scores Again

http://online.barrons.com/article/SB50001424052702304336204576582773433304168.html?mod=BOL_archive_twm_fs#articleTabs_article%3D1

 

Moreover, Asia is underinsured. "The competitive environment is about increasing the size of the insurance pie, not fighting for the next piece of it," Tucker says. "There is plenty for all good companies in the region. We have great opportunities and potential. We are 100% retail and 100% Asia. If you want a pure play on the retail consumer in financial services in Asia, there is no other company."

 

Tucker believes AIA, now the fifth-largest insurer, will one day become the world's biggest.

 

EVEN BEFORE HE BECAME CEO, Tucker had set his sights on AIA, with good reason. It was the model for Prudential's operations in Asia, which Tucker began building just a few years after joining the British insurer (no relation to Prudential Financial of the U.S.), after his first job as an accountant trainee. Tucker instantly saw why it was so successful. AIA was founded in 1919, and had a vaunted sales force that was among Asia's most productive.

....

 

Early in 2010, Tidjane Thiam, Pru's new CEO—and part of the team that analyzed AIA in 2008—decided to try to buy AIA for $35.5 billion. Thiam came under fire for overbidding; in any event, the deal collapsed that June, and cost Pru nearly $650 million in penalties and fees.

 

AIG's only option at that point was to take AIA public. It owed billions to the New York Fed. AIG chief Robert Benmosche needed a new CEO, because AIA's boss had no experience running a public company. Out of the blue, Tucker contacted Benmosche, and at a meeting in Switzerland, AIG's forceful leader was instantly impressed: "He clearly understood we had to transform the system that [had] worked for decades to one that recognized it had matured, the middle class had matured and the middle class had a lot more money. It needed a much more productive, professional agent. And frankly, I needed somebody who was a known figure, who could say to the investing public, 'I know what it takes to build a great company.' "

....

 

The number of AIA Hong Kong agents in the Million Dollar Round Table, an association of top-performing insurance agents, had fallen 50%. Rivals had poached people, and other sales channels were gaining ground, including banks such as HSBC and Standard Chartered, and national behemoths such as Bangkok Life Assurance, China Life and Ping An Insurance. "AIA, now with a new identity, has to put things back on track," says Patricia Cheng, an insurance analyst at CLSA Asia-Pacific Markets in Hong Kong.

....

 

Tucker also rejuvenated management ranks, hiring an array of former Pru colleagues, including Ng Keng Hooi to run Thailand, the Philippines, India and Taiwan; Thanh Phong Huynh to oversee Singapore, Malaysia, Indonesia, Vietnam, India and Brunei; and Bill Lisle as chief distribution officer. Other new managers are helping AIA make inroads into channels such as banks.

 

THE IPO, TUCKER SAYS, "drew a line in the sand between the volatility of the past and the future. It gave agents, customers and employees enormous security on the basis of being in a quoted company that is financially strong and well-placed, and has a terrific brand."

....

 

In the first half of 2011, the value of new business—a metric Tucker likes since it differentiates from legacy business—jumped 32%. Across key markets, agent productivity rose sharply, widening profit margins. In Hong Kong, agent productivity rose 20%; the number of active agents rose 9%. In Thailand, the value of new business jumped 51% and agent productivity by 20%. In China, new business was up 47%, and the number of active agents rose 38%. In Singapore, new business rose 59%. In Malaysia, he joined up with Alliance Bank Malaysia to offer Islamic products. Mostly, though, the units are wholly owned. In Guangzhou, China, where AIA had been losing share, it won the No. 1 position for agency sales from Ping An. As for finances, AIA's solvency ratio—income to debt—is a high 356%. The company has $3.5 billion in cash. In July, it declared its first dividend.

 

AIA's stock could be worth far more that its current price of 22.45 Hong Kong dollars (US$2.88). Assuming capital markets behave themselves and the Chinese economy stays healthy, bulls think it could double in five years.

 

There are challenges ahead, and possible acquisitions. But Tucker has ruled them out for now, saying "organic growth is the path for us." There is plenty of that to be had.

 

 

 

 

 

 

 

[PlanMaestro]

 

AIG unit could be next VA powerhouse

http://www.investmentnews.com/article/20120809/FREE/120809930

 

 

Not all financial advisers remain convinced of the SunAmerica's potential VA firepower. Susan Moore, founder of Moore Wealth Management and an adviser with LPL Financial LLC, for instance, didn't like a rider requirement that 20% of the VA assets be put in a fixed account. “It's really just a stable value account that could dilute returns,” she said.

 

However, observers agree that a combination of strengthened wholesaling efforts, attractive living benefits for customers who want income early in retirement and a massive retrenchment among VA providers puts SunAmerica in the pole position to capture market share.

 

“After the crisis, one thing advisers are looking for is whether you're committed to the space,” said Tamiko Toland, managing director, retirement income consulting at Strategic Insight. “SunAmerica never disappeared, and they see an opportunity with wholesaling talent that's available in order to build a good distribution network.”

 

As market players MetLife and Prudential moderated their VA sales and with companies like Sun Life Financial Inc. and The Hartford Financial Services Group Inc. exiting the product line, SunAmerica had a shot at attracting more wholesalers to its ranks.

 

In early 2009, the company had about 55 wholesalers, and that's expected to be near 100 by the end of 2012, Mr. Maginn said.

....

 

 

The fact that SunAmerica has managed to avoid overloading its books with annuity liabilities is also a strength.

 

“The increase in sales is the result of the execution, plus an environment where they think they can make more money, as opposed to wanting to be No. 1 in market share,” said Mr. Newsome.

 

The insurer doesn't necessarily want to be the number one VA seller, but would be content with a top three or top five placement. As of the first quarter, it was the seventh-largest seller of variable annuities, according to data from LIMRA.

 

“The VA business is only about 10% of the assets at SunAmerica Financial Group and less than 5% of AIG's overall assets,” Mr. Maginn said. “There's a tremendous amount of capacity, but we're growing in a disciplined way.”

 

 

 

[Uccmal]

AIG stock is really on fire.  Did antone expect this yet?  If this keeps up Benmoches share retirement program is going to get much pricier.  He should have held out on the flattering article for a few months.

[nkp007]

AIG stock is really on fire.  Did antone expect this yet?  If this keeps up Benmoches share retirement program is going to get much pricier.  He should have held out on the flattering article for a few months.

 

Luckily we put ourselves in a position where our biggest fear is that AIG can't buy its shares back at a big enough discount.

 

Screw heads we win, tails we don't lose. This is: Heads we win. Tails we win a little less.

[txlaw]

AIG stock is really on fire.  Did antone expect this yet?  If this keeps up Benmoches share retirement program is going to get much pricier.  He should have held out on the flattering article for a few months.

 

Luckily we put ourselves in a position where our biggest fear is that AIG can't buy its shares back at a big enough discount.

 

Screw heads we win, tails we don't lose. This is: Heads we win. Tails we win a little less.

 

Haha, very true.

[fareastwarriors]

Why AIG is still the market's scariest stock

 

http://finance.fortune.cnn.com/2012/08/15/aig-julian-robertson/

[Cardboard]

Just reading the 10Q, there is another $950 million that will be freed up to AIG on Aug 31 from an escrow account that was put in place for the sale of Alico to MetLife.

 

Regarding AIA, what is the latest thinking by AIG management regarding its remaining 19.9% interest? While I like buybacks very much at current level, I would like to retain this investment.

 

Cardboard

[racemize]

Just reading the 10Q, there is another $950 million that will be freed up to AIG on Aug 31 from an escrow account that was put in place for the sale of Alico to MetLife.

 

Regarding AIA, what is the latest thinking by AIG management regarding its remaining 19.9% interest? While I like buybacks very much at current level, I would like to retain this investment.

 

Cardboard

 

I believe they are planning on selling out the rest--at Christmas or so, they were talking about rebuying or selling, and then they started selling. 

[MrB]

Why AIG is still the market's scariest stock

 

http://finance.fortune.cnn.com/2012/08/15/aig-julian-robertson/

 

........AIG shares will reach a tipping point eventually, says Standard & Poor's equity analyst Cathy Seifert, when institutions rush to own them. It may happen when AIG is once again considered for inclusion in a major index like the Dow Jones Industrial Average or the S&P 500, both of which have dozens of exchange-traded-funds and mutual funds tracking their holdings. (It was kicked out of both in 2008.)........

 

So what are the reasons for exclusion? Government ownership? Float?