AIG - American International Group

[enoch01]

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?

 

 

Looks like it was kicked out of the DJIA because of it's "effective nationalization".  Not sure if that's the same reason for keeping it out today:

http://www.djindexes.com/mdsidx/html/pressrelease/press_hist2008.html#20080918

 

I'm not sure about S&P 500

[PlanMaestro]

Third Point Joins Blue Ridge, Omega In Bets On AIG

http://www.bloomberg.com/news/2012-08-15/third-point-joins-blue-ridge-omega-in-bets-on-aig.html

 

Cooperman made it one of his largest positions. Blue Ridge's with warrants fourth largest behind Apple, Amazon, and Priceline. Loeb's is only like 1%.

 

And this other guy was buying shares too:

 

Julian Robertson initiated holdings in American International Group, Inc.. His purchase prices were between $27.43 and $34.4, with an estimated average price of $31.13. The impact to his portfolio due to this purchase was 4.7%. His holdings were 523,000 shares as

of 06/30/2012.

[gokou3]

Institutional ownership:

 

Fairholme 88.00 M

Hotchkis & Wiley 16.00

Blue Ridge - John Griffin 10.40

Glenview Capital 9.40

Pzena 8.32

Omega - Leon Cooperman 4.59

Third Point - Daniel Loeb 2.25

Julian Robertson 0.52

 

Total 139.48

% of outstanding 8.5%

 

 

Many on the list are "value investors".  Anyone know about Hotchkis?

[stahleyp]

Hotchkis and Wiley is a value shop, too. They got crushed in the downturn though. By and large, a good track record before that though.

 

Romnick at FPA also has a new position.

[MrB]

ILFC Announces Pricing of $750,000,000 of 5.875% Senior Notes Due 2022 (BSW)

08/16/12 

http://pdf.reuters.com/htmlnews/8knews.asp...

 

LOS ANGELES--(Business Wire)--

International Lease Finance Corporation ("ILFC"), a wholly owned subsidiary of

American International Group, Inc. (NYSE: AIG), announced today that it has

priced, and entered into an agreement to issue and sell, subject to certain

conditions, $750 million aggregate principal amount of 5.875% senior notes due

2022 (the "Notes") pursuant to an effective registration statement filed on July

23, 2012 with the Securities and Exchange Commission.

 

ILFC expects to close the offering on August 21, 2012, subject to the

satisfaction of customary market and other closing conditions.

 

The Notes will be unsecured and will not be guaranteed by ILFC`s parent, any of

ILFC`s subsidiaries or any third party.

 

 

 

[racemize]

Looks like MLIII is closed out after yesterday's sale:

 

http://www.bloomberg.com/news/2012-08-23/aig-gains-as-new-york-fed-ending-62-billion-auction-mortgages.html?cmpid=yhoo

[mankap]

Who could have though couple of years ago that there will be market for ML III.

AIG will additional $1.9B from the remaining ML III sales.They are building up cash for the next treasury sales.

I am hoping that the next tranche sales by treasury will be at least $10B. 

 

[PlanMaestro]

Looks like MLIII is closed out after yesterday's sale:

 

http://www.bloomberg.com/news/2012-08-23/aig-gains-as-new-york-fed-ending-62-billion-auction-mortgages.html?cmpid=yhoo

 

Good profit.

 

AIG has received more than $6 billion in proceeds through July from the auctions and MAY GET ANOTHER $1.9 BILLION this month

[gokou3]

New York Fed Sells Remainder of Maiden Lane III LLC Securities; Marks End of AIG-Related Assistance; Approximately $6.6 Billion Net Gain Generated for U.S. Public from the Portfolio

http://www.newyorkfed.org/newsevents/news/markets/2012/an120823.html

 

The New York Fed’s management of the ML III portfolio will result in a net gain for the benefit of the public of approximately $6.6 billion, including $737 million in accrued interest on the New York Fed’s loan to ML III. 

 

So, if I understand correctly, the 2/3 equity portion of ML3 nets the NYFED 6.6-0.737 = 5.863B, meaning AIG's 1/3 equity portion nets $2.9B.  This is higher than the previous estimate.

[PlanMaestro]

http://www.ft.com/cms/s/0/dfbc99e8-e88d-11e1-8ffc-00144feab49a.html#ixzz24lNbDufr

 

Agricultural economists at the University of Illinois estimate the drought will trigger this year gross indemnities of roughly $30bn, with an underwriting loss of $18bn. Of that, the US government would shoulder around $14bn, while private sector insurers are likely to face a loss of $4bn, they said. Standard & Poor’s, the rating agency, put the losses of the private sector a notch higher at $5bn.

 

“The US drought is indeed a ‘catastrophic’ event,” Gregory W Locraft, insurance analyst at Morgan Stanley in New York, wrote in a recent note to clients, adding that it “is likely the largest [insurance] crop loss in history.”

 

Gary Schnitkey and Bruce Sherrick, at the University of Illinois, warned some of the US crop insurers are owned by publicly listed companies, “who may not have realised the scope of losses that their crop insurance subsidiaries could generate”.

Ace estimates a hit of $268m if its “modelled worst case” of the drought comes to fruition while Munich Re, the world’s biggest reinsurer, estimates costs of €160m.

 

Dom Addesso, president of Everest Re Group, the parent of Heartland Crop Insurance, told investors in a recent conference call that the “the only headwind in the insurance book” of the company right now was “the crop business”.

 

Moody’s, the rating agency, said other insurers with big exposures include QBE, American Financial, Rural Community, part of Wells Fargo, and Fireman’s Fund, part of Allianz. The rating agency warned that smaller insurers focused on agriculture or with businesses concentrated in loss-affected areas, including Rural Community, Farmers Mutual and a subsidiary of John Deere., “appear considerably more vulnerable on a direct basis than their more diversified industry peers”.

 

[MrB]

Asset-Liability Management and Product Pricing In A Low- Interest-Rate Environment

Note: 2004 document

Summary: Interest rates remain low, relative to levels seen over the past 30 years.

As companies have discovered, low interest rates can play havoc on a life insurance

company’s financial statements. Meanwhile, the forward curve is pointing to

continued increases in interest rates over the next few years.

 

 

 

http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=11&cad=rja&ved=0CGkQFjAK&url=http%3A%2F%2Fwww.soa.org%2Flibrary%2Fproceedings%2Frecord-of-the-society-of-actuaries%2F2000-09%2F2004%2Fjune%2Frsa04v30n228pd.aspx&ei=c-M8UIv-Jqza0QXBqIGoBQ&usg=AFQjCNEaHldBhtEOxElZOGgMqPSZDimeRA

[PlanMaestro]

Statistics

 

Overview

http://www.iii.org/facts_statistics/industry-overview.html

http://www.iii.org/facts_statistics/international.html

http://www.iii.org/facts_statistics/insurance-company-rankings.html

http://www.iii.org/facts_statistics/distribution-channels.html

http://www.iii.org/facts_statistics/investments.html

http://www.iii.org/facts_statistics/profitability.html

 

Life/Health Insurance

http://www.iii.org/facts_statistics/life-insurance.html

 

Annuities

http://www.iii.org/facts_statistics/annuities.html

 

P&C Commercial

http://www2.iii.org/commercial-insurance/rankings.html

http://www.iii.org/facts_statistics/property-casualty-insurance-cycle.html

 

Workers Comp

http://www.iii.org/facts_statistics/workplace-safety-workers-comp.html

 

CAT

http://www.iii.org/facts_statistics/catastrophes-global.html

http://www.iii.org/facts_statistics/catastrophes-us.html

 

Mortgage Insurance

http://www.iii.org/facts_statistics/mortgages.html

 

[MrB]

Good links thanks PM

 

Note: If I'm not mistaken then the AIA and government most recent share sale locksups both expired yesterday and with the elections coming up in Nov, I think it makes for an interesting quarter. It's a pity the share price is up 10% since then, which will cost shareholders an extra $50m/$1Bn of buyback and on the last round it would have cost an extra $285m and since shareholders are at least doubling their money with the buybacks, we're talking at least $550m in value which equals a 1% dividend yield. Playing around with the numbers a bit, but every dollar increase in the share price are costing shareholders significant value. 

 

So my Xmas wish: Significant buyback with a low share price.

[valueinvesting101]

How do these buybacks impact strike price for Tarp warrants?

[Mephistopheles]

How do these buybacks impact strike price for Tarp warrants?

 

I'm pretty sure they don't.

[mankap]

There may not be a direct relationship but there can be a indirect impact.Buyback will cause increase in share price which will increase the warrant price.

[mankap]

Bernstein analyst expects $9B buyback by AIG pretty soon.That could mean treasury may sell $18B worth of shares.

Now market expectations are that AIG will announce $9B buyback.If the buyback is announced to be less than $9B than we may see a drop in AIG price.That may provide another opportunity for buying AIG shares.

 

AIG BUYBACK Anticipated and 4 Stock Analyses to Note

By saw1997a . 9 hours ago . Permalink

AIG is believed by Bernstein to be days away from announcing another $9 billion buyback, which may enable the Treasury to lower its stake to 20 percent or lower, and it could result in AIG book value accretion of $69. The firm predicts that this will remove an overhang and that shares will be valued more in-line with other turnaround non-life names. The firm gives AIG an Outperform rating and a $45 price target.

[persistentone]

There may not be a direct relationship but there can be a indirect impact.Buyback will cause increase in share price which will increase the warrant price.

 

Does anyone have a web site that will give a time graph of the AIG warrant price since inception?  Yahoo is limited to five days.

[vpagano]

Correct me if I'm wrong but a 3-year chart on BigCharts should just about do it:

 

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=aigws&insttype=&freq=2&show=&time=10

 

 

[MrB]

There may not be a direct relationship but there can be a indirect impact.Buyback will cause increase in share price which will increase the warrant price.

 

Does anyone have a web site that will give a time graph of the AIG warrant price since inception?  Yahoo is limited to five days.

http://www.investorpoint.com/stock/AIG.WS-American+International+Group+Inc.+Wt+Wi/chart/

[Uccmal]

http://www.bloomberg.com/news/2012-09-06/aig-to-sell-aia-stake-as-ceo-benmosche-seeks-funds-for-buybacks.html

 

The sleeper stock of the season.  They had better move quickly on the buybacks. 

 

We were all expecting BAC to go up fist. 

 

Definitely a UU (unknown and unknowable) situation when Plan Maestro bought it up last winter.  Just read Rick Zeckhauser paper last night. 

[mankap]

I was hoping for a  $9-10B buyback .It is going to be $5B buyback.That could bring down the outstanding to 1.58B.

[racemize]

yeah, Benmoche has been emphasizing that buy backs are not the only capital management they want to do.  Hopefully, they are judging the cash flows right--I was personally hoping for at least one big one, but 5 billion will do I guess.

[theando]

I think the market is slightly "disappointed" in the $5B number vs. 9-10B some were expecting. My take is neutral as they are only selling 25% of AIA, but only at a 2% discount. As long as AIA is performing reasonably well they can leak it out over time without having to take an 8-10%  haircut. I could argue for selling it all, but this seems ok.

 

The real key is ILFC. Can  AIG get that to market quickly. If so that is the game changer to get the rest/a good chunk of the government stake reduced. I think this will be an interesting stock through the election.

[PlanMaestro]

Insurance rates increasing at an accelerated rate and on the right lines.

 

 

The Dallas-based electronic exchange’s property and casualty commercial insurance market barometer puts the composite rate for U.S.-based commercial risks up 5 percent for August. Rates stood up 4 percent for the months of May, June and July of this year.

 

Commercial property rates in the United States were up 7 percent in August—an acceleration from a 6 percent increase seen in July.

 

Workers’ compensation and general liability rates were up 6 percent in August. Rates for directors’ and officers’ liability increased a point to 4 percent from 3 percent in July. Employment practices liability insurance rates held steady up 3 percent.

 

Not all lines saw an uptick in rate increases in August. Commercial auto rates dropped from up 5 percent in July to up 4 percent in August. Rates for umbrella/excess increased 3 percent in August compared to 4 percent in July. 

 

By account size, rates at small and medium accounts were up 5 percent, large accounts were up 4 percent, and jumbo accounts of over $1 million were up 3 percent, says MarketScout.

 

From an industry class perspective, rate increases in August were led by 6 percent hikes in manufacturing and contracting.

 

Looking to personal lines, rates in August this year compared to August last year were up 3 percent—an increase from up 2 percent in July.

 

Insurance on homes valued at above and below $1 million was up 3 percent in August. Auto insurance rates were up 2 percent for the month.