Uccmal Posted October 12, 2012 Share Posted October 12, 2012 So, using a similar valuation, AIG would be worth 120/share ~ Of course growth matters..... Link to comment Share on other sites More sharing options...
PlanMaestro Posted October 12, 2012 Author Share Posted October 12, 2012 So, using a similar valuation, AIG would be worth 120/share ~ Of course growth matters..... In this case a lot. https://www.bcgperspectives.com/content/articles/insurance_growth_life_insurance_in_asia/#chapter1 http://www.iisonline.org/files/uploads/2011/06/Keith%20Walter%202011%2006%2009.pdf Link to comment Share on other sites More sharing options...
PlanMaestro Posted October 12, 2012 Author Share Posted October 12, 2012 That raises an eyebrow. It's just $1.7 billion in cash, Malaysia has above average growth, and in a distribution business it pays to be #1. Link to comment Share on other sites More sharing options...
mankap Posted October 12, 2012 Share Posted October 12, 2012 I think AIG will delay the sales of AIA stake if Fed does not approve buyback in 2013.This way atleast AIG can participate in the appreciation of AIA price next year. Link to comment Share on other sites More sharing options...
wknecht Posted October 16, 2012 Share Posted October 16, 2012 Just getting up to speed on this thesis, and I'm very interested despite the run up this year. About their reserve adequacy, I'm not an actuary but I did what I think are some fairly standard (and probably simplistic) adequacy calcs using the data disclosed in Schedule P of their annual statement. With the new management, the new actuaries, the reviews, and the relatively recent strengthening, I was somewhat expecting this to invoke a "I wonder how they got such high numbers" type of reaction, but this wasn't the case when using aggressive assumptions (e.g., no losses after 10 years, no explicit consideration of cost inflation). Management has disclaimed the usefulness of the Schedule P data and the additional disclosures for adequacy tests, but they cared enough to add the 20+ pages of disclosures this year. Anyway, this is just one test (attached if anyone is interested) and should be considered in the broader context. I get some of the qualitative points: Since 2006, they've been winding down some of the long-tail lines that have given them headaches in the past Have reinsured asbestos losses with BRK up to $3.5b Large discount to book provides margin for error Management and third-party reviews Some recent strengthening But I'm still not quite comfortable personally given their reserving record. Also, the point of course is for management to be "accurate" (not too conservative) so as to be fair to buyers and sellers. In AIG's case though, the relationship with a large seller is unique, and I'm inclined to think there has been an incentive to make sure the government exits at a profit. Whether this incentive has trickled into a reserve bias (consciously or unconsciously) over the last several years is speculative, but again AIG has historically been "fairer to sellers" even absent this incentive. I saw some good discussion made back in Feb on the board, but I'm curious of folks thoughts on the reserves, particularly if I'm missing some obvious point. Has anyone seen any substantive discussion outside of filings of reserve adequacy by management that they could point me to (or previous discussions on this board I may have missed)?Reserve_rough_estimates.xlsx Link to comment Share on other sites More sharing options...
mrvlad0 Posted October 16, 2012 Share Posted October 16, 2012 Hello All. AIG 2015 LEAPs now available. Link to comment Share on other sites More sharing options...
mankap Posted October 16, 2012 Share Posted October 16, 2012 Thanks WK I do not know if I got it correctly.So you think that they AIG is under reserved by 6% or 13% depending upon which martrix you use. Link to comment Share on other sites More sharing options...
wknecht Posted October 16, 2012 Share Posted October 16, 2012 Thanks WK I do not know if I got it correctly.So you think that they AIG is under reserved by 6% or 13% depending upon which martrix you use. No their numbers are higher by 6%/13% (depending on whether I include/exclude a couple lines where my calcs were dramatically different for some reason). Since I used aggressive assumptions though (tail factor of 1 in row 52), I was expecting their #'s to be quite a bit higher than mine. I haven't defined "quite a bit," but if you play around with the tail factor it doesn't take much for these #'s to increase dramatically. I suppose an additional step in this analysis could be to imply tail factors using AIG & competitor loss experience & reserves for each line, but I didn't get to that point or run other quantitative tests. Definitely I would not substitute #'s, I was just trying to see if they were obviously being conservative which I couldn't tell. This doesn't mean they're not conservative. I wanted to take a look though and get a quantitative data point because the qualitative hasn't quite done it for me yet. Link to comment Share on other sites More sharing options...
racemize Posted October 16, 2012 Share Posted October 16, 2012 The reserve analysis I did a while back showed that they had bolstered previous reserves quite a bit and that the recent reserves weren't changing dramatically over time. I've been assuming that that meant the recent reserves were simply close to accurate and not necessarily overly conservative. I believe Plan has more experience in this area though, so maybe he can jump in. Link to comment Share on other sites More sharing options...
FrankArabia Posted October 17, 2012 Share Posted October 17, 2012 your reserve analysis is nothing but a mathematical exercise. Link to comment Share on other sites More sharing options...
MrB Posted October 17, 2012 Share Posted October 17, 2012 Bernstein does a good job taking a crack at the reserves Link to comment Share on other sites More sharing options...
racemize Posted October 17, 2012 Share Posted October 17, 2012 your reserve analysis is nothing but a mathematical exercise. Not sure what your point is here--I manipulated their triangles and looked at where the changes were occurring and made some other estimations of their lines (e.g., length of tail). This allowed me to see specifically where their reserves had been changing over time, so now I know more information than I did prior to the manipulation. I guess you are implying that isn't analysis? Is adjusting earnings to get owner earnings not some kind of analysis? It is after all, only adding and subtracting numbers... Link to comment Share on other sites More sharing options...
berkshiremystery Posted October 18, 2012 Share Posted October 18, 2012 AIG Warrants Reach 20-Month High as Stock Gains Oct. 17, 2012 http://www.bloomberg.com/news/2012-10-17/aig-warrants-reach-20-month-high-as-stock-gains.html Link to comment Share on other sites More sharing options...
racemize Posted October 18, 2012 Share Posted October 18, 2012 It's starting to feel like it is time for an AIG cheering thread... Link to comment Share on other sites More sharing options...
PlanMaestro Posted October 18, 2012 Author Share Posted October 18, 2012 Even in the sponsoring area they are making the right decisions (die Man U) http://www.youtube.com/AIG?x=us-en_showcase3_55_10 Link to comment Share on other sites More sharing options...
nkp007 Posted October 18, 2012 Share Posted October 18, 2012 It's starting to feel like it is time for an AIG cheering thread... I swear as soon as we start cheering this ship is going to turn around. Let's permanently keep this as an AIG mourning thread. Link to comment Share on other sites More sharing options...
berkshiremystery Posted October 18, 2012 Share Posted October 18, 2012 It's starting to feel like it is time for an AIG cheering thread... Well actually,... I currently get the gut feeling that AIG might be the grape harvest that might mature faster than BAC to intrinsic value. Despite I had a small overhang in BAC at my initial starting weightings in the last year. My first choice was BAC (1)... and thereafter AIG (2). But strangely, I witness in front of my eyes that my AIG matures faster in my portfolio. No wonder,.. Berkowitz had it 1/3 of his fund. Somehow he must have felt that AIG legacy issues compared with BAC's should be earlier left behind. But my full attention is still on BAC through my still bigger portfolio weighting. I look on it like a little kid waiting to open his Christmas present,... and feeling well that my AIG toy train runs securely on autopilot. Link to comment Share on other sites More sharing options...
racemize Posted October 18, 2012 Share Posted October 18, 2012 It's starting to feel like it is time for an AIG cheering thread... I swear as soon as we start cheering this ship is going to turn around. Let's permanently keep this as an AIG mourning thread. you are probably right.. In that case, the treasury will probably keep this down forever! =p. Although, maybe the reserves will come out and kill us all. Link to comment Share on other sites More sharing options...
berkshiremystery Posted October 18, 2012 Share Posted October 18, 2012 Post-AIG derivatives rules drafted by SEC Oct. 17, 2012 http://articles.marketwatch.com/2012-10-17/economy/34513411_1_derivatives-financial-crisis-bank-regulators ----- Swaps Collateral Costs May Increase Under SEC Proposal Oct. 17, 2012 http://www.bloomberg.com/news/2012-10-17/swaps-collateral-costs-may-increase-under-rules-weighed-by-sec.html?cmpid=yhoo Link to comment Share on other sites More sharing options...
txlaw Posted October 18, 2012 Share Posted October 18, 2012 It's starting to feel like it is time for an AIG cheering thread... Well actually,... I currently get the gut feeling that AIG might be the grape harvest that might mature faster than BAC to intrinsic value. Despite I had a small overhang in BAC at my initial starting weightings in the last year. My first choice was BAC (1)... and thereafter AIG (2). But strangely, I witness in front of my eyes that my AIG matures faster in my portfolio. No wonder,.. Berkowitz had it 1/3 of his fund. Somehow he must have felt that AIG legacy issues compared with BAC's should be earlier left behind. But my full attention is still on BAC through my still bigger portfolio weighting. I look on it like a little kid waiting to open his Christmas present,... and feeling well that my AIG toy train runs securely on autopilot. I had the same feeling. They have just less problems to deal with than BAC, and they have had the flexibility to engage in highly accretive capital management. AIG warrants are by far my largest position, and I plan on holding for a long time. Link to comment Share on other sites More sharing options...
benchmark Posted October 18, 2012 Share Posted October 18, 2012 It's starting to feel like it is time for an AIG cheering thread... Well actually,... I currently get the gut feeling that AIG might be the grape harvest that might mature faster than BAC to intrinsic value. Despite I had a small overhang in BAC at my initial starting weightings in the last year. My first choice was BAC (1)... and thereafter AIG (2). But strangely, I witness in front of my eyes that my AIG matures faster in my portfolio. No wonder,.. Berkowitz had it 1/3 of his fund. Somehow he must have felt that AIG legacy issues compared with BAC's should be earlier left behind. But my full attention is still on BAC through my still bigger portfolio weighting. I look on it like a little kid waiting to open his Christmas present,... and feeling well that my AIG toy train runs securely on autopilot. I had the same feeling. They have just less problems to deal with than BAC, and they have had the flexibility to engage in highly accretive capital management. AIG warrants are by far my largest position, and I plan on holding for a long time. Given the recent run up, is AIG still a bargin compare to BAC? Link to comment Share on other sites More sharing options...
racemize Posted October 18, 2012 Share Posted October 18, 2012 I feel like there is more long-term upside on BAC than with AIG, but AIG has less issues to deal with and so may go up sooner, particularly with the final treasury exit coming soon (essentially what txlaw and berkshiremystery just said). Perhaps I'm underestimating AIG's potential in the long term (I have trouble thinking it will go greater than 2 of book by warrant expiry). However, it seems like both should have a jump on the March stress tests. Link to comment Share on other sites More sharing options...
MrB Posted October 18, 2012 Share Posted October 18, 2012 It's starting to feel like it is time for an AIG cheering thread... Well actually,... I currently get the gut feeling that AIG might be the grape harvest that might mature faster than BAC to intrinsic value. Despite I had a small overhang in BAC at my initial starting weightings in the last year. My first choice was BAC (1)... and thereafter AIG (2). But strangely, I witness in front of my eyes that my AIG matures faster in my portfolio. No wonder,.. Berkowitz had it 1/3 of his fund. Somehow he must have felt that AIG legacy issues compared with BAC's should be earlier left behind. But my full attention is still on BAC through my still bigger portfolio weighting. I look on it like a little kid waiting to open his Christmas present,... and feeling well that my AIG toy train runs securely on autopilot. I hear you. Will get more fuzzy with BAC when it starts buying back stock. Give it a few months. At that point I will cheer a low price. Link to comment Share on other sites More sharing options...
mankap Posted October 18, 2012 Share Posted October 18, 2012 Raceme At the time of expiry book will also be up.Even if we assume that the book will be $100 at the expiry of warrants, it could trade at $200. Link to comment Share on other sites More sharing options...
txlaw Posted October 18, 2012 Share Posted October 18, 2012 It's starting to feel like it is time for an AIG cheering thread... Well actually,... I currently get the gut feeling that AIG might be the grape harvest that might mature faster than BAC to intrinsic value. Despite I had a small overhang in BAC at my initial starting weightings in the last year. My first choice was BAC (1)... and thereafter AIG (2). But strangely, I witness in front of my eyes that my AIG matures faster in my portfolio. No wonder,.. Berkowitz had it 1/3 of his fund. Somehow he must have felt that AIG legacy issues compared with BAC's should be earlier left behind. But my full attention is still on BAC through my still bigger portfolio weighting. I look on it like a little kid waiting to open his Christmas present,... and feeling well that my AIG toy train runs securely on autopilot. I had the same feeling. They have just less problems to deal with than BAC, and they have had the flexibility to engage in highly accretive capital management. AIG warrants are by far my largest position, and I plan on holding for a long time. Given the recent run up, is AIG still a bargin compare to BAC? BAC is probably more of a bargain than AIG at this point. However, that could change depending on capital management actions at AIG. Link to comment Share on other sites More sharing options...
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