plato1976 Posted November 15, 2012 Share Posted November 15, 2012 Hi, Newbie here for the insurance business but found this idea may be very attractive. Trying to understand the life insurance part of AIG. Some very stupid question: Revenue wise, Chartis is almost 3 times the AIG life However, in terms of book value, Chartis is less than 1.5 of AIG life can some veteran here educate me ? Appreciate a lot. Also , the life insurance part seems not a very attractive business - at least now the market thinks so Almost all major life insurance corps are well trading below book - sth like 0.7-0.8 pb or even lower. I just want to quantify if this part will be a drag to AIG 's future growth and valuation Thanks! My first post here, and btw, I was really impressed by the post quality on this forum. Hope I can contribute something material in the future, but now, I am simply a newbie - looking for good ideas here to park some of my cash /Plato1976 Link to comment Share on other sites More sharing options...
Uccmal Posted November 15, 2012 Share Posted November 15, 2012 Hi Plato, I'll leave the book value/ revenue question for someone else since I haven't done such a comparison. Life insurers are trading below book because their earnings are getting squeezed by the falling/low interest rate environment. Many of them made extreme long term guarantees based on historic interest rate normals. During better/normal times their spread is reasonable. Right now the cash they hold, and the longer term treasury rates are too low to provide much wiggle room. Operation twist and such moves to keep money cheap long term aren't helping their cause. P&C isn't doing much better on the interest rate front but their business allows them more chance of price increases, doesn't involve 30'year forward assumptions, and the payouts aren't increasing anymore than inflation rates. Link to comment Share on other sites More sharing options...
PlanMaestro Posted November 15, 2012 Author Share Posted November 15, 2012 Benmosche … again… 34min interview http://www.youtube.com/watch?v=vLEyf79TNVQ&feature=plcp Link to comment Share on other sites More sharing options...
PlanMaestro Posted November 15, 2012 Author Share Posted November 15, 2012 China PICC in talks with AIG as buyer for $4 billion HK IPO http://www.foxbusiness.com/news/2012/11/15/china-picc-in-talks-with-aig-as-buyer-for-4-billion-hk-ipo/#ixzz2CKWIjHZH Link to comment Share on other sites More sharing options...
longlake95 Posted November 16, 2012 Share Posted November 16, 2012 Adding to AIG in little bites, over the past week....oversold. Link to comment Share on other sites More sharing options...
PlanMaestro Posted November 19, 2012 Author Share Posted November 19, 2012 Soros new buy. Largest equity position (5.4%). http://www.sec.gov/Archives/edgar/data/1029160/000101143812000346/form_13f-soros.txt Link to comment Share on other sites More sharing options...
BargainValueHunter Posted November 19, 2012 Share Posted November 19, 2012 http://articles.chicagotribune.com/2012-11-12/business/sns-rt-us-aig-assetsbre8ab0lk-20121112_1_executive-officer-bob-benmosche-aig-systemically-important-financial-institution Even as it looks to sell off the bank, though, one place AIG is bulking up is in mortgages. The company's mortgage insurer, UGC, has become unexpectedly strong in recent years as competitors have faltered due to crisis-era losses. But Benmosche said AIG would like to go even deeper than just insuring home loans. "We are also now looking at ways we could become direct investors in mortgages," he said. "We are going to do more of our own direct lending, both commercially and residentially." AIG's motivation is the same as for many insurers in this persistently low interest rate environment -- yield. With fixed income portfolios struggling, insurers are hungry for even a few extra basis points of relatively safe return. http://research.stlouisfed.org/fred2/graph/fredgraph.png?&id=MBS10Y&scale=Left&range=Max&cosd=2002-12-18&coed=2012-11-07&line_color=%230000ff&link_values=false&line_style=Solid&mark_type=NONE&mw=4&lw=1&ost=-99999&oet=99999&mma=0&fml=a&fq=Weekly%2C+As+of+Wednesday&fam=avg&fgst=lin&transformation=lin&vintage_data-ipsquote-timestamp=2012-11-19&revision_data-ipsquote-timestamp=2012-11-19 Link to comment Share on other sites More sharing options...
MrB Posted November 20, 2012 Share Posted November 20, 2012 See interview with Chartis/P&C CRO on page 35. Gives some insight on the changes. http://www.reactionsnet.com/pdf/CROForum2011.pdf Link to comment Share on other sites More sharing options...
MrB Posted November 21, 2012 Share Posted November 21, 2012 Don't think I've seen it posted here Robert Benmosche Is Pretty Sure People Angry At AIG Re: Bailouts Sit At Home Thinking, “Look at them, with their free EZ Passes” “People are angry because they want to blame somebody else. They don’t take responsibility for their own goddamn lives. ‘I’ve never been promoted, because they don’t like me and there were these guys at AIG, look at them they have free lunches and EZ Pass and look at me I don’t get a free lunch.’ These people make me nuts. Get off your goddamn ass and do something. That’s what the people at AIG did, They picked up their asses and went to work.” http://dealbreaker.com/2012/10/robert-benmosche-thinks-people-angry-at-aig-re-bailouts-sit-at-home-thinking-look-at-them-with-their-free-ez-passes/ Link to comment Share on other sites More sharing options...
PlanMaestro Posted November 21, 2012 Author Share Posted November 21, 2012 Tucker stages dramatic turnround at AIA http://www.ft.com/cms/s/0/c2ed6b20-3136-11e2-bb5e-00144feabdc0.html#ixzz2CsCHbFxN Mr Tucker has led a dramatic turnround via a simple-sounding strategy of boosting profitability through changing products and cutting costs. “It was not an incredible strategic positioning,” he says. “It was an execution . . . focused on doing the right thing in the right way with the right people.” The company has so far managed to beat expectations doing just that, and has been gaining ground on the Pru in terms of new business and profitability. “The key thing has been the margin expansion from 29 per cent in 2009 to 46 per cent now against limited volume growth,” says Mark Kellock at Barclays in Hong Kong. The question now is whether AIA can keep making such gains within the business, or if it can only rely on continued market growth in underinsured Asia or on taking share from others. AIA is the biggest insurer in Asia outside of China by the value of its historic business – its embedded value at nearly $30bn is roughly double the Pru in Asia, according to Morgan Stanley. However, the Pru’s margins are higher on a pan-Asia basis. In top-line growth, too, the UK-listed group is ahead of AIA. The value of the Pru’s new business almost doubled in Asia between 2008 and 2011. Even in Malaysia, AIA’s $1.7bn deal for ING’s business will leave it behind the Pru in terms of new business market share, according to analysts at Credit Suisse. There are gains AIA can make in the redesign of its Korea business and in smaller markets such as Taiwan, Vietnam and Indonesia. But analysts are also focusing on Hong Kong, where the group lacks a bank partner to sell its products. Mr Tucker says he has had conversations with potential partners, but is in no rush to form a tie-up. “I think we don’t rely on that; we can rely on our agency, which is absolutely top quality,” he says. He also says market share in terms of profits is much more important than sales. However, AIA will pass an important milestone this year, with its value of new business set to surpass the $968m recorded in 2008 before the collapse to $566m in 2009. It has added $812m in the first three quarters of this year so far. Link to comment Share on other sites More sharing options...
txlaw Posted November 21, 2012 Share Posted November 21, 2012 So do people want AIG to sell off the remaining portion of AIA and buy back shares, or keep AIA for the long term? Link to comment Share on other sites More sharing options...
JRH Posted November 21, 2012 Share Posted November 21, 2012 So do people want AIG to sell off the remaining portion of AIA and buy back shares, or keep AIA for the long term? I want Benmosche and his capital allocation team to make an informed and pragmatic decision with a long-term focus on my behalf! ;) Link to comment Share on other sites More sharing options...
MrB Posted November 21, 2012 Share Posted November 21, 2012 I understand that Ben's mind is made up about selling out of AIA. I prefer to get out of life and into P&C, which is a simpler business. This might be happening with AIG currently increasing its already sizable investment in PICC. Link to comment Share on other sites More sharing options...
txlaw Posted November 21, 2012 Share Posted November 21, 2012 So do people want AIG to sell off the remaining portion of AIA and buy back shares, or keep AIA for the long term? I want Benmosche and his capital allocation team to make an informed and pragmatic decision with a long-term focus on my behalf! ;) Indeed. But what do you think is the correct decision at this point in time? Link to comment Share on other sites More sharing options...
txlaw Posted November 21, 2012 Share Posted November 21, 2012 I understand that Ben's mind is made up about selling out of AIA. I prefer to get out of life and into P&C, which is a simpler business. This might be happening with AIG currently increasing its already sizable investment in PICC. I agree. Link to comment Share on other sites More sharing options...
PlanMaestro Posted November 21, 2012 Author Share Posted November 21, 2012 I understand that Ben's mind is made up about selling out of AIA. I prefer to get out of life and into P&C, which is a simpler business. This might be happening with AIG currently increasing its already sizable investment in PICC. Our opinion does not matter much and we have to rely on BB's team. For what is worth, life insurance for middle-income countries is a tremendous simple business if you are not writing guarantees. Plus, AIA is the cream of the crop. I'm conflicted, I never liked activist investors that are quick on the trigger for a 5% gain in book value. I much rather see them get rid of ILFC. Now, if Pru wants to pay a big premium. Miller and BB commented on these issues a while back. http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/aig-american-international-group/msg69288/?topicseen#msg69288 Link to comment Share on other sites More sharing options...
JRH Posted November 21, 2012 Share Posted November 21, 2012 So do people want AIG to sell off the remaining portion of AIA and buy back shares, or keep AIA for the long term? I want Benmosche and his capital allocation team to make an informed and pragmatic decision with a long-term focus on my behalf! ;) Indeed. But what do you think is the correct decision at this point in time? From my somewhat naive point of view, it looks like a good idea to sell AIA and buy back shares. But it's a debate that needs to be settled by looking at the IRR of both options. AIA seems to have a huge, long-term demographic tailwind and a capable CEO; the IRR on the share buyback really depends on how quickly AIG can increase their ROE going forward. How's that for another non-answer? Link to comment Share on other sites More sharing options...
FrankArabia Posted November 21, 2012 Share Posted November 21, 2012 buying back shares at under tangible book makes sense as long as they believe the numbers... my big concern amongst many are why insiders hold so little shares. Link to comment Share on other sites More sharing options...
MrB Posted November 21, 2012 Share Posted November 21, 2012 buying back shares at under tangible book makes sense as long as they believe the numbers... my big concern amongst many are why insiders hold so little shares. I take some comfort from the way their incentives are structured. The proxy is well worth a read. There looks to be a lot in the AIA price at the moment, which supports an argument of selling and buying back shares. However, Ben is focused on increasing the coverage ratio now, which I'm ok with. A bit like BAC strengthening the balance sheet rather than buying back stock. So sell AIA and restructure/pay down debt and invest in the business to get operating profits up. I don't like life anyway, so I'm biased. However, if you are selling life insurance and related products you want to do it in a young growing population, not in a place like Japan. I think AIA is more a case of the former. Also Ben is a Life man. All in all, they are probably being squeezed out of life because of circumstances more than anything else. It suits me just fine. Link to comment Share on other sites More sharing options...
Guest rimm_never_sleeps Posted November 21, 2012 Share Posted November 21, 2012 lots and lots of pretty hard headed investors getting involved in aig right now as government gets out. these investors increasingly are going to have more of a say in what AIG is going to do to increase shareholder value. After all BB does not own a lot of stock. These new investors are going to want a return on their money and will likely want a more aggressive value creation initiative. Link to comment Share on other sites More sharing options...
PlanMaestro Posted November 22, 2012 Author Share Posted November 22, 2012 AIG, PICC Group ink JV to sell life insurance in China http://news.yahoo.com/aig-picc-group-ink-jv-sell-life-insurance-014347123--finance.html Link to comment Share on other sites More sharing options...
MrB Posted November 23, 2012 Share Posted November 23, 2012 Hi, Newbie here for the insurance business but found this idea may be very attractive. Trying to understand the life insurance part of AIG. Some very stupid question: Revenue wise, Chartis is almost 3 times the AIG life However, in terms of book value, Chartis is less than 1.5 of AIG life can some veteran here educate me ? Appreciate a lot. Also , the life insurance part seems not a very attractive business - at least now the market thinks so Almost all major life insurance corps are well trading below book - sth like 0.7-0.8 pb or even lower. I just want to quantify if this part will be a drag to AIG 's future growth and valuation Thanks! My first post here, and btw, I was really impressed by the post quality on this forum. Hope I can contribute something material in the future, but now, I am simply a newbie - looking for good ideas here to park some of my cash /Plato1976 Link to comment Share on other sites More sharing options...
mrvlad0 Posted November 27, 2012 Share Posted November 27, 2012 Beyond the Turnaround at AIG www.institutionalinvestor.com/Article/3118378/Beyond-the-Turnaround-at-AIG.html Benmosche: In another three years we will again be the largest insurance company in the world by market cap Berkowitz predicts the share price will rise to $70 next year as the government exits the company and Benmosche’s team continues to bolster the bottom line. Link to comment Share on other sites More sharing options...
glider3834 Posted November 27, 2012 Share Posted November 27, 2012 Berkowitz is right - AIG is undervalued & is also my largest portfolio holding. Ben Benmosche has done an amazing job - he is an incredible guy who hasn't let personal health challenges stop him from leading AIG out of a difficult & challenging period. The insights on Peter Hancock's work at Chartis were illuminating - the use of analytics , targeting emerging market growth sectors, using internet & online distribution methods more, focusing more consumer insiurance segments - all good stuff. Sun America's (& Chartis) challenges on the earnings side are a problem thoughout the insurance industry - ultimately if insurers can't earn their investment returns, premiums will have to go up for P&C & Life policies. Link to comment Share on other sites More sharing options...
jay21 Posted November 27, 2012 Share Posted November 27, 2012 How are people getting comfort over a valuation of book value for AIG? What are the current and expected ROE's of the operating segments? Link to comment Share on other sites More sharing options...
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