alertmeipp Posted February 16, 2012 Share Posted February 16, 2012 nice summary on perception vs. reality. I think we will see private investors buying chunks of AIG from the Fed soon. Link to comment Share on other sites More sharing options...
bmichaud Posted February 17, 2012 Share Posted February 17, 2012 Ok I think I have answered my own question regarding dividends and taxes flowing up from the insurance companies. On page 10 of the 1Q2011 CC midway down, the CFO says that the aggregate dividend capacity of the insurance companies is $4.4 billion, and in addition he says, ....in addition to the dividends, importantly, are those tax sharing payments. And so regardless of the rate, there are tax sharing payments that will flow from he operating companies to the holding company, and the holding company will not pay taxes because of our very valuable tax assets. It is slightly confusing because he may mean that the cash flow from the DTA will flow up, NOT regular cash flow to fund the tax liability at the parent. However, I think the fact that he says "regardless of the rate" implies that the $4.4 billion will be an after tax cash flow, which was my original question. So if the dividends are after tax and we capitalize them at 10x, then just the insurance cos are worth $23 per share (asusming 1.9B shares out)and upwards of $33 if one assumes a 10% Ke and 3% GR (I know I said an 8% Ke before, but trying to be more conservative). Regarding where the Maiden Lane portfolios are located. ML 2 is in the SunAmerica portfolio and the income from that portfolio would flow through to the dividend payments (see page 5 of 4Q2010 CC third paragraph up from the bottom). ML 3 is reported in AIG's "Other" segment and the MTM changes in the investment are what flow through into the income statement (see page 4 of 3Q2011 CC four paragraphs down from top). So we are good to go counting the ML 3 investment separately from the insurance company valuation. My major question as of right now is what are they referring to on page 10 of the presentation Plan posted when they indicate "$25 to $30 billion of Capital Management" by 2015? Has a majority of that been accomplished via the various capital management actions taken in 2011 or are those actions yet to come? If the latter, then what are those actions? I haven't yet read the transcript from that presentation so the answer may be in there. Lastly, after reading through several CCs, I am very, very impressed with Peter Hancock. His strategy of "value over volume" and a focus on "risk-adjusted ROE" sounds very similar to WEB's strategy for pricing insurance. I think his risk management background definitely shines through in his commentary, which is super attractive from a shareholder's point of view. At risk of stating the obvious, it appears capital management is going to be very shareholder friendly going forward, with capital being returned to shareholders in a big way if it cannot generate attractive returns. Here is a good interview with Peter: http://www.propertycasualty360.com/2011/09/16/chartis-ceo-charts-a-value-over-volume-course-for Link to comment Share on other sites More sharing options...
PlanMaestro Posted February 17, 2012 Author Share Posted February 17, 2012 My major question as of right now is what are they referring to on page 10 of the presentation Plan posted when they indicate "$25 to $30 billion of Capital Management" by 2015? Has a majority of that been accomplished via the various capital management actions taken in 2011 or are those actions yet to come? If the latter, then what are those actions? I haven't yet read the transcript from that presentation so the answer may be in there. Sorry for not answering bmichaud, taxes is not my strong suit, and thanks for the Peter Hancock interview. Regarding the "Capital Management" issue it is not mentioned in the actual presentation. Benmosche followed his own path that did not necessarily match the backing slides. So we can only speculate. I suspect that some of the subsidiaries divested, including Maiden Lane, were a drag on returns. Also the 1/3 AIA participation is just M2M volatility, because it is not consolidated. I imagine that sooner or later they will have to make a choice: sell it to reduce the government overhang or increase the participation to at least 51%. Results coming February 23th. I suspect Thailand will be horrible. Might be an issue or an opportunity. Link to comment Share on other sites More sharing options...
PlanMaestro Posted February 17, 2012 Author Share Posted February 17, 2012 On the AIA debate: "I don't see us holding a third of the company forever. One of two things is going to happen - either we will monetize that one-third interest in AIA and use it for some other corporate purpose, or in fact if the stars were aligned in a different way , possibly we would want to re-acquire a portion of it." - Miller, AIG director http://www.reuters.com/article/2012/01/26/us-davos-aig-idUSTRE80P1F720120126 So when somebody says to me, why aren't you selling AIA, sell AIA and get rid of that. Well, the problem is, it's not in the shareholder interest right now to do that if all we're going to do is pay down the SPV and give up 5%. We have time, if we do it appropriately, to take this year and to think it through and think about AIA strategically vis-a-vis AIG, and make the right decision at the right time So you heard and seen a lot of publicity on that, and then we can – for example if we can deal with the IPO of ILFC, if that can happen this year and it's enough cash and some other cash comes in, then we have a shot at paying down that amount, then we could think about using the proceeds if we decided to sell AIA potentially for capital management, capital management meaning we could buy some of the overhang from the US Treasury, which would be part of a deal that everyone would be part of if and when the US Treasury decides to do that. - Benmosche http://dl.dropbox.com/u/32606407/AIG_US_2012-02-15_PRESENTATION.pdf <A - Robert H. Benmosche>: What I just said, I think AIA is a position that we have, that's worth about, I don't know, $12 billion to $13 billion on any given day. It's encumbered by the SPV, so if we sell any of AIA, it goes to the SPV; can't be used for any other purpose but the SPV. And so we think it pays to wait, so that at the time we are free to do what we need to do with that position. We would then make – and so I can't tell you until the time comes. If all of a sudden, AIA shares is – there is a cold comes over Asia and AIA is back down to $20 Hong Kong, I mean $20 Hong Kong, yeah. And AIG is sitting at $29, it's going to be pretty tough to want to sell at that point and buy AIG shares, just would be, I think. Then we would have to ask ourselves, what are we going to do with the capital, because we got capital, and so you heard us say that maybe a way to get out of the volatility, because it is volatile, the way you solve that problem is you buy back the 51%. Once you are back to 51%, the volatility goes away. So that's an option. I just don't know, but what we do know is whatever we do do, it will be in the interest of our shareholders. And people say, well, how is the U.S. Treasury going to feel about that? They're a shareholder. Anything we do to drive shareholder value is good for the United States Treasury. They're aligned, they're a shareholder, and you know what, they're a shareholder that wants to get a profit for the American taxpayer. They're not trying to maximize an investment. They don't – they're not worried about capping it out because they think you've peaked. Look, I'd rather have the U.S. Treasury, quite frankly, as our shareholder than some of the activists you read about every day, who decide that we just got to get a return on our investment. We really don't care about your company. One of the things I did learn early on from Wall Street that it's a – it's a very simple rule. All of you in this room are not looking for great companies. You may find one, and that would be wonderful, but it has nothing to do with your decisions. You're looking for a great stock. You want to buy that stock. You want it to go up and when you feel you've gotten enough out of it, you want to get out of it. You are renters; you're not owners. Some of you are, but usually you're an owner because you're trapped. And so, I'm looking and thinking about owners, and I'm thinking about the fact that I want to have a great company, and I have to have a good stock that you all are interested in. But, the U.S. Treasury is an owner, and they want to get out for a profit for the owner being the American public. That's a good place to be, and so I'm glad to have them as a shareholder and there is no problem for the company. - Benmosche http://dl.dropbox.com/u/32606407/AIG_US_2012-02-15_PRESENTATION.pdf Link to comment Share on other sites More sharing options...
racemize Posted February 17, 2012 Share Posted February 17, 2012 Results coming February 23th. I suspect Thailand will be horrible. Might be an issue or an opportunity. From: http://www.chartisinsurance.com/about-us_2112_338130.html Chartis Thailand In Thailand, Chartis has been operating since 1941. Chartis Thailand has 17 nationwide offices with more than 500 professional workers and 3,500 insurance agents who support the steady growth of our business. Our company deals with 340,000 commercial and consumer insurance policy documents which include 3 million clients nationwide. Our financial stability ranks A from Standard and Poor’s (S&P’s) credit rating*. From accounting record at the end of 2010, Chartis Thailand showed 1,373 % or 13.73 times of the Capital Adequacy Ratio (CAR). Considering the new regulation to govern the insurance business which is the Risk Base Capital calculation (RBC), Chartis Thailand possesses 713% of capitals or more than 7.13 times higher than the RBC regulation. Currently our company have more than 4,600 million bahts of capitals and assets.** All of the abovementioned are the crucial confirmation of Chartis Thailand’s financial stability. Chartis Thailand consists of New Hampshire Insurance Company and Chartis Insurance (Thailand) Public Company Limited. I wonder how big it will be. I hate to think too short term on this, but perhaps owning before isn't a good idea... Link to comment Share on other sites More sharing options...
enoch01 Posted February 17, 2012 Share Posted February 17, 2012 Results coming February 23th. I suspect Thailand will be horrible. Might be an issue or an opportunity. From: http://www.chartisinsurance.com/about-us_2112_338130.html Currently our company have more than 4,600 million bahts of capitals and assets.** All of the abovementioned are the crucial confirmation of Chartis Thailand’s financial stability. Chartis Thailand consists of New Hampshire Insurance Company and Chartis Insurance (Thailand) Public Company Limited. I wonder how big it will be. I hate to think too short term on this, but perhaps owning before isn't a good idea... 1 Thai baht = 0.0324 US dollars. A complete wipeout of their "capitals and assets" would be $149 million. Link to comment Share on other sites More sharing options...
racemize Posted February 17, 2012 Share Posted February 17, 2012 perhaps the real issue is business interruption insurance. http://www.bloomberg.com/news/2011-12-08/floods-tsunami-may-dent-black-box-of-supply-chain-insurance.html Coming after record insured losses of about $70 billion from natural disasters in the first half, the Thai floods may push up premiums for business interruption insurance, which is sold by Allianz, American International Group Inc. (AIG) and other firms as an add-on to business-property coverage. Link to comment Share on other sites More sharing options...
PlanMaestro Posted February 17, 2012 Author Share Posted February 17, 2012 perhaps the real issue is business interruption insurance. http://www.bloomberg.com/news/2011-12-08/floods-tsunami-may-dent-black-box-of-supply-chain-insurance.html Coming after record insured losses of about $70 billion from natural disasters in the first half, the Thai floods may push up premiums for business interruption insurance, which is sold by Allianz, American International Group Inc. (AIG) and other firms as an add-on to business-property coverage. Hutchinson Technologies, just one of several HD suppliers, had around $30 million in business interruption claims (not sure with who). I can see why one could wait on buying. I guess I am becoming more of a fundamentalist lately (hehehe): this is not business threatening issue and prices will increase for the stronger. It also depends if it was reinsured. Link to comment Share on other sites More sharing options...
racemize Posted February 17, 2012 Share Posted February 17, 2012 this was big enough the reinsurance kicks in, so it should be limited to those policies anyway. Link to comment Share on other sites More sharing options...
MrB Posted February 23, 2012 Share Posted February 23, 2012 For those that wants to understand "triangle speak", this might help http://investors.progressive.com/pdf/lossreport_0611.pdf Thanks for a great thread Link to comment Share on other sites More sharing options...
racemize Posted February 23, 2012 Share Posted February 23, 2012 Nice post Mr. B. Progressive's triangle looks a ton better than AIG's... I still don't follow the one posted by Vinod (I think). Link to comment Share on other sites More sharing options...
PlanMaestro Posted February 23, 2012 Author Share Posted February 23, 2012 ILFC Closes $900 Million Senior Secured Term Loan http://www.marketwatch.com/story/ilfc-closes-900-million-senior-secured-term-loan-2012-02-23 The loan will bear interest at LIBOR plus 400 basis points with a 1% LIBOR floor, and is priced at 99% of par value. The collateral used to support the transaction has an initial weighted average age of 13.4 years. ILFC plans to use the proceeds to repay a portion of the company's outstanding debt, to pay related fees and expenses for the transaction, and for general corporate purposes. A portion of the proceeds will be used to prepay in full all amounts outstanding under ILFC's secured revolving credit facility, and as a result ILFC no longer has any debt agreements with a change of ownership limitation. PS: thanks MrB Link to comment Share on other sites More sharing options...
racemize Posted February 23, 2012 Share Posted February 23, 2012 looks like a good 4Q, not much details though: http://www.reuters.com/article/2012/02/23/aig-idUSL2E8DNDYW20120223?feedType=RSS&feedName=marketsNews&rpc=43 EDIT better link: http://finance.yahoo.com/news/AIG-Reports-Fourth-Quarter-bw-514712088.html?x=0 Link to comment Share on other sites More sharing options...
PlanMaestro Posted February 23, 2012 Author Share Posted February 23, 2012 Huge tax benefit, for a $10.43 per share EPS for the quarter. On an operating basis, EPS of $0.82. $368 million Thailand hit. $55.33 book value per share. Cannot access the 10K for the details. Link to comment Share on other sites More sharing options...
BargainValueHunter Posted February 23, 2012 Share Posted February 23, 2012 Huge tax benefit, for a $10.43 per share EPS for the quarter. On an operating basis, EPS of $0.82. $368 million Thailand hit. $55.33 book value per share. Cannot access the 10K for the details. Didn't Berkowitz just say that book value "is $45 per share but will soon go to $55"? Link to comment Share on other sites More sharing options...
PlanMaestro Posted February 23, 2012 Author Share Posted February 23, 2012 Didn't Berkowitz just say that book value "is $45 per share but will soon go to $55"? Yep. Hancock said the same thing in December. $105 billion book value. Link to comment Share on other sites More sharing options...
Parsad Posted February 23, 2012 Share Posted February 23, 2012 F**k me! Pardon my french, but I thought they were going to have an average quarter, and I sold some of our AIG warrants because all of the financials have been going up over the last month and I've been cutting back on the exposure a bit. I wanted to keep our BAC and our WFC, so LUK and AIG have been going. Gad almighty! ::) Cheers! Link to comment Share on other sites More sharing options...
PlanMaestro Posted February 23, 2012 Author Share Posted February 23, 2012 Do not worry Parsad. The US Government is in the black again so they will probably announce another sale soon and the fabulous IBs will find a way to push this down. Link to comment Share on other sites More sharing options...
Parsad Posted February 23, 2012 Share Posted February 23, 2012 Actually after reading the press release, I don't feel so bad. Almost $17B was the tax asset release, so while it can be used to offset future income and adds to book, it isn't an actual profit. The actual operations had a pretty decent quarter...a little better than I was expecting. Cheers! Link to comment Share on other sites More sharing options...
PlanMaestro Posted February 23, 2012 Author Share Posted February 23, 2012 Benmosche discussing the results http://video.cnbc.com/gallery/?video=3000074972 Link to comment Share on other sites More sharing options...
PlanMaestro Posted February 23, 2012 Author Share Posted February 23, 2012 2011 2007 billions 64 82 revenues 556 1048 assets 75 163 LT debt 441 942 liabilities 106 104 equity Link to comment Share on other sites More sharing options...
Uccmal Posted February 24, 2012 Share Posted February 24, 2012 Do not worry Parsad. The US Government is in the black again so they will probably announce another sale soon and the fabulous IBs will find a way to push this down. Lets hope so. I sold my 2014s ahead of earnings expecting a Q like FFH had. I am not ready to back up the truck here. I need a few more weeks/months to review. Looks like I will may get it. What makes you think the Fed will be in a hurry? Aside from AIG is not really part of their mandate. Link to comment Share on other sites More sharing options...
PlanMaestro Posted February 24, 2012 Author Share Posted February 24, 2012 What makes you think the Fed will be in a hurry? Aside from AIG is not really part of their mandate. The common shares are owned by the Treasury (TARP). Election year? Link to comment Share on other sites More sharing options...
rranjan Posted February 24, 2012 Share Posted February 24, 2012 Actually after reading the press release, I don't feel so bad. Almost $17B was the tax asset release, so while it can be used to offset future income and adds to book, it isn't an actual profit. The actual operations had a pretty decent quarter...a little better than I was expecting. Cheers! ;D They were not going to have 20B of profit in one Q. If AIG ever makes 20B of profit in one Q in next couple of years then warrants will fly. Link to comment Share on other sites More sharing options...
Cardboard Posted February 24, 2012 Share Posted February 24, 2012 The booking of these tax assets is huge. This was a large disappointment (not being booked) in the last quarter and there was a real risk of these being marked down. How many large financial companies do you know that trade at less than half of tangible book value? How many insurance companies? This thing should trade quite a bit higher from now on. The increase in book value, the hard market, all business doing well and being world class, solid balance sheet, share buybacks and some possibility of financial engineering with non-core assets bodes well. It should be no problem now to find willing buyers for the treasury stake. Even Peter Hancock is very well regarded by Ajit Jain. http://online.wsj.com/article/SB10001424053111904491704576574972537237478.html Cardboard Link to comment Share on other sites More sharing options...
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