AIG - American International Group

[myvalueedge]

mrvlad0, thanks for the link.

 

zippy1 - similar problem...largest holding suing my second largest holding. 

[dcollon]

An Open Letter to Bob Benmosche by Todd Sullivan (Seeking Alpha)

 

http://seekingalpha.com/article/1320881-an-open-letter-to-bob-benmosche?source=email_rt_article_title

 

[muscleman]

http://usmarketbuzz.com/hpq-big-news-hewlett-packard-company-nysehpq-american-international-group-inc-nyseaig-3185#

 

Seriously? Is this a big news or not so big? The market on April 5th opened much lower that day, but I don't understand why. Maybe there are other big news?

[Liberty]

Closed above 40 for the first time since early 2011. Warrants up almost 6% too.

 

Hopefully they get a chance to do buybacks before the price runs up too much...

[muscleman]

Closed about 40 for the first time since early 2011. Warrants up almost 6% too.

 

Hopefully they get a chance to do buybacks before the price runs up too much...

 

Right. I hope I had bought more but now I think there is probably no longer such a chance. :(

 

[Liberty]

The Greenberg saga continues:

 

http://www.reuters.com/article/2013/04/08/us-aig-greenberg-idUSBRE9370QC20130408

[bmichaud]

An Open Letter to Bob Benmosche by Todd Sullivan (Seeking Alpha)

 

http://seekingalpha.com/article/1320881-an-open-letter-to-bob-benmosche?source=email_rt_article_title

 

Thank you Todd - very insightful and original  :P

[Vish_ram]

In AIG-WT prospectus I noticed this

 

"The Dividend Threshold Amount is subject to adjustment on a proportional basis whenever the

exercise price is adjusted, provided that no adjustment will be made to the Dividend Threshold

Amount for any adjustment made to the exercise price pursuant to this paragraph (4)."

 

Am I reading it right that the dividend threshold of $.675 also will get adjusted? I've not seen anyone else talk about this.

[racemize]

In AIG-WT prospectus I noticed this

 

"The Dividend Threshold Amount is subject to adjustment on a proportional basis whenever the

exercise price is adjusted, provided that no adjustment will be made to the Dividend Threshold

Amount for any adjustment made to the exercise price pursuant to this paragraph (4)."

 

Am I reading it right that the dividend threshold of $.675 also will get adjusted? I've not seen anyone else talk about this.

 

That sounds like it is talking about cases where you have splits/reverse splits (so that the threshold is also changed).  The paragraph (4) exclusion is for when the strike price is adjusted based on a dividend over the threshold.

[stahleyp]

http://buzz.money.cnn.com/2013/04/09/aig-stock/?iid=HP_LN

 

 

Popular press is picking it up. We'll see what happens next.

[deadspace]

ROE 10%

 

For me the key to this investment lies in management's  goals of 10% ROE.  If this can happen with consistency then this is worth book value.  If they can grow earnings beyond 10% per year it may be worth much more

 

Problem is the float is only going to earn 1% in this interest rate environment - so how do we get to 10% ROE with a float making 1% for the foreseeable future and beyond

 

ANy takers on this question?

[biaggio]

$10 of float and assets for every $1 of equity?

 

last time I looked equity /capital was at 15%

 

 

[Guest wellmont]

ROE 10%

 

For me the key to this investment lies in management's  goals of 10% ROE.  If this can happen with consistency then this is worth book value.  If they can grow earnings beyond 10% per year it may be worth much more

 

Problem is the float is only going to earn 1% in this interest rate environment - so how do we get to 10% ROE with a float making 1% for the foreseeable future and beyond

 

ANy takers on this question?

 

the valuation period of a stock begins tomorrow and goes to doomsday. if you believe that we are in for 1% rates till doomsday then you certainly don't want to own most insurance companies. if you believe the world may revert to the mean someday, or even overshoot, then this one may pique your interest.

[JRH]

the valuation period of a stock begins tomorrow and goes to doomsday. if you believe that we are in for 1% rates till doomsday then you certainly don't want to own most insurance companies. if you believe the world may revert to the mean someday, or even overshoot, then this one may pique your interest.

 

I might offer the alternative possibility that the insurance pricing cycle (though obviously its own thing in the short term) revolves loosely around a profitability target, NOT an absolute ROA.  The implications if I am correct are that low rates would not permanently prevent a reversion to historical profitability.  Insurance would eventually just reprice higher.  Obviously this affects the short term vs. long term policies in drastically different ways.

 

EDIT: Probably the trickier thing to separate here is whether low rates are necessarily the effect of a surplus of liquidity, which will chase returns in all forms and reduce yields and spreads alike.  In that case, ROE could definitely remain pressured indefinitely.

[Uccmal]

At this time AIG is a return to value story for me.  I will reassess its long term potential at $55.00.

 

40 to 55 > 300,000 in profits for me.

 

Will worry about the other metrics when these numbers are reached.

[deadspace]

 

 

the valuation period of a stock begins tomorrow and goes to doomsday. if you believe that we are in for 1% rates till doomsday then you certainly don't want to own most insurance companies. if you believe the world may revert to the mean someday, or even overshoot, then this one may pique your interest.

 

Fair enough but If the achievement of ROE of 10% and therefore a price to book value of 1  is dependent on return of higher interest rates and IF this does not occur for 10 years the common will not turn out to be a very good investment at all - the warrants which are on an 8 year time line would be a disaster...

[MrB]

 

 

the valuation period of a stock begins tomorrow and goes to doomsday. if you believe that we are in for 1% rates till doomsday then you certainly don't want to own most insurance companies. if you believe the world may revert to the mean someday, or even overshoot, then this one may pique your interest.

 

Fair enough but If the achievement of ROE of 10% and therefore a price to book value of 1  is dependent on return of higher interest rates and IF this does not occur for 10 years the common will not turn out to be a very good investment at all - the warrants which are on an 8 year time line would be a disaster...

 

Don't ignore buybacks

[deadspace]

the valuation period of a stock begins tomorrow and goes to doomsday. if you believe that we are in for 1% rates till doomsday then you certainly don't want to own most insurance companies. if you believe the world may revert to the mean someday, or even overshoot, then this one may pique your interest.

 

I might offer the alternative possibility that the insurance pricing cycle (though obviously its own thing in the short term) revolves loosely around a profitability target, NOT an absolute ROA.  The implications if I am correct are that low rates would not permanently prevent a reversion to historical profitability.  Insurance would eventually just reprice higher.  Obviously this affects the short term vs. long term policies in drastically different ways.

 

EDIT: Probably the trickier thing to separate here is whether low rates are necessarily the effect of a surplus of liquidity, which will chase returns in all forms and reduce yields and spreads alike.  In that case, ROE could definitely remain pressured indefinitely.

 

JRH that is an interesting concept.  If low rates are the result of increase liquidity and yields are being reduced everywhere because of low rates then one would argue that investors would be happy to pay book value even for ROE of 5%

[kevin4u2]

the valuation period of a stock begins tomorrow and goes to doomsday. if you believe that we are in for 1% rates till doomsday then you certainly don't want to own most insurance companies. if you believe the world may revert to the mean someday, or even overshoot, then this one may pique your interest.

 

I might offer the alternative possibility that the insurance pricing cycle (though obviously its own thing in the short term) revolves loosely around a profitability target, NOT an absolute ROA.  The implications if I am correct are that low rates would not permanently prevent a reversion to historical profitability.  Insurance would eventually just reprice higher.  Obviously this affects the short term vs. long term policies in drastically different ways.

 

EDIT: Probably the trickier thing to separate here is whether low rates are necessarily the effect of a surplus of liquidity, which will chase returns in all forms and reduce yields and spreads alike.  In that case, ROE could definitely remain pressured indefinitely.

 

JRH that is an interesting concept.  If low rates are the result of increase liquidity and yields are being reduced everywhere because of low rates then one would argue that investors would be happy to pay book value even for ROE of 5%

 

And the Dow would be at 30000.

[gokou3]

 

 

the valuation period of a stock begins tomorrow and goes to doomsday. if you believe that we are in for 1% rates till doomsday then you certainly don't want to own most insurance companies. if you believe the world may revert to the mean someday, or even overshoot, then this one may pique your interest.

 

Fair enough but If the achievement of ROE of 10% and therefore a price to book value of 1  is dependent on return of higher interest rates and IF this does not occur for 10 years the common will not turn out to be a very good investment at all - the warrants which are on an 8 year time line would be a disaster...

 

I think (or hope) the premium increases will help offset the low interest rates.

[JRH]

the valuation period of a stock begins tomorrow and goes to doomsday. if you believe that we are in for 1% rates till doomsday then you certainly don't want to own most insurance companies. if you believe the world may revert to the mean someday, or even overshoot, then this one may pique your interest.

 

I might offer the alternative possibility that the insurance pricing cycle (though obviously its own thing in the short term) revolves loosely around a profitability target, NOT an absolute ROA.  The implications if I am correct are that low rates would not permanently prevent a reversion to historical profitability.  Insurance would eventually just reprice higher.  Obviously this affects the short term vs. long term policies in drastically different ways.

 

EDIT: Probably the trickier thing to separate here is whether low rates are necessarily the effect of a surplus of liquidity, which will chase returns in all forms and reduce yields and spreads alike.  In that case, ROE could definitely remain pressured indefinitely.

 

JRH that is an interesting concept.  If low rates are the result of increase liquidity and yields are being reduced everywhere because of low rates then one would argue that investors would be happy to pay book value even for ROE of 5%

 

And the Dow would be at 30000.

 

Yep, in the extreme, basically what I was imagining. Easier to buy the argument if it is just happening to a fraction of that degree.

[deadspace]

the valuation period of a stock begins tomorrow and goes to doomsday. if you believe that we are in for 1% rates till doomsday then you certainly don't want to own most insurance companies. if you believe the world may revert to the mean someday, or even overshoot, then this one may pique your interest.

 

I might offer the alternative possibility that the insurance pricing cycle (though obviously its own thing in the short term) revolves loosely around a profitability target, NOT an absolute ROA.  The implications if I am correct are that low rates would not permanently prevent a reversion to historical profitability.  Insurance would eventually just reprice higher.  Obviously this affects the short term vs. long term policies in drastically different ways.

 

EDIT: Probably the trickier thing to separate here is whether low rates are necessarily the effect of a surplus of liquidity, which will chase returns in all forms and reduce yields and spreads alike.  In that case, ROE could definitely remain pressured indefinitely.

 

JRH that is an interesting concept.  If low rates are the result of increase liquidity and yields are being reduced everywhere because of low rates then one would argue that investors would be happy to pay book value even for ROE of 5%

 

And the Dow would be at 30000.

 

Yep, in the extreme, basically what I was imagining. Easier to buy the argument if it is just happening to a fraction of that degree.

 

Problem here is if interest rates go up then AIG can increase earnings from investment and ROE so theoretically the stock price should move higher but yield premiums would readjust to move all stocks PE lower - if interest rates stay down well then there is little hope to improve ROE beyond 5-6% so AIG stock price stays down at 60% of book.  But whats wrong with 6% ROE in a 0% interest environment ?  Why should that not be worth book value.  Why do we assume that you need 10% ROE to go for book value.  People talk about investors expectations for 10% returns in financial stocks so 10% ROE will equate to 1x book....  That 10% figure may have been true in a 5% interest rate environment but why should  it still be true in a 0% environment ?

[Liberty]

http://www.reuters.com/article/2013/04/19/us-aig-bankofamerica-lawsuit-idUSBRE93I0K920130419

 

American International Group Inc (AIG.N) won a legal victory over where its $10 billion mortgage fraud lawsuit against Bank of America Corp (BAC.N) should be heard, a two-year-old case that has largely been on hold because of the dispute over venue.

 

The 2nd U.S. Circuit Court of Appeals on Friday agreed with AIG that the case belongs in state court, not federal court as Bank of America preferred.

[Liberty]

Hitting 100+ weeks high, warrant is as high as it has ever been. No big news that I can see, except some speculation that a dividend is coming.

 

http://www.bloomberg.com/news/2013-04-24/aig-extends-rally-on-dividend-speculation.html

 

I hope they won't, and will instead keep buying expensive debt and resume big buybacks.

[wescobrk]

JRH that is an interesting concept.  If low rates are the result of increase liquidity and yields are being reduced everywhere because of low rates then one would argue that investors would be happy to pay book value even for ROE of 5%

 

And the Dow would be at 30000.

 

Yep, in the extreme, basically what I was imagining. Easier to buy the argument if it is just happening to a fraction of that degree.

 

Problem here is if interest rates go up then AIG can increase earnings from investment and ROE so theoretically the stock price should move higher but yield premiums would readjust to move all stocks PE lower - if interest rates stay down well then there is little hope to improve ROE beyond 5-6% so AIG stock price stays down at 60% of book.  But whats wrong with 6% ROE in a 0% interest environment ?  Why should that not be worth book value.  Why do we assume that you need 10% ROE to go for book value.  People talk about investors expectations for 10% returns in financial stocks so 10% ROE will equate to 1x book....  That 10% figure may have been true in a 5% interest rate environment but why should  it still be true in a 0% environment ?"

 

I know this is an AIG thresd, but If that's the case, BAC should be at 20 before year end.