AIG Offers Cash Buyout For 21st Century

Insurance conglomerate AIG has offered to buy out the remaining 38.1% of 21st Century public shares it doesn't already own at $19.75/share in cash or $690 million, a 19% premium to yesterday's price. AIG says it is offering a "full and fair value" (at 19.6 P/E) for the outstanding shares, and that it won't sell off 21st century, because its direct personal auto insurance business is one AIG "knows well" and wants to expand into. Bank of America insurance analyst Tamara Kravec recently said insurers like AIG had a banner year due to good weather, so AIG looks to be using its windfall for acquisitions in the U.S. and in Europe: An AIG subsidiary signed an IT agreement yesterday with Accenture to expand property and casualty businesses in Europe. Cliff Gallant of Keefe Bruyette & Woods said that despite strong earnings, he's not recommending personal auto insurers because a potential price war could impact future earnings.

• Sources: Reuters.com; The Street;MarketWatch; Houston Chronicle (I, II); Consultant News; AIG Press Release
• Related commentary: Short and Longer Term Directions For American International Group; Insurance Sector Looks Cheap; Insurance Stocks: Wall Street's Biggest Secret; Cramer On AIG (Jan. 4)
• Potentially impacted stocks and ETFs: American International Group (AIG), 21st Century (TW), Berkshire Hathaway (BRK), Wells Fargo (WFC), Allianz SE (AZ), AXA (AXA), iShares Dow Jones U.S. Insurance (IAK)

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