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Value Growth Investments
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Deep value investor with focus on long-term investments with good growth potential. I am a Chartered Accountant with a Masters in Computer Applications and currently pursuing MBA in Information Management with over 17 years of investing experience in stocks, options and commodities.
  • A Second-Look At AIG P&C 0 comments
    Feb 23, 2014 10:21 PM | about stocks: AIG
    • Analysts are wrong in the interpretation of P&C combined ratio, which helps in the short-term as we can do buy-backs below the book value - this goes a long way in improving EPS.
      If we exclude Prior year development net of premium adjustments from the P&C adjusted combined ratio 102.-3.1, P&C has been profitable with a adjusted combined ratio of 99.1. If we don't get any major insurance loss like Sandy, combined with the increase in premiums (which generally happen after a storm), 2014 will be a fantastic year for P&C.
      In fact, AIG has healthy premium growth in P&C which augurs well for the future. AIG lost around $189mn in aircraft leasing business (1,117 - 1,306). The AERCAP deal is a double whammy or probably a triple whammy for the following reasons:
      1. They will not lose money anymore on aircraft leasing business.
      2. They will have recurring income from AERCAP as they are able to turn the business to profit from a loss.
      3. The sale frees up liability of around $20 billion, which can be used to underwrite new policies. I assume an additional $200mn can be earned as a result of this alone.
      Bottom line, AIG need not do any magic for the turnaround - doing the business as usual itself should have telling effects

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: AIG, AIG-WTPlease add AIG warrants symbol to your database SYMBOL: AIG-WT (in yahoo finance)

    Stocks: AIG
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