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AIG moves quickly following Friday's departure of 4 senior executives in P&C to Berkshire,...

AIG moves quickly following Friday's departure of 4 senior executives in P&C to Berkshire, promoting 3 from its "strong bench" to fill those slots. "No matter how difficult the problem, (we) will continue to win on the merits in every market where we choose to compete," says P&C CEO Peter Hancock. No surprise given his comments on Friday, Bernstein's Josh Stirling says AIG's a buy on weakness. (PR)
Comments (2)
  • ahouseoforange
    , contributor
    Comments (314) | Send Message
     
    The earnings announcement and more importantly their outlook will set the tone for the weeks and months ahead. A quarterly dividend of 10 to 15 cent's share may be announced. In addition, would expect movement towards a buyback authorization by the board for an amount in the range of $5 billion with the authorization covering the period from now until the end of calendar 2014. In all likelihood they will exhaust the $5 billion before the end of this year and looking for an additional $5 billion buyback to be added early 2014. As such by mid-2014 AIG would have repurchased another $10 billion of stock. At the current market cap that would amount to about 15% of all outstanding shares which will help move EPS higher in the years ahead. Obviously as the stock rises over the next year less and less stock will be removed from circulation with every dollar spent on buybacks. However, as long as the stock is trading at such a discount to book the impact on EPS is very positive.

     

    Some will say why pay any dividend at all and why not just buy back stock? The initiation of a dividend is kind of like a 'statement' on AIG's return to being one of the strongest players in its field and in the business world in general. Once the dividend is reinstated a large number of mutual funds (prohibited from owning non-dividend paying stocks) will start adding AIG to their funds. The latter will then drive the stock price higher which would result in AIG being able to buy back fewer shares! Kind of like a vicious cirlce and not a plus to many who, again, would prefer funds to be spent solely on buybacks. However, the dividend reinstatement is nearly as important as the FED regulators of AIG giving it a clean bill of health. It makes an important statement about the overall health of the company and as such has value beyond merely the amount of the dividend.
    29 Apr 2013, 10:52 AM Reply Like
  • kinte
    , contributor
    Comments (60) | Send Message
     
    Thanks! That is indeed a good news.
    29 Apr 2013, 08:12 PM Reply Like
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