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- AIG reported a solid Q3, with earnings exceeding analyst estimates.
- BV showed a solid 15% increase over last year's numbers, supported by a stock buyback program.
- The stock continues to trade substantially below BV, including investments and deferred tax assets suggesting a stronger buyback program.
- The Net Payout Yields aren't strong enough for an investment.
AIG - Large Discount To Intrinsic Value, P&C Business Needs To Deliver
- AIG continues to exhibit improving performance and a strongfinancial position, which is underappreciated by the market.
- . The company has also been aggressively payingdown higher cost debt and replacing it with lower cost debt to reducenet interest costs, which will help coverage ratios.
- I expect the combination of prudent capitalallocation and improved profitability, to lead to a higher multiple onthis growing book value.
- AIG recorded revenues of $8.6 billion with earnings of $1.09 per share during its third quarter. Following the strong results the company authorized share repurchases of $1.5 billion.
- The company improved performance across core segments and consequently noted an operating income of $1.75 billion, up by a significant margin of 22.8% from last year.
- The net earnings stood at $2.2 billion for the quarter as the company announced a 12.5 cents per share dividend.
- Net investment income grew by 13% to $4.03 billion. This was due to an increase in returns from hedge funds and private equity investments.
- AIG is proving itself to be the powerhouse that investors have expected it to be in the past as the company has its growth prospects intact for the future.
Update: AIG Warrants Still A Better Option Than Common Shares
- Back in June, I determined that the AIG Warrants were more compelling than the common shares using very conservative assumptions.
- Since then, AIG has reported good numbers, and bought back a lot of stock. Meanwhile the share price and warrant price have both lagged.
- This all makes the opportunity even better than before.
American International Group: This Ridiculous Valuation Won't Last Forever
- AIG reported great third quarter results with both premium and earnings momentum.
- Book value per share grew more than 15% year-over-year, and the company aggressively bought back its own shares.
- Still, investors don't seem to care.
- AIG's valuation discount is completely undeserved.
- Don't give up just yet.
- AIG, one the great turnaround stories of the last decade, is often cited as a strong financial stock.
- However, while book value is rising consistently, earnings growth is expected to slow down.
- Its low valuation could propell the stock higher, although competitor Allianz is valued similarly.
- AIG blew away investors with its third quarter report on Monday, a scenario that has played out before.
- Analysts are far too pessimistic on AIG, actually lowering earnings estimates since the second quarter report.
- Strong fundamentals, share repurchases and a terrific valuation make AIG a buy here.
- AIG reported better than expected earnings, beating on both the top and bottom lines.
- This positive quarter has cemented my bullish outlook on AIG.
- I previously discussed how management would improve profitability and grow book value per share.
American International Group: Excellent Book Value Growth, Low Valuation, High Risk/Reward Ratio
- American International Group's share price performance has been disappointing.
- AIG, however, presented respectable book value growth over the last three financial years and exhibited continued momentum in the first six month of 2014.
- Low valuation is still a compelling argument to buy one of the largest insurance companies in the country.
- Higher interest rates could provide tailwinds for AIG's investment income and be a catalyst for higher share prices.
American International Group: A Deep-Value Insurance Investment With Massive Potential
- American International Group still trades at an extremely low valuation compared to its book value and compared to its peers.
- Narrowing the gap between book value and share price likely to be a multi-year story.
- AIG offers investors a massive margin of safety, and remains a Strong Buy for investors capable of playing the patience game.
AIG: How Will The Shift In Focus Influence Investors' Decision To Buy, Sell Or Hold?
- Deutsche Bank rated AIG a "hold" in August and set its share target price at $59.00.
- The company's after-tax operating income was $1.8 billion while in the corresponding quarter of the last year it stood at $1.7 billion.
- After-tax EPS amounted to $1.25 for Q2 2014, whereas in Q2 2013, the company reported an after-tax EPS of $1.12.
- New CEO, Peter Hancock, is altering the business mix of the company and encouraging the use of technology to boost efficiency.
- Analysts predict a median target price of $60.50.
- First we'll explore the features that AIG warrants offer investors, including the exercise price, expiration date, and adjustment formulas.
- Since the warrants are obviously dependent upon the underlying security, we'll walk through a valuation of AIG common stock and its effect on the warrants.
- Lastly, we'll weigh the potential risks associated with the warrants so that you can make a sound investment decision based upon your risk tolerance.
- In this article, we focus on the strengths and weaknesses of American International Group.
- We specifically look at its profitability, income potential and growth prospects.
- AIG's valuation is also put under the microscope, and we compare it to a sub-industry peer, too.
- AIG has presented a quality quarter with higher earnings and better combined ratios.
- Its book value has grown by double-digits year-over-year indicating more growth potential in a cyclical upswing in the insurance industry in the years ahead.
- AIG is a 'get it and forget it' story.
- Buy AIG now at a 30% discount to book value and sell when investors love AIG once again, possibly at a sizable premium to book value.
American International Group: Underscoring Focus On Core Insurance Activities
- The insurance giant has effectively reported a positive earnings surprise in the second quarter.
- The positive results were achieved on the back of improved underwriting activity and one-time gain of $1.4 billion from the sale of its aircraft-leasing unit.
- Life and retirement business segment also registered an increase of 3% in the pre-tax operating income brought in by both its retail and institutional segments.
- Now, the business has become more centered towards its mainstream insurance business.
- The scrip is undervalued and represents an upside potential of 19.50%.
- AIG posted very strong Q2 results last night.
- AIG's underlying strength in all of its businesses prove management has completely turned the company around.
- AIG is simply cheap based on book value, earnings and projected total returns going forward.
Mon, Nov. 3, 4:20 PM
- Q3 after-tax operating income of $1.7B up 23% from a year ago. Operating EPS of $1.21 up from $0.96.
- Book value per share excluding AOCI and DTA of $58.11 up 15% Y/Y. 24.8M shares repurchased during quarter for about $1.5B; $3.4B of stock bought back YTD. Another $1.5B of share repurchases is authorized.
- AIG Property & Casualty: Pretax operating income of $1.096B up 2% Y/Y. Net premiums written of $8.953B up 3%. Net investment income of $1.265B up 4%. Adjusted combined ratio of 95.6 improves by 240 basis points.
- Commercial Insurance underwriting: Net premiums written of $5.496B up 5%. Adjusted combined ratio of 91.6% improves 300 basis points.
- Consumer Insurance underwriting: Net premiums written of $3.454B flat Y/Y. Adjusted combined ratio of 98.5% improves 110 basis points.
- AIG Life & Retirement: Pretax operating income of $1.348B up 18% Y/Y. Premiums and deposits of $9.662B up 15%. Net investment income of $2.614B up 6%. AUM of $334B up 10%.
- Mortgage Guaranty: Pretax operating income of $135M up 214% Y/Y thanks to a big drop in claims alongside a boost in net premiums earned ($227M, up 11%).
- Conference call tomorrow at 8 ET
- Previously: American International Group beats by $0.12, beats on revenue
- AIG +1.3%
Mon, Oct. 20, 7:12 AM
Fri, Sep. 19, 12:13 PM
- Jay WIntrob's exit from AIG (AIG -1.9%) could hardly be considered a surprise after he was passed over to lead the company in favor of Peter Hancock. Nevertheless, leadership continuity stands for something, and Wintrob played a big role in the bounce in profits at AIG's Life and Retirement unit.
- The new management structure, says Wells Fargo, suggests the insurer sees itself less as a P&C and Life firm, and more of a commercial segment and consumer segment firm.
- Previously: Peter Hancock puts his stamp on AIG's management team
Wed, Sep. 17, 3:16 PM
- Leading markets higher as the reality of higher interest rates gets nearer is the financial sector (XLF +0.9%). Whether its banks, brokerages, or insurers, a higher benchmark rate for some time has been considered a key bullish catalyst. An especially large move is being seen in the online brokerage names who have been forced to forego money market fees for years thanks to ZIRP: E*Trade (ETFC +3%), Schwab(SCHW +3.2%), Ameritrade (AMTD +2%).
- Morgan Stanley (MS +1.8%), Bank of America (BAC +1.2%), JPMorgan (JPM +0.9%)
- U.S. Bancorp (USB +1.1%), Regions Financial (RF +2%), New York Community Bank (NYCB +0.8%), Huntington Bancshares (HBAN +1.3%), KeyCorp (KEY +1.3%)
- MetLife (MET +0.6%), Voya Financial (VOYA +0.7%).
- Chubb(CB +0.4%), AIG (AIG +1.1%), Hartford (HIG +0.8%)
- Financial sector ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, KIE, IAT, SEF, IYG, IAK, FXO, KBWB, FNCL, RKH, QABA, FINU, KRU, KBWR, RWW, KBWP, RYF, KBWI, KRS, FINZ
Mon, Sep. 8, 7:30 AM
Tue, Aug. 5, 9:08 AM
- Calling his appointment as next CEO of AIG a "vote for continuity," Peter Hancock tells earnings call listeners there will be no abrupt change in strategy at the company when he takes over on September 1.
- The stock has given back some its big premarket gain as Hancock speaks of "pricing pressures" as likely to constrain continued improvements in the company's loss ratio for the remainder of the year.
- Earnings call presentation slides
- Shares +1.8% premarket
- Previously: Parting gift from Benmosche as AIG beats and boosts buyback
Mon, Aug. 4, 4:06 PM| 3 Comments
Fri, Jun. 6, 9:48 AM
- AIG (AIG +0.9%) takes out a multi-year high after last night's $2B boost to its share repurchase program. The current price of $55.42 hasn't been seen since the early days of 2011.
- Barclays chimes in after the news, lifting its price target on the Overweight-rated stock to $64 from $56.
- Previously: AIG adds $2B to buyback
Wed, Jun. 4, 10:56 AM
- Providing a particular boost to the large insurers, the Senate today approves a bill giving the Fed the flexibility to tailor capital rules for insurers which may fall under their purview - as opposed to original Dodd-Frank language which could have required a "one size fits all" policy in which insurers would have faced the same capital rules as those applied to largest banks.
- “It is becoming increasingly clear that the Fed will be given the flexibility to tailor its regulation of insurance companies,” says FBR's Ed Mills. “This should be a strong positive for the insurance firms deemed systemically important.”
- Speaking at his company's annual meeting today (webcast and presentation slides), Prudential (PRU +2.7%) Vice Chairman Mark Grier is pleased with the Senate action and says his company can meet any reasonable capital standard.
- MetLife (MET +2.5%), AIG (AIG +0.9%)
Tue, May. 27, 10:56 AM
- Alongside a rise in the common stock to a multi-year high, AIG's (AIG +0.9%) TARP warrants advance to a new all-time high of $24.03, beating the $24 they traded at on the day of their issuance in January 2011.
- The warrants allow their owners the right to buy AIG common at $45 per share up to January 2021.
- "Our inclination remains to run from the popular and embrace the hated where prices tend to reflect such mistrust," wrote Bruce Berkowitz in 2011 as the warrants plunged as low as $4.66 each. In addition to its 75.7M stake of AIG common stock, Fairholme is the largest holder of the insurer's warrants with 24.5M as of March 31.
Wed, May. 21, 10:11 AM
- "Investors should move their focus from capital deployment to capital generation," says analyst Michael Nannizzi. "[AIG] is best positioned among SIFI candidates to deploy capital accretively into its core businesses if large-scale buybacks are not a near-term option."
- The upgrade, says Nannizzi, therefore, is not about an easier regulatory environment, but about AIG's "second best" capital deployment option being underappreciated by investors.
- The stock is up 2.4% on the session, and earlier this morning touched its highest level since January 2011.
- Previously: AIG upgraded to Buy at Goldman
Wed, May. 21, 7:24 AM
Thu, May. 15, 3:25 PM
- AerCap (AER -2.7%) financed the cash portion of the purchase (closed yesterday) primarily with new debt issuance, significantly boosting leverage, says S&P's Betsy Snyder, downgrading the credit rating to BB+ from BBB- and removing the company from CreditWatch negative.
- "We expect the consolidated entity to generate solid cash flow and gradually decrease leverage following the merger, but we don't expect AerCap's debt leverage to return to previous levels for at least the next 18 to 24 months," she says.
- AIG is now the owner of nearly 100M shares of AerCap.
- Previously: AerCap rally means billions for AIG
Wed, May. 7, 11:56 AM
- Efficient markets are hard at work as a big bounce for AIG (AIG +2.8%) has the stock erasing nearly all of its knee-jerk post-earnings loss from yesterday.
- Summing up a good bit of sell-side sentiment, Deutsche's Josh Shanker says the "beat" was thanks to better-than-expected numbers from capital market sensitive items. He sees "normalized" core EPS at closer to $0.79, well shy of his team's estimate of $0.84. "The slow progress on earnings growth is key to our Hold recommendation."
- Those with more skin in the game at Seeking Alpha acknowledge a bit of disappointment with operating results, but also note a sizable gain in book value - up 4.6% Q/Q to $71.77 per share - and the continued wide discount to book the stock trades at.
- "As long as book value is growing and AIG undertakes efforts that will result in better underwriting discipline, AIG still makes a very interesting value proposition," writes Achilles Research.
Tue, May. 6, 8:56 AM
- Nomura's Cliff Gallant boosts his targets on AIG post-earnings as buybacks and debt reduction offset a bit of operating weakness. He sees FY14 EPS of $4.72 vs. $4.60 previously and FY15 to $5.24 from $5.10. He also lifts his price target to $53 from $50, but remains Neutral on the stock amid "nagging quarterly reserve additions, heightened competition in its core commercial business and single digit ROEs, but also acknowledge that the company has been making steady material operating improvements."
- On the conference call, there's some frustration with the pace of buybacks. The company used up $867M of its $1.4B authorization in Q1. Presumably, the rest will be accounted for this quarter. Will a faster pace ensure after that, especially once the sale of ILFC closes? Management - with federal regulators looking over its shoulder - plays it coy.
- CC presentation slides
- Previously: AIG lower after revenue and profit slips
- Previously: American International Group beats by $0.15, misses on revenue
- Shares -2.3% premarket
Wed, Apr. 16, 3:18 PM
- Alongside Barclays' Jay Gelb's upgrade of Lincoln Financial (LNC +2.3%) to Overweight is a downgrade of Reinsurance Group of America (RGA -0.3%) to Equal Weight and cut in the price target to $81 from $88, citing increased competition in the life reinsurance market.
- For Lincoln, Gelb has boosted confidence in the company's ability to generate strong earnings growth despite the low interest rate environment.
- His top picks in the sector remain Prudential (PRU +1.6%), MetLife (MET +0.8%), Aflac (AFL +1.5%), and Protective Life (PL +1.2%), and he has a "positive outlook" on AIG and Hartford Financial (HIG +1.4%).
- "AFL has a top-tier ROE as well as robust share buybacks, and should benefit in 2015 from the Japan Post partnership," writes Gelb, noting yen weakness will hurt GAAP earnings, but the company has hedged profit repatriation back to the States. AIG and HIG, he says, "should deliver substantial share buybacks along with attractive valuations and ultimately higher ROEs."
- ETFs: KIE, IAK, KBWI, KBWP
AIG vs. ETF Alternatives
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