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Can American International Group (AIG) Keep the Earnings Streak Alive This Quarter? - Tale of the Tapeat Zacks.com (Nov 13, 2014)
at Fox Business (Nov 11, 2014)
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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.
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. 15, 1:11 PM
- The role is key one for AIG and its new CEO Peter Hancock, who - prior to becoming CEO and now - believes investment in technology will pay large dividends for the insurer.
- Named today to the role is Philip Fasano who joins AIG from Kaiser Permanente, where he held the same position. He'll report directly to Mr. Hancock.
- Source: Press Release
Mon, Sep. 8, 7:30 AM
Thu, Aug. 28, 8:16 AM
- CEO until the end of this month, AIG's Bob Benmosche tells Bloomberg's Betty Liu he moved up his plan to step down after a dire cancer prognosis gave him a year or less to live. The cancer is stable for now, he tells Liu.
- Peter Hancock takes over on September 1.
Wed, Aug. 27, 3:04 AM
- Federal judge Thomas Wheeler has turned down a U.S. bid to dismiss a more than $25B lawsuit filed by former CEO of AIG (NYSE:AIG) Maurice "Hank" Greenberg.
- The government's bailout in 2008 took an initial 79.9% stake in AIG and conducted a reverse stock split, diluting existing shareholders. Starr had been AIG's largest shareholder with a 12% stake.
- Greenberg's Starr International sued in 2011, stating that the $182.3B bailout of AIG was an illegal taking and violated its due process rights.
Thu, Aug. 21, 11:43 AM
- Hedge funds are having a difficult time of it again this year, up 1% vs. a 7.5% gain for the S&P 500, according to Goldman Sachs, which crunched the numbers on 775 funds with $1.9T in AUM.
- Nevertheless, Goldman's list of 50 stocks which "matter most" to hedge funds has outperformed the S&P 500 on a quarterly basis 66% of the time since 2001. The stocks this quarter (posted in order of the number of funds in which a name is a top-10 holding):
- ACT, AAPL, FB, AGN, AAL, GM, TWC, AIG, MSFT, HTZ, CHTR, MU, WMB, LNG, C, DAL, HCA, APC, CBS, ALLY, GOOGL, APD, NRF, BAC, EBAY, LBTYK, PCLN, VRX, BIDU, DTV, DISH, DG, EQIX, MA, WAG, ARCP, GILD, LINTA, MON, FOXA, VC, AMZN, BRK.A, BRK.B, SUNE, CMCSA, JPM, MIC, CCI, HES, LAMR.
- A special call-out to Northstar Realty (NYSE:NRF), Visteon (NYSE:VC), SunEdison (NYSE:SUNE), Macquarie Infrastructure (NYSE:MIC), and Lamar Advertising (NASDAQ:LAMR) for making the list of hedge fund hotels despite their relatively tiny market caps.
Wed, Aug. 13, 3:44 AM
- Berkshire Hathaway (BRK.B), (BRK.A) has hired two senior executives from AIG's (NYSE:AIG) Asia operations to boost its insurance business in the region.
- The company has recently put a large effort on expanding its businesses by moving beyond its core reinsurance operations. In July, it entered the fiduciary insurance business and hired AIG's VP of fiduciary liability.
- Additionally, Berkshire Hathaway Specialty Insurance, the company's commercial insurance business, is applying for licenses from regulators in Sydney, Hong Kong, Singapore and Europe.
Tue, Aug. 12, 7:28 AM
- Q2 adjusted net income of $212.4M or $1.29 per share vs. $67.1M and $0.59 one year ago, thanks to the ILFC purchase.
- Net interest margin earned on lease assets of $550.8M vs. $160.1M. Net interest margin as a percent of average lease assets of 10.1% vs. 8.5%.
- Adjusted debt to equity ratio rises to 3.7:1 from 2.6:1 following the ILFC deal.
- AER +2.3% premarket - pleasing to AIG, the owner of nearly 100M shares, or 46% of AerCap.
- Conference call at 9 ET
- Previously: AerCap beats by $0.50, beats on revenue
Wed, Aug. 6, 7:18 AM
- AIG agrees to the purchase of Ageas Protect from Belgium-based Ageas Group for about $305M. The deal is set to close in Q4.
- Ageas Protect offers term life, critical illness, and income protection coverage to U.K. consumers. It's been around since 2008 and a 4.8% share of new protection business in that country, producing premiums of £91.8M in 2013.
- Source: Press Release
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
Tue, Aug. 5, 3:57 AM
- AIG (NYSE:AIG) has agreed to settle a shareholder lawsuit for $960M. which was filed in 2008 shortly after the insurance group’s value collapsed due to the tremendous losses sustained from its insurance written on mortgage securities.
- The settlement was disclosed as AIG reported Q2 net income of $3.1B, compared with $2.7B in the same period a year earlier.
Mon, Aug. 4, 6:02 PM
Mon, Aug. 4, 4:20 PM
- Q2 after-tax operating income of $1.8B vs. $1.7B a year ago. After-tax operating income per share of $1.25 vs. $1.12 a year ago. 18.1M shares repurchased during quarter for $1.1B, and board authorizes another $2B more going forward.
- Book value per share excluding AOCI of $67.65 up 10% Y/Y.
- P&C pre-tax operating income of $1.355B up from $1.086B a year ago, thanks to lower catastrophe losses. The adjusted combined ratio of 96.9 compares to 96.5 a year ago.
- Life and Retirement pre-tax operating income of $1.18B vs. $1.5B a year ago, with AUM of $332.8B up 13% Y/Y. Premiums and deposits of $7.36B up 9%.
- Mortgage Guaranty (United Guaranty Corp.) pre-tax operating income of $210M up from $73M a year ago. This year's results were boosted higher net premiums earned and $89M in favorable prior year reserve development.
- This is the last quarter in which CEO Bob Benmosche will be at the helm.
- Conference call tomorrow at 8 ET
- Previously: American International Group beats by $0.20, beats on revenue
- AIG +3.3% AH
Mon, Aug. 4, 4:06 PM| 3 Comments
Sun, Aug. 3, 5:35 PM
- ACLS, ACXM, AEIS, AIG, ANV, APL, AREX, BRS, CAR, CHGG, CKEC, CKP, CNQR, CRK, CUTR, DRC, ECOM, ELNK, ENH, EOX, EPAM, GTAT, ININ, IRWD, JMBA, KAMN, KONA, LF, LLNW, LMNS, MCEP, MDR, MRO, MWA, NLS, OGS, OTTR, PHH, PL, PLOW, PXD, QLYS, REGI, ROSE, RP, RTEC, SALE, SNHY, THC, TNET, TNET, TSRA, TXRH, VNO, VNR, VVC, WAGE, Y
Wed, Jul. 23, 3:16 PM
- The14 year-old ATR-72 plane flying to a Taiwanese island crashed today, killing dozens. Its value is pegged at about $13.2M.
- According to Aon Plc - a broker which tracks aviation market coverage - AIG is the lead insurer.
- Claims for airline insurers are on the rise of late after several years with a lack of crashes, and today's tragedy follows the downing of the Malaysian Air jet over Ukraine.
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