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The Wall Street Journal: As TARP era winds down, U.S.’s financial-crisis bailout scorecard nears completionat MarketWatch.com (Dec 20, 2014)
- 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.
Tue, Jan. 21, 12:33 PM
- A decision in Bank of America's (BAC -0.2%) Article 77 hearing is likely to come sooner than expected after the promotion of the presiding judge - Barbara Kapnick - to NY's Appellate Division. She will begin her new job on February 3, and is expected to issue a ruling prior to that.
- At issue is whether the $8.5B private settlement resolving claims over $174B of MBS will be allowed to stand. The deal was approved by a number of heavyweight investors, but AIG is leading a group claiming the amount is far too small and trustee BNY Mellon failed to do its job during negotiations.
Mon, Jan. 13, 8:27 AM
- "The formation of AIG Financial Network represents a groundbreaking opportunity for us to bring the extraordinary power of AIG into the homes and lives of our fellow Americans," says CEO Bob Benmosche.
- "AIG Financial Network advisors will receive state-of-the-art training, and will be highly equipped to bring data-driven, needs-based financial planning and consultation to American families and small businesses nationwide," says SVP Dan Mule.
- As part of the creation, AIG is revamping its process testing and training new advisors, and will be onboarding securities-licensed financial advisors.
- Press release
Mon, Jan. 6, 8:53 AM
- Following a 6-month research restriction, AIG is upgraded to Buy with $59 price target at Credit Suisse. The team had previously seen the stock as cheap vs. book value, but not vs. earnings. "While we believe that consensus EPS estimates are still optimistic, we believe the current valuation embeds something worse following management backing off its 2015 ROE goal."
- The team expects AIG will fare best among insurers when put through the Fed stress test for the first time (2015 at earliest). Thanks to the ILFC sale, CS wouldn't be surprised if AIG boosts its capital return plans before the CCAR process.
- Shares +1.2% premarket
Fri, Jan. 3, 8:22 AM
- "AIG India Fund is closing down completely as the fund has no short-to-medium-term plans for India," says a source, who adds all four employees of the fund will join Brookfield Asset Management (BAM). The deal is expected to close by month's end.
- From 2007-09, AIG invested $200M of the $300M fund across 5 projects - 3 of which it's exited. "The buyout is a good decision as it will help an established team like Brookfield leverage and help AIG exit some of its previous investment," says Cushman & Wakefield's Sanjay Dutt.
Dec. 31, 2013, 12:03 PM
- In December, Mortgage Guaranty boosted the maximum mortgage it will insure to $850K from $750K, and Genworth (GNW +0.9%) boosted from $625K to $850K in October. AIG's United Guaranty introduced a limited program for mortgages of up to $1M, and Radian (RDN -0.4%) is considering raising its $850K cap.
- The moves come as the jumbo mortgage market heats up and the insurers see an opening to grab market share. The companies say small lenders have been contacting them looking for insurance for low down-payment jumbo loans. "We’re making these changes because we sense some level of demand - in the last six months the number of inquiries have increased,” says Genworth's Anthony Guarino.
- There's also credit profiles: For years, lenders have only been interested in the best borrowers, but are now turning their attention to those further down the trough as the government makes itself less of a presence in the mortgage market.
Dec. 17, 2013, 3:23 PM
- AerCap's (AER +6.4%) gains today put the stock more than 40% higher since the deal with AIG was announced yesterday, and Deutsche's Michael Linenberg says there's more to come, reiterating his Buy rating and boosting the price target to $40 from $27.
- "We expect the deal to be accretive for AER shareholders on the onset, in light of the $600M of expected annual synergies and the attractive price at which the portfolio will be acquired,"says Linenberg. "Moreover, AerCap is inheriting ILFC’s order book of 385 in-demand aircraft, which should lead to a strong/relatively predictable stream of CF/EPS for the foreseeable future."
- For AIG, the deal - at the moment - is less sale than a swap, as the insurer will be an owner of 46% of AER's common stock and will still include ILFC's operating results on its own books.
- Writing in Barron's, Dimitra Defotis, says the spotlight now turns to AIG's core financial operations, and that may not be a good thing based on last quarter's results. Yes, AIG trades at a discount to book, but with analysts not projecting earnings growth next year, that discount could be warranted.
- Maybe the most bullish case for AIG at the moment is the moonshot in AerCap may allow the insurer to unload its stake at a sweet price (the lockup agreements aren't yet known).
Dec. 16, 2013, 12:57 PM
- "Our preliminary conclusion is that we would lower AerCap's (AER +30.7%) corporate credit rating one notch to BB+ from BBB-," says S&P, putting the company on "CreditWatch with negative implications" due to the deal to buy ILFC (AIG +1.2%).
- The assumption of ILFC's debt, plus the debt to fund the acquisition, plus anticipated purchase accounting write-downs on ILFC's assets will push AerCap's debt-to-capital ratio to among the highest of eight aircraft leasing companies rated by S&P, says the agency. "We expect that the consolidated AerCap would generate solid cash flow and gradually de-lever following the merger, but would not restore its balance sheet for at least several years," says analyst Betsy Snyder.
- Previous coverage
Dec. 16, 2013, 8:01 AM
- "Upon completion, the transaction will have a positive impact on [our] liquidity and credit profile and will enable us to continue to focus on our core insurance businesses," AIG CEO Robert Benmosche says, regarding the deal to sell ILFC to AerCap (AER).
- AER is paying ~$3B (net to AIG after loan settlements is ~$2.4B) in cash and issuing ~97.5M shares.
- AIG will own around 46% of AER's common shares as a result of the deal, and will thus "include ILFCs operating results in continuing operations."
- AIG is also providing a $1B revolver. (PR)
- AIG +2.8% premarket; AER +17.7% premarket
Dec. 16, 2013, 6:20 AM
Dec. 13, 2013, 3:24 PM
- There are too many "unknowns" on a potential AerCap (AER +4%) deal to buy ILFC (AIG +1%) to figure out what AER's balance sheet and income statement would look like afterwards, says Well Fargo's Gary Liebowitz, but based on the company's recent history, he pretty certain about a few things.
- AER will NOT: 1) Overpay for aircraft 2) Subject itself to excessive residual value risk by retaining older jets 3) Impair its ability to sell aircraft, or 4) Expose itself to significant future funding risks.
- He retains his Buy rating on AER with a price target of $26-$27.
- Previous coverage of the potential deal
Dec. 12, 2013, 1:07 PM
- Moving nicely ahead in a bright red market is AIG (AIG +2.2%) which is now in talks to sell ILFC to AerCap Holdings (AER +4%), according to a Bloomberg report. "We never comment on rumors," says AerCap CEO Aengus Kelly when reached by telephone.
- Based in the Netherlands, AerCap - a former holding of Cerberus Capital - is the largest independent aircraft lessor with $15B in assets, and - recently reporting a debt/equity ratio of 2.5x - said it could increase the load to 3.5x-4x "if extremely attractive opportunities are found."
- Of course, AIG's effort to sell ILFC to a Chinese consortium for about $4.2B isn't formally dead, but the insurer is free to pursue other sales avenues.
Nov. 25, 2013, 3:55 PM
- Apple (AAPL), Google (GOOG), and AIG are the most popular (long) holdings of hedge funds, according to Goldman's latest hedge fund monitor, which analyzed the positions of 783 hedge funds with $1.7T of gross assets. Hedge fund holdings of AIG, however, account for 14 of the company's float compared to negligible amounts for Apple and Google.
- The 20 most concentrated hedge fund holdings as defined by the percent of equity cap owned by the funds has consistently been a significant outperformer, according to Goldman. In order: AN, STZ, JCP, FDO, THC, HRB, BEAM, MU, NWSA, VRSN, CBG, NFLX, GT, TSO, ETFC, MSI, WPX, WYN, HES, CCI. The top 20 last quarter is here.
- Overall, the studied hedge funds' performance leaves a bit to be desired, with average return of 6% YTD. Fewer than 5% outperformed the S&P 500, and 20% of funds posted an absolute loss.
Nov. 18, 2013, 11:25 AM
- Among those in talks to join the investor group led by Hong Kong-based P3 Investments are Taiwanese big shot Richard Tsai and China's Xiao Jianhua, reports Bloomberg, citing sources close to the matter. Tsai's family - they say - could take a majority stake in the takeover bid, while Xiao's contribution is more about financing.
- It's quite a web as Tsai is also a limited partner of P3 and U.S. regulators will only approve a sale if there is no dominant shareholder in the buyout consortium. Also interested in the deal is Fubon Financial, of which Tsai is vice chairman.
- The deal for AIG to close the $4.2B sale of ILFC has missed a number of deadlines as the original consortium of buyers fell apart.
Nov. 18, 2013, 3:53 AM
- A court is due to begin hearing final arguments today over an agreement in which Bank of America (BAC) would pay investors $8.5B to settle claims that it sold mortgage bonds that didn't meet their promised quality.
- Those in favor of the deal include BlackRock (BLK), Pacific Investment Management Co (PIMCO) and Goldman Sachs (GS), while those against include AIG (AIG). The latter calls the agreement a "pennies on the dollar" settlement, as it argues that investor losses exceeded $100B.
Nov. 10, 2013, 2:51 AM
- New York regulators reportedly want AIG (AIG) and MetLife (MET) to pay over $100M between them to resolve civil and criminal investigations into whether two life-insurance units that the latter bought from MetLife in 2010 for $16B lacked the requisite licenses and supplied misleading information.
- Both companies would probably contribute to the penalty. The units are Alico and Delaware American. (Previous)
Nov. 6, 2013, 3:29 PM
- The $274M lawsuit was brought by the former president of AIG real estate Kevin Fitzpatrick, who said the insurer - shortly after its bailout - broke agreements entitling him to a share of the profits on real estate investments.
- The lawsuit had been filed in 2009 and AIG had referred to the case as a material piece of litigation in its quarterly reports. Fitzpatrick was not part of the notorious AIG Financial Products Terms of the settlement are not available.
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