Sure. Reason would be to keep stock down to buyback more shares. I don't think the do this unless the discounted cash flow is higher overall. So tough to know the future that I really don't think they will. I have not seen maturities, need to look at 10k again, but hopefully they have been investing in st bonds in anticipation of rising rates. I would have been, but I also would have thought rates would be higher by now.
I'd be careful about all of this "managing" and "smoothing" earnings talk. They got sued for this when Greenberg was still in charge. Interest rates - they need higher rates, period. They do hedge and the notes in the quarterly lay it out for you- maturities and hedging. Going forward, they are going to have claims and not having higher rates puts an awful lot of pressure on underwriting which, while getting better, they have not been the best at, so, they need higher rates.
they will only buyback shares if the stock is selling under book value if it is over they will increase the div or pay down debt. i want the stock to be 80 on monday and then i'll determine if the stock should be held any longer.. have been holding and buying since 32. at the moment i am holding until it reaches bv. it will take them 4 to 5 year to work off their 16 billion tlc. at the moment they are earning zero on this. they do not want to defer taxes they want profits and that 16 billion in cash to buyback shares and paydown debt. their stock is in the form of options so div do nothing for them only appreciation in the stock price. jmho
A bit rambling, but spot on. Thank you. If you would, could you comment on this? Say interest rates do rise (well, duh). Is it possible/ likely that AIG could "manage earnings" as Whitney Tilson suggested some years ago, by selling bonds (and other stuff) to take losses, while deferring the gains from reinvesting at higher rates? I know the overall effect would be small to none over thime, but... Is it possible this technique will allow AIG to smooth and delay earnings significantly? Could they use this technique to hide the health of the business while they continue to pump free cash flow into buybacks at discounted prices?
Goal is to move the Value of the Business 10%/yr over the next 3 yrs. Lets say BV is $80 (close enough). So in 3 yrs that is 106.50. They do want to raise the divi, but have stated that is less of a priority when stock is significantly discounted to BV. Stock price 60 and in 3 yrs if they are successful will be near 100. Say 100 or a 67% gain. Is a compounded annual return of approx 18.5%. I think that works.
Success will come from buybacks. Big money from AER selling. Cashflow is very good. Are diligently working on loss ratios. As these come down, and I think they will over the next year, then we will see much more rapid increases in stock price. My guess is 70 in a year, 84 in 2 and 100 in 3.
Just my high level look. Next couple reports will be interesting. You may not be getting a 10 bagger, but you I think you will do very well over the next 3 yrs with AIG. JMHO, due your own DD.
Interest Rates: Have seen some notes on the board that this will be a big help. Really depends on what current rates they are getting. They have bonds, and depending on when bought will determine the rates. If rates rise, to reinvest they would have to take a loss on selling the bond (assumes rate is now higher than the original invested rate). So I think this is a bit more complicated than "YEAH rates are increasing, MO MONEY!". I have not analyzed, so would like to hear others thoughts on this who maybe have a bit more knowledge on AIG's investments. With that said, for certain they should be able to get higher rates than what they have invested over the past few years. And if they had them in Short Term Maturities in anticipation of increasing rates, then as they mature AIG will be able to invest at higher rates. So my overall point is I dont think rising interest rates will have an immediate impact on the business but will be positive over the next few years if/when rates increase.
Sentiment: Strong Buy
AIG raises $3.7B from AerCap stock sale
Jun 4 2015, 05:50 ET | By: Yoel Minkoff, SA News Editor Contact this editor with comments or a news tip
AIG sold $3.7B in AerCap Holdings (NYSE:AER) stock on Wednesday, building capital to buy back its own shares. The New York-based insurer previously announced a $3.5B share-repurchase plan in April.The larger-than-planned transaction saw AIG selling about 71.2M shares, following expectations for a 50M share public offering. The move reduces AIG's stake in AerCap from 46% to 5%.Previously: AIG and AerCap gain as AIG sells chunk of stake (Jun. 02 2015)
This was corrected on 06/04/2015 at 06:07 AM
Please do some DD. Rising interest rates will substantially effect the earnings of AIG. If we normalize rates AIG will be printing money as they have insane amounts notes, bills, bonds.
Thank you and don't apologize for crude calculations, Adding decimals to hypotheticals is a waste of time. They pay finance students to go crazy working those numbers. They hate it because they know it's a waste too, Now to your point- You're looking at something near the low end of $.40 to $1.50 income range per share per year. My point is that at both ends of that range there will be a hit to the market valuation of AIG's current holdings. AOCI write downs will offset those income gains- completely or more-so at first, then decreasing over time. My sense is that, unless the dollar tanks, the slow rise in interest rates will make income gains versus AOIC write-offs largely negating and negligible for several years to come. That effect is trumped by larger insurance profitability metrics, IMHO. Even the buyback discount will have more effect. Your analysis seems to have more relevance beyond the 5 year horizon. Again, Thank you. I'll defer to your quantitative expertise. I'm good enough with numbers not to be seduced by them.
In my humble opinion.....
global government bond rout = higher interest rates on government debt = higher return on invested float for insurance companies.
I usually don't pay much attention to Seeking Alpha articles, but this guy made a pretty compelling argument:
The charts only include the fixed income assets and the related net investment income from these specific assets (full disclosure--see the linked 10-Q and 10-K's for the company's total assets and total net investment income for each period-end). I also included short-term investments within the analysis due to the fact that the company includes the short-term investment income within the net investment income for fixed maturity securities. This is a simplistic approach to analyzing the interest rate sensitivity of AIG's asset portfolio, but it provides valuable insight into how higher rates will benefit the company's earnings for the current investment portfolio.
Based on the analysis there are a few observations that can be made:
"The current net investment income for fixed income securities has been pressured by the low rate environment, as seen by the low 3.95% for Q1 2015.
If rates were to rise and the company were able to achieve the average percentage for 2013 and 2014, based on the Q1 2015 portfolio AIG would have the potential to increase the net investment income by 4% (or ~$460 million).
If rates were to rise and the company were able to achieve the average percentage for 2006 and 2007, based on the Q1 2015 portfolio AIG would have the potential to increase the net investment income by 17% (or ~$1.9 billion).
This type of benefit to the net investment income will not be seen instantly, but instead the company will see the benefit over an extended period (as new money yields increase). The rising interest rate environment is a tremendous catalyst that will greatly impact AIG in many different ways."
I know AIG is betting on rising interest rates, or at least hedging them, but I fail to see the short term effect on the stock. Enlighten me.
2M more shares over avg volume yesterday and it is over avg volume today already. So the buyback appears to be occurring or you have additional investors coming in. Remember this was a hedge fund favorite for some time. With lots of talk of interest rates climbing and the stock being well under BV I can easily see investors coming back in a large way. Personally I think it is a combo occurring as the Company is restricted on how much they can buy daily.
I would agree with you if I hadn't seen the warrants trade so out of sync with the common in the past. I'd be fine with a couple percent discount
warrants trade where they should historicaly/generaly that's where they trade about 40% of common,i don't understand what you guys are talking#$%$ about?
My heart is with you, but my head says stealth works better. If $3.5B per quarter isn't waking this stock up (much less my warrants with shrinking time premium), why not quietly continue those? That's a $14B annual rate they might be able to maintain for the next two years. Boring but brilliant. I'm guessing the current buyback was upped with this heavy steady buyback schedule in mind.