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American International Group, Inc. Message Board

  • teamonfuego teamonfuego Oct 29, 2009 12:46 PM Flag

    Valuation

    Ok, I hopped back in today because of a few things:
    (1) They have already completed $10 Billion worth of sales, helping pay off the roughly $90 Billion remaining (remember that the $150 Billion figure includes what is essentially a $60 Billion credit line that they haven't tapped yet)

    (2) The payments they have received of roughly $3 Billion, according to WSJ, is just a portion of the total outstanding credit default swaps they wrote that have since gone up in value.

    (3) According to UBS, AIG has lost a good deal less commercial business than they expected (http://www.marketwatch.com/story/aig-losing-less-commercial-business-ubs-says-2009-10-14). As a result, analyst estimates for q3 will be far below actual results, which I believe will come in around $3.00 to $3.50 per share.

    (4) Current net tangible equity is about $55 Billion. After subtracting the share that the government owns, common shareholders are left with about $11 Billion in net equity.

    (5) The market cap is $4.8 Billion, which is about .40 times the $11 Billion that makes up the share of net equity of common shareholders and only $2 Billion more than the $3 Billion WSJ estimates as what they have received from counterparties on their CDS trades.

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    • Looking solid again...earnings are going to be stellar and the stock should hit $45 soon

    • You seem to have done your homework on AIG and have made some very good points. The one comment I have regarding AIG not to have lost as much business as was expected is that a good chunk of it's business...the insurance and pension business... is not something that can be unwound overnight. AIG's name is now quite tainted and it is probably seeing a pretty steady drain away to other companies that are seen as stable and with less financial baggage.

    • Why anyone would be short this name at these prices is crazy. Remember that this was a $200 Billion market cap company before the crash. The Fed removed a big portion of their CDS's so lets say it should have only been worth $150 Billion (givne the profits those contracts once provided). The outstanding debt they have is about $80 Billion so lets say the remaining potential equity is $70 Billion. The govt owns 80% of the remaining equity. So common shareholders own 20% of $70 Billion or $14 Billion. This is almost 3 x the current market price.

    • Good point although I think earnings will probably be right around the prior quarter level of $2.50. That still means it is trading at a big discount to tangible net worth after excluding the government's interest.

 
AIG
55.33+0.40(+0.73%)Feb 27 4:01 PMEST

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