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American International Group, Inc. Message Board

  • fairvalue23 fairvalue23 Apr 29, 2010 7:59 AM Flag

    AIG Is ‘Grossly Overvalued,’ Lowered to ‘Underperform’ by KBW

    AIG Is ‘Grossly Overvalued,’ Lowered to ‘Underperform’ by KBW American International Group Inc., the insurer rescued by the U.S., was cut to “underperform” by KBW Inc. on the prospect that meeting government obligations will wipe out most of common shareholders’ value.

    AIG Is ‘Grossly Overvalued,’ Lowered to ‘Underperform’ by KBW
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    By Andrew Frye

    April 27 (Bloomberg) -- American International Group Inc., the insurer rescued by the U.S., was cut to “underperform” by KBW Inc. on the prospect that meeting government obligations will wipe out most of common shareholders’ value.

    “The publicly traded shares are grossly overvalued,” said Cliff Gallant, a KBW analyst, in a note to investors today. “Under the current ownership and capital structure, we see little long-term value in the common shares.” Gallant said he expects AIG to fall to $6 in 12 months, compared with yesterday’s closing price of $44.51.

    AIG turned over a stake of almost 80 percent to the U.S. in the 2008 bailout that swelled to $182.3 billion. The New York- based insurer has missed four rounds of dividend payments on a Treasury Department investment of more than $40 billion in preferred shares. Gallant said the Treasury is entitled to a 10 percent annual dividend from AIG, which posted a fourth-quarter loss of about $8.9 billion.

    “Even if AIG does report earnings, the income will not be accruing to the common shareholder,” Gallant wrote. “After liquidity needs are met, AIG has a legal obligation to the preferred owners to pay this dividend, effectively eliminating any real earnings per share.” Gallant previously rated AIG “market perform.”

    AIG dropped 3.3 percent to $43.06 at 8:10 a.m. in New York in early trading. The company has advanced about 48 percent this year on the New York Stock Exchange after falling 97 percent in 2008 and 4.5 percent in 2009.

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