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American International Group, Inc. Message Board

  • donald_sharp007 donald_sharp007 May 3, 2013 8:50 AM Flag

    AIG SIFI Designation

    My understanding is designations will start being announced on May 9th. Benmosche has made it known they expect to be a SIFI and are planning accordingly. My question for the board how will AIG's stock price be impacted once AIG's SIFI status is confirmed? Interested to hear different takes. Cheers!

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    • Thanks to all for the useful feedback which is basically pos or neg in short term and a positive in long run as value of additional oversight at the holding company level is recognized. I'm on board with the long term view and think initial response to headlines will be somewhat negative and provide a buying opportunity. Also, the ILFC closing is scheduled for around mid-June which will free up $20B in capital and facilitate any new financial requirements, buybacks and dividends. Interesting times...

    • 1. Initial news will be viewed as a negative (1-2 month duration). the ignorant common holder won't fully understand the SIFI designation and will trade off headlines that will emphasis government control and no one likes government control.
      2. After the selling, the headlines will change. They will explain how being a SIFI is a positive thing and that being designated as such means you have to meet stricter financial requirements and basically guarantee that you can stay afloat. As sonoranwm stated, they'll capitalize on this and the buying will begin again. (2 months duration)
      3. By this time it's time for another earnings announcement which AIG will blow out of the water and may even announce the dividend. Stock goes higher.

      Just my two cents on SIFI and a completely made-up possible future.

      Good luck.

      Sentiment: Buy

      • 1 Reply to txandco
      • I think the SIFI designation will be viewed as positive right away for all insurance stocks, just because it gets over a hurdle toward buybacks and dividends. Whether or not it's a positive long term is debatable. There are pros and cons. Personally, I think a SIFI designation can be viewed as a "seal of approval" and may actually lower borrowing costs and may even attract customers who have to consider counter-party risk. On the other hand, it will require holding more capital and maybe limit profitability. Maybe these 2 things cancel out, but who knows? Personally, I think the whole idea is crazy, but I don't mind owning a stock that goes up because of it.

    • My view after following this for a long time is a) regulatory/Fed pain in the #$%$ but b) big picture a seal of approval and a marketing tool talking about the regulatory scrutiny, esp. as AIG wants to improve it's ratios and improve it's ratings....

    • i think it is too soon to tell but there should be one positive outcome. It seems to me being a SIFI carries an implicit stamp of approval and guaranty from the US gov. You are TBTF afterall. So if you need insurance would you rather go with one that is implicitly backed by the US or one that is not? I would imagine that implicit guarantee would justify higher premiums.

    • I think the SIFI designation is a given and accepted as destiny. I guess it depends on what the regulations will end up being. Short term who knows but long term it will mean nothing.

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