I Believe AIG Longs Will Conservatively Make 6X Their Money From Today's Prices...
over the next 10 years...Here is my assumption. Today's stock price is $38, and today's tangible book value is $66 per share. I believe this book value per share will grow at 8% per year over the next 10 years, especially once buybacks and aquisitions start. If we slap a 1.5X price/book multiple, our year ten price puts us well over $200 per share. Keep in mind that this is a company that used to trade at 5x book value during the hank greenberg days, and never traded below 2x book prior to 2007....Obviously there are going to be bumps on the road to meeting this goal, but I this is my investment thesis, and I have half of my net worth invested with AIG so my money is where my mouth is on this one.
Well, during the last quarter AIG aquired the remaining 50% interest in their Israeli insurance operation, and if the goverment allowed that aquisition there is no reason to believe they will restrict any future aquisitions. The only thing that will be different going forward is AIG will be required to maintain increased capital levels relative to what they were back in the day. But this is also true for all financial institutions so its not like the company will lose their competitive advantage as a result. CEO Bemosche also mentioned during the most recent conf call that AIG is planning on reentering into the Chinese market via life insurance.
Why should the fed care? If the acquisitions diversify AIG, that's a positive. They've already been labelled systemically important and are subject to stricter capital ratios. AIG might as well get some benefit by leveraging their size, if they are restricted in leveraging their capital.