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American International Group, Inc. Message Board

  • mycrof4 mycrof4 Jun 19, 1998 7:25 PM Flag

    WB pays 23 PE for GRN then what should A

    Friday June 19, 6:51 pm Eastern
    Time

    Buffett's firm buying insurer in $22 billion
    deal

    (Combines takes, adds background, details)

    OMAHA,
    Neb., June 19 (Reuters) - Warren Buffett's Berkshire
    Hathaway Inc. said on Friday it
    will acquire insurer
    General Re Corp. in a deal valued at $22
    billion.

    Omaha-based Berkshire, controlled by the billionaire who is
    one of the world's most widely
    imitated investors,
    will add General Re to its stable of insurance
    businesses, which include Geico
    Corp., the nation's
    seventh-largest auto insurer.

    General Re is one of the
    world's largest issuers of reinsurance policies, which
    insurance companies
    buy to manage risks associated with
    the policies they write. Reinsurers have been viewed
    as ripe for
    consolidation amid intense pricing
    competition and scarce growth prospects in the
    industry.

    Buffett, whose fortune Forbes magazine estimated at $21
    billion, said General Re's profits could
    grow faster if
    it were part of Berkshire, since it would have more
    capital available to it and be able
    to exploit more
    opportunities overseas. He also cited tax advantages that would
    result from the
    merger.

    ``This combination
    virtually assures both Berkshire and General Re
    shareholders that they will have
    a better future than if
    the two companies operated separately,'' the Omaha,
    Neb.-based investor
    said in a statement.

    Buffett's
    other holdings include big stakes in Coca-Cola Co.,
    McDonald's Corp., Gillett Co., and
    an estimated 20
    percent of the world's silver, acquired earlier this
    year.

    In a statement released after the stock market
    closed, General Re said its shareholders will have
    the
    option of taking either 0.0035 of a Berkshire Hathaway
    Class A share or 0.105 of a Class B share,
    for a
    total of about $22 billion.

    Berkshire Hathaway's
    Class A stock, the most expensive on the New York Stock
    Exchange, rose
    $1,900 to $80,900 on the Big Board
    Friday. General Re stock jumped $51.50 to $275
    in
    after-hours trading.

    General Re Chairman Ron Ferguson
    will join Berkshire's board of directors, the
    companies said.

    The deal is subject to approval by
    regulators and the two companies'
    shareholders.

    Completion is expected in the fourth quarter, the companies
    said.

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    • Dear Fellow Shareholders,

      If Warren
      Buffett is willing to pay 23 PE for General Re
      then
      what Should AIG be worth. I was racking my
      brains
      today trying to figure out why AIG was up 4 1/4
      .
      There was no news and then at 4:00 WHAMM!!!! I fell
      out
      of my chair!!! I couldn't believe it!! Then the
      gears
      started working and I wanted to see how AIG would compare

      with
      GRN;

      http://www.techstocks.com/~wsapi/investor/chart?s=AIG+GRN&pts=100&span=Months

      As you can see from the chart we blow them away on
      Price quality
      Here are some other
      comparisons;

      Return On Equity AIG===14.54,GRN===12.42(from
      Yahoo)
      Underwriting Margin AIG==3.0,GRN===.5 (from Value Line 98
      est.)
      % Expenses to PREM Written AIG===20.5,GRN===29
      (VL98est.)

      ANNUAL GROWTH RATES est 94-96 to 00-02
      Premium Income
      AIG==14%, GRN===10.5%
      Investment Income AIG==16.5%,
      GRN===12%
      Earnings AIG===16.5%, GRN===12%
      Dividends AIG===17%,
      GRN===7%
      Book Value AIG===16% GRN===10%

      So with a PE of
      23 shouldn't AIG be worth alot more than the
      27
      PE that it carries now. Especially with AIG's record
      of
      13 years of rising earnings. I think come Monday all

      Insurance stocks will take off. I feel that AIG will beat
      them
      all. If they can put something on paper in Japan this
      weekend
      and have the dollar go down vs. the Yen we will see
      the
      bottom in concern to the Asian Crisis. And all the
      money
      thats sitting on the sidelines will be going back into
      the
      markets with a ferver. I hope I'm right for most of
      the
      money will then head to the Insurance Companies, It
      will
      be killing two birds with one stone.

      Good
      Luck to us and Go AIG!!!!!!!!!!!!

      MYCROFT

      • 1 Reply to mycrof4
      • "Buffett, who is widely followed for his
        stock-picking prowess, refused at the press conference to
        comment directly on Berkshire's portfolio, including in
        American International Group Inc., another insurance
        giant.

        However, Buffett said he did not think it was a conflict
        of interest to have a stake in AIG with this
        acquisition (General Re).

        Buffett also said that he
        had not pursued any other acquisitions in the
        reinsurance business and that he had no other targets in the
        financial services industry on his 'dance card.'"

        --
        From
        http://biz.yahoo.com/finance/980619/bekshire_g_1.html

 
AIG
59.02+0.08(+0.14%)Aug 26 4:00 PMEDT