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American International Group, Inc. Message Board

j0n_48195 38 posts  |  Last Activity: Apr 29, 2016 3:19 PM Member since: Apr 2, 2001
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  • Reply to

    Too big to fail?

    by strappedtoo Apr 10, 2016 8:28 AM
    j0n_48195 j0n_48195 Apr 29, 2016 3:19 PM Flag

    That's true, but if his logic had been correct otherwise, the comparison to $1500 would have been valid. In other words, $56 worth of stock would have been worth $1500 wwithout dilution. But if you take into account 92% (I think) dilution (meaning a share today only represents .08 share of the old company) that makes the adjusted peak value $144 in todays share dollars. We're not there yet, but it's crazy to think AIG "should" see $1500 again before we're in the clear.

    Sentiment: Buy

  • Reply to

    Losses from Japanese Earthquakes

    by combined_ratio Apr 17, 2016 6:33 PM
    j0n_48195 j0n_48195 Apr 27, 2016 1:15 PM Flag

    That's a lot of reading between the lines, but I was at least able to infer the house fire stuff. Have to agree with you on all points, except I'm feeling a bit more generous about giving a slimmed down AIG more time to sort out their performance issues. BTW, dismantling AIG would be more than a "bone" to warrant holders. The double adjustment for distributions would be a windfall for us. Either way, AIG stands to be profitable, even if it is boring over the next few years. I'm assuming you're invested. If so, good luck to us both.

    Sentiment: Buy

  • Reply to

    Losses from Japanese Earthquakes

    by combined_ratio Apr 17, 2016 6:33 PM
    j0n_48195 j0n_48195 Apr 26, 2016 10:18 PM Flag

    I've done OK, but only OK, ball-parking big events like Sandy. That means high or low by a factor of 2- after the press released overall damage estimates. It's still guesswork. This was no Sandy. I expect this was just another day at the office, albeit an unpleasant one (human tragedy aside). This is, after all, what insurance companies do. Why they even need reinsurance is a mystery to me. I get the math of managing catastrophic risk. But when you add overhead and profit to the transaction you have to wonder if it's really worth it. (Kind of like hedge funds.) Regardless, AIG has bigger issues to deal with. KB would never be accused of being diplomatic, but he's right that this way down the list of concerns for AIG- if that is indeed what he's trying to say..

    Sentiment: Buy

  • Reply to

    Big banks

    by strappedtoo Apr 15, 2016 9:30 AM
    j0n_48195 j0n_48195 Apr 15, 2016 11:04 AM Flag

    AIG is a CASH machine. What it isn't is an EARNINGS machine. If ROE stays stuck in second gear, AIG will rightfully remain cheap. If they can get a grip on P&C expenses and underwriting, the gap between book and market value will close in a hurry.

    Sentiment: Buy

  • Reply to

    What do you know....

    by sunshinemink7 Mar 31, 2016 4:12 PM
    j0n_48195 j0n_48195 Apr 13, 2016 9:42 AM Flag

    Best of luck to you. Time will tell whether my stubbornness is a virtue or a vice. This is an odd case, where you can measure the market's irrationality by the price of the common. We're almost $10 in the money on the warrants. Given their double adjustments, and the fact they are rewarded even more if the company fails and is sold off by divisions, this is the most self-hedged investment I've ever made. In less than 5 years, it won't matter what the market thinks about the time value. Strike should be about $30, each warrant worth 1.3-ish shares and book value in the $85 range- unless AIG is dismantled, in which case the warrants are worth much more. So, my most probable scenario prices the warrants at $70 in 2021. I can't imagine them below $50. They could just as well be north of $100.

    Sentiment: Buy

  • Reply to

    Too big to fail?

    by strappedtoo Apr 10, 2016 8:28 AM
    j0n_48195 j0n_48195 Apr 10, 2016 12:53 PM Flag

    Most would agree with you, but add that AIG has more downsizing to do before they press their case. When they finally get there, they can't afford a "no". Further, I don't think this is just about what's logical or right. The feds are appealing the Met Life decision. That delisting is not a done deal. The truth is the fed doesn't really want these companies to downsize. They would rather regulate them. It's the government mindset. Once they got the authority, the fed would fight to regulate a corner gas station. Met Life won because the law lacked clear criteria and relied on government whim. That's the way the fed likes it. Don't expect them to give up without a fight.

    Sentiment: Buy

  • Reply to

    Question about buybacks

    by j0n_48195 Mar 23, 2016 1:25 PM
    j0n_48195 j0n_48195 Apr 5, 2016 4:15 PM Flag

    Points taken. We have to agree to disagree on some. Dividends are supposed to be "forever". I have to think the markets would discount for that "day of reckoning". But in the end, the market does what it wants to do. t's ironic I would argue against your view. If you had your way the warrants would hit the jackpot, but even more jobs would be put at risk. Buybacks can stop on a dime, AIG would have to make draconian cuts to protect an unsustainable dividend as long as possible.

  • Reply to

    Question about buybacks

    by j0n_48195 Mar 23, 2016 1:25 PM
    j0n_48195 j0n_48195 Apr 5, 2016 12:56 PM Flag

    You are right about many buybacks being used to hide stock bonuses. WB says options are the most egregious example of accounting abuse- they're not required to be posted as a cost. Nevertheless, I differ on the rest of your thesis. Do you think AIG would trade anywhere near $54, if they hadn't reduced share count by a third? To value investors, market based arguments are not foremost. You are correct, so far as the business commentators go (and yes there are "lumped together" studies to back them up). The warrants would have benefited even more, if that buyback cash were paid in dividends instead. But as a shareholder, I'd prefer buybacks. Book value has been growing yoy in the double digit range. The market is right to be skeptical, but that value will assert itself soon enough.

    Sentiment: Buy

  • Reply to

    Question about buybacks

    by j0n_48195 Mar 23, 2016 1:25 PM
    j0n_48195 j0n_48195 Apr 4, 2016 8:28 AM Flag

    My rationale is that their problems are fixable. Insurance is mainly a commodity business. What works and what doesn't is relatively easy to identify, though remedies may be difficult to execute. Insurance is also "fungible". What I mean by that is it may be worth more dead than alive. Just like an old car may be worth more for for parts than transportation. If AIG cannot get it's house in order, they will be dismantled and sold piecemeal. Many companies can delay that painful decision indefinitely. AIG no longer can. One way or another, AIG's underpriced assets will reach their natural peer valuations. The more that happens by shrinking, the more it benefits the warrants relative to the common.

    Sentiment: Buy

  • Reply to

    Question about buybacks

    by j0n_48195 Mar 23, 2016 1:25 PM
    j0n_48195 j0n_48195 Apr 2, 2016 8:14 AM Flag

    On average, we're all average. Right? But everyone of us is different. So are corporations. The implication of that study is that buyback companies could have reinvested in their businesses more profitably. That's like saying many healthy people jog, so we should make everybody in the hospital jog. I'm guessing many of the buyback companies would have been even less profitable chasing growth that wasn't there. Boards don't make that decision in a vacuum. It's based on their cash flow and growth prospects. Too many CEOs seek to grow their empires at the expense of shareholders. Why give a CEO a larger company to manage, when he's doing a lousy job with a smaller one? That's bad for shareholders, but also the economy. It destroys jobs in the longer term.

    And what about dividends? Are there studies that prove high dividends hurt profitability? Of course not. Mediocre profits are the reason why many companies return more to shareholders in dividends and retain less for growth (or use more debt to run the business).,Both return capital to shareholders and shrink the balance sheet.. The main distinction is that dividends are a much less flexible way of doing it. AIG has had plenty of time to get its house in order. While they've managed capital well, chronic low profitability, with no end in sight until forced upon them, demands they shrink the balance sheet. When AIG turns that ROE around, talk about growing the business will have credibility.

    Sentiment: Buy

  • Reply to

    Question about buybacks

    by j0n_48195 Mar 23, 2016 1:25 PM
    j0n_48195 j0n_48195 Apr 1, 2016 5:05 PM Flag

    You sound like an employee with a job on the line. Been there. In that case, I understand your position..Buybacks are neither good nor bad, except in the context of stock price and, as you say, opportunities for growth and reinvestment in the business. When a repurchased share earns an immediate 38% return on book, buybacks are a "no-brainer" provided book is real and the cash is there. AIG thinks they are retaining enough to reinvest to modernize their business. Otherwise, the stock price is TELLING THEM to shrink. The regulators are TELLING THEM to shrink, or at least punishing them for not. Icahn and Paulsen are TELLING THEM to shrink. As painful as Adam Smith's invisible hand might be, all economic forces are aligned. Until AIG's ROE justifies a growing asset base, shrinking is the most prudent and profitable thing to do. Delaying the necessary adjustments only temporarily defers unemployment for some, and permanently destroys value for all shareholders. Markets are about allocating capital efficiently. With a ROE of 6-7% AIG must do better to justify diverting more assets to growth. Growth is not health. Profitability is. AIG isn't healthy yet.

    Sentiment: Buy

  • Reply to

    What do you know....

    by sunshinemink7 Mar 31, 2016 4:12 PM
    j0n_48195 j0n_48195 Mar 31, 2016 5:53 PM Flag

    I felt we were at least a buck under valued on the warrants. That "correction" happened on double volume and then some for the warrants, while the common fell on tepid volume- a good sign for both. Maybe Berkowitz is finally done selling and another fund is giving the warrants a well deserved look. I bet Icahn or Paulsens' guys' jaws dropped when they realized how even a partial liquidation could affect the warrant conversion rate. That double adjustment increases their value exponentially. I'm weak on accounting and insurance, but I get the math. If AIG distributes tens of dollars per share over the next five years, as I suspect, those warrants will convert more that 2 shares per warrant, at a strike in the low 20"s or lower. Because that dynamic only really bites in the out years, I feel its value has been overlooked and over-discounted. Bout time somebody wised up.

    Sentiment: Buy

  • Reply to

    guaranteed

    by jtirich Mar 30, 2016 12:08 PM
    j0n_48195 j0n_48195 Mar 30, 2016 1:16 PM Flag

    Logically you are correct, but my own experience, as well as psychological evidence proves otherwise. Humans, as it turns out, are not very rational beings. In fact, there has proven to be an inverse correlation between CEO compensation and performance in recent decades. In other words, you DON'T get what you pay for- just the opposite. The best performing CEOs work from a sense of mission. The more you pay them, the more money becomes their ONLY motivation. Peter will perform better, because his survival and reputation depend upon it. Whether he makes $12M (2015 compensation) or $20M will have little bearing on that.

    Sentiment: Buy

  • Reply to

    Question about buybacks

    by j0n_48195 Mar 23, 2016 1:25 PM
    j0n_48195 j0n_48195 Mar 30, 2016 1:14 PM Flag

    Answers my question. Thank you. Your qualifier "typically" reflects my understanding that it's a judgement call by the regulators. I'm not sure whether people get on the phone with them to talk through a scenario beforehand, or they just look to precedents and trust they're OK. Either way, let's hope the buybacks continue without pause- and yes, the recent weak volume is a concern in that regard. Thanks again.

    Sentiment: Buy

  • There was a recent article, which referenced AIG, stating that there is a 5 week stock repurchase blackout before, and a 2 day blackout after, earnings release. I think they quoted that period beginning March 24th (tomorrow)? My feeble research indicates these are just guidelines. My understanding is that ongoing buybacks can chug along with little blackout, absent "material" information or an event. Based on buyback volumes in recent quarters, it seems AIG has gotten 10% of the whole market's quarterly volume, rather than just 2/3rds of it. With volume down by half during many recent days, this matters. Are my projections of 40-50 M shares repurchased each quarter still valid? Is AIG really plowing through this extensive blackout period? I know some of this is a judgement call, but there are many posters here who know more than I do on such matters. Anybody?

    Sentiment: Buy

  • Reply to

    amazing

    by jtirich Mar 10, 2016 2:32 PM
    j0n_48195 j0n_48195 Mar 10, 2016 11:20 PM Flag

    I wouldn't cheer Icahn's exit. He and Paulson's presence is keeping Peter honest and focused. I'm hoping for great things too. I think the warrants are especially attractive. If P&C produces we win. If they don't, warrants are doubly rewarded by spinoff adjustments. I still think that additional share conversion adjustment is the big secret in plain sight.

    Sentiment: Buy

  • j0n_48195 j0n_48195 Mar 9, 2016 8:50 AM Flag

    Tons of data, but I don't see any analysis. Might be useful, but I'm calling this post SPAM.

  • j0n_48195 j0n_48195 Mar 8, 2016 8:33 AM Flag

    Their $2.2B buyout has just been terminated. Nice try though.

  • Reply to

    GOLD up Massive on Every Exchange on the Planet

    by talfster Feb 29, 2016 11:47 PM
    j0n_48195 j0n_48195 Mar 1, 2016 8:39 AM Flag

    Stupidity in explosive growth phase. Say good bye to idiots.

  • Reply to

    hancock is still the best ionvestor

    by jtirich Feb 28, 2016 9:11 AM
    j0n_48195 j0n_48195 Feb 29, 2016 3:25 PM Flag

    You and me both. I think the warrants are structured so we win either way, but I've worked at companies going through similar shake-ups. Families suffer when corporate leadership is weak. AIG needs more than metrics to fix their P&C. They need somebody with vision. Peter's creative finance is necessary but not sufficient.

AIG
55.82-0.01(-0.02%)Apr 29 4:00 PMEDT