AIG Rewards Shareholders through Dividends and Stock Repurchases
AIG's Restructuring, Business Exits Could Boost Long-Term Returns
Returning capital
American International Group (AIG) deploys its capital on new initiatives, technology upgrades, expansion of product lines, and services for increasing its presence globally.
In 2016, the company will make select investments in technology and innovation, and it will also return capital to its shareholders. It rewards shareholders through dividends and stock repurchases.
The company declared a rise of 124% in its quarterly dividend to $0.28 per share, translating into an annualized dividend yield of 1.8%. Its dividend yield has remained at par when compared with other players in the insurance business that form 22.7% of the Financial Select Sector SPDR ETF (XLF).
Share repurchases
In the third quarter of 2015, AIG repurchased approximately 61 million shares, forming 4.9% of total outstanding shares, for an aggregate purchase price of $3.7 billion. The company made additional repurchases of approximately $602 million through the end of October 2015.
AIG authorized the repurchase of additional shares with an aggregate purchase price of up to $5.0 billion, bringing the company’s remaining share repurchase authorization to approximately $6.3 billion.
AIG management highlighted the possibility of returning $6–$7 billion in capital to shareholders in 2015 in the form of share repurchases and dividends. The company appears to be optimistic about capital flows in the life insurance business as well as the improved risk profile of the property and casualty business.
Other insurers have also repurchased their shares and returned capital to shareholders. ACE (ACE) repurchased $430 million in shares, Chubb (CB) repurchased $346 million in shares, and Allstate (ALL) undertook a share repurchase of ~$250 million.
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