Bruce Berkowitz (Trades, Portfolio): As we have written in all of our letters, we bought AIG at substantial discount to tangible book value (“TBV”). We had a simple thesis that AIG still had a franchise value, and that AIG (NYSE:AIG) was worth at least TBV. We then started selling in 2014 as our thesis played out and AIG approached our estimate of TBV. That was always our game plan.
We have made a considerable amount of money in AIG, and AIG remains the largest position in the Fairholme Fund (Trades, Portfolio) in the form of long-dated, double-ratchet warrants, which we received during the recapitalization of AIG in 2011. It is my belief that these double-ratchet warrants have unique features regarding conversion price and conversion ratio, and they can potentially disproportionately benefit from future corporate actions of AIG including asset sales, capital distributions, and dividend payments. Continue Reading »