|New Threads Only:|
|New Threads & Replies:|
Forum List » Guru News and Commentaries|
Guru News, Stock picks and commentaries
The Economist on the New and Improved AIG - the Most-Bought Stock of Hedge Funds
Posted by: Holly LaFon (IP Logged)
Date: March 5, 2013 10:41AM
AMERICANS are often asked by politicians if they are better off now than they were four years ago. Anyone involved with American International Group (AIG), an insurance company felled by the financial crisis, can safely answer “yes” to that question. In just four years it has freed itself from a $182 billion bail-out; gone from being publicly owned back to the private sector (the Treasury sold the last of its stake in December); and turned itself into a leaner, simpler business. Now that it has successfully shaken off government ownership, AIG’s next task is to prove its worth as a stand-alone, listed company.
That AIG is around at all is remarkable. By piling into what would emerge as the most rotten part of the financial system (insuring investors against losses on securities linked to American subprime mortgages) during the credit bubble, it ended up owing billions of dollars to those holding the other side of its bets. Ben Bernanke, the Federal Reserve’s chairman, famously derided AIG as a hedge-fund attached to a large and stable insurance company.
Today’s AIG is different. The buccaneering financial-products unit, whose need for collateral caused the government to intervene in September 2008, is all but shuttered. Many of AIG’s prized units have been sold to help finance its rescue, notably Alico and AIA, both non-US life-insurance businesses with bright prospects. An aircraft-leasing arm is in the process of being flogged.
The transition back to private ownership has been pretty smooth. Much of the credit for the transformation falls to Bob Benmosche, a former boss of MetLife, an insurance rival, who was pulled out of a retirement spent cultivating grapes in Croatia to take the reins in August 2009. Known for his blunt, speak-your-mind approach (a month into the job, he said he was avoiding “those crazies down in Washington”), he has helped turn a demoralised group with a radioactive brand into a company with a renewed sense of self.
The happy ending to this corporate fairy tale is still some years away, however. What remains of AIG is hardly a world-beating company. Return on equity, at 5%, is just about the lowest of its American peers. Margins are lousy at both the general-insurance division (known as property-casualty, which insures homes, cars and the like) and the life-insurance bit (which offers bank-like savings products).
Continue reading the article here.
Stocks Discussed: AIG,
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC. Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.