This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

AIG Plans $5 Billion Buyback (Update 1)

Updated with afternoon market action, economic news, and comment from Sterne Agee analyst John Nadel.

NEW YORK ( TheStreet) -- American International Group (AIG - Get Report) on Thursday announced that it was selling up to $2 billion in shares of AIA Group Ltd. to a group of private investors, partially funding a new authorization for AIG to buy back up to $5 billion in common shares.

AIG spun-off AIA Group of Hong Kong in 2010, netting about $20.5 billion at that time, and selling another $6 billion worth of the shares in March.

AIG's $5 billion share repurchase authorization is expected to be acted upon quite soon, through another deal to repurchase common shares held by the U.S. Treasury. Following a repurchase of about $3 billion government-held shares in August, the government was left holding 53% of AIG's shares, which were worth about $31.9 billion, as of Wednesday's close, at $34.81.

Deutsche Bank analyst Joshua Shanker early on Thursday reiterated his "Buy" rating for AIG, while raising his price target by $2 to $42, saying that he now expects the next government sale of AIG shares "to be a large offering," that "AIG will be a significant repurchase," and that "a repurchase of $10 billion would be book value per share -accretive by $7-8."

While raising his price target for AIG because of the expected increase in book value, Shanker expects the Federal Reserve "to exercise its jurisdiction" over the company, and "request a moratorium on further capital management activities until it can author and apply a stress test to AIG's capital adequacy."

Following the next government offering and AIG buyback, Shanker expects AIG to suspend share buybacks until the second half of 2013, causing him to lower his 2013 EPS estimate for the company to $3/60 from $3.90.

Although the government has sold some common shares held in bailed-out companies into the open market, its slow strategy to unwind from AIG through company buybacks has been working out well for all parties, as the shares have risen 50% year-to-date through Wednesday's close.

Sterne Agee analyst John Nadel later on Thursday said that AIG's shares were "likely to come under considerable pressure," since "both the sale of AIA and the buyback authorization are meaningfully below both our and consensus expectations." The analyst had been factoring a sale of AIG's full $7 billion AIA stake and a $9 billion common share buyback into his earnings estimates.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
AIG $54.79 0.20%
AAPL $124.49 -1.50%
FB $82.16 -1.20%
GOOG $548.46 -0.65%
TSLA $188.77 -0.94%


DOW 17,776.12 -200.19 -1.11%
S&P 500 2,067.89 -18.35 -0.88%
NASDAQ 4,900.8850 -46.5560 -0.94%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs