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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

AIG Buybacks Getting a Little Stressed: Street Whispers

Weiss Ratings senior financial analyst Gavin Magor says that "any company facing AIG's 2008 disaster would have loved to have been granted four years and limitless government cash."

"In return for the bailout, AIG was initially being forced to break up the conglomerate," he says, "but the company was granted an indefinite stay of execution, which they took full advantage of, to maintain their leadership in many area of insurance, especially in price-sensitive areas like property and casualty, where there were rumors of complaints that they were underpricing the market, simply to gain control."

Taxpayers bought AIG the most valuable thing on Wall Street: time.

In return, with Monday's sale of AIG shares, the "Treasury and the Federal Reserve have now recovered a combined total of $194.7 billion" from the AIG bailout, including profits on the sale of shares and interest payments on loans, "representing a positive return of $12.4 billion to date compared to the original combined $182.3 billion commitment," according to the Treasury.

Underwriters have the option to purchase an additional 83,076,922 shares over the next 30 days, which could bring the government an additional $2.7 billion.

Treasury Secretary Tim Geithner said that "taking action to stabilize AIG during the financial crisis was something the government should never have had to do, but we had no better option at the time to protect the American economy from the damage that would have been caused by the company's collapse,"adding that "to stabilize and then restructure the company with a very substantial positive gain for the American taxpayer is a significant accomplishment, but we need to continue the critical task of implementing Wall Street reform so that the American economy is never put in this position again."

Be that as it may, it's all water under the bridge for investors, who need to decide if holding shares in AIG is still a good deal.

At Monday's close, AIG's shares traded for less than 10 times the consensus 2013 EPS estimate of $3.47, among analysts polled by Thomson Reuters. Among 18 analysts polled, 10 rate the shares a "Buy," while the remaining eight have neutral ratings. That's a pretty strong vote of confidence, and the consensus price target of $38.21 implies another 15% upside for the shares.

Sterne Agee analyst John Nadel last week called AIG's announcement of the sale of $2 billion AIA shares "a much smaller portion than expected," and said there was "no obvious answer" as to why the company didn't sell more of its $7 billion stake in the Asian insurer.

On the bright side, AIG has at least $5 billion more in potential fuel for additional buybacks, once the company navigates its first round of Federal Reserve stress tests next early next year.

Interested in more on Capital One Financial? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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!
DOW 16,943.81 +28.74 0.17%
S&P 500 1,967.57 +2.89 0.15%
NASDAQ 4,415.49 +19.2860 0.44%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

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