This Day On The Street
Continue to site
ADVERTISEMENT
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

AIG Will Sink or Swim Without Uncle Sam (Update 2)

The government's sale of shares follows AIG's announcement on Sunday of an agreement to sell "up to a 90% stake in International Lease Finance Corporation (ILFC), a non-core asset," to an investor group led by Weng Xianding, the chairman of New China Trust Co. Ltd. for about $4.75 billion.

The transaction values ILFC at $5.28 billion. AIG said that it would "retain at least a 10% ownership stake" in the aircraft leasing unit, so that the company can "continue to participate in the growth of ILFC's unique franchise, including the benefits that the investor group will bring to the company."

The company also said that "when the transaction meets the criteria for 'held for sale' accounting treatment, AIG expects to record a non-operating loss of approximately US$4.4 billion, which includes a non-cash charge of approximately $1.8 billion associated with the utilization of tax net operating loss carry forwards from this transaction."

Signs of P&C Underwriting Weakness


AIG on Friday announced that its "preliminary estimate" of losses from Hurricane Sandy would be $2.0 billion, net of reinsurance, or $1.3 billion after taxes. The company also said it expected to contribute $1 billion in capital to its AIG Property Casualty unit, after the unit had paid $2.4 billion in dividends to the holding company through the first three quarters of 2012.

AIG also said on Friday that the P&C unit had $49.6 billion in capital and that the parent company had total equity of $102.4 billion. So for AIG, Sandy is clearly "an earnings event, not a capital event," as Deutche Bank analyst Joshua Shanker wrote in a report on Monday.

Sandy will wipe out AIG's fourth-quarter earnings, with Shanker estimating a net loss of 16 cents a share and lowering his 2012 EPS estimate to $3.77 from $4.10, while lowering his 2013 EPS estimate by a nickel to $3.45."

Shanker said that the company's exposure to Sandy was "higher than we would expect," but also said that "a lack of gross loss detail could mean that AIG is reserving conservatively by reserving up to its retention, given the uncertainty still inherent from the event, and may result in favorable development in the future."
2 of 3

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
Only $9.95
14-Days Free
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
SYM TRADE IT LAST %CHG
ALL $64.87 0.00%
AIG $61.82 0.00%
TRV $100.50 4.00%
AAPL $126.84 1.10%
FB $86.76 1.20%

Markets

DOW 17,619.51 +23.16 0.13%
S&P 500 2,063.11 +5.48 0.27%
NASDAQ 4,986.8670 +28.3990 0.57%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs