American International Group Inc.
) wrote off the US government's stake in the company by
repurchasing the final warrants from the US Treasury for $25
million. This makes the company an independent insurer once
AIG had wound up the $182.3 billion government bailout loan in
Dec 2012. The company had received the loan in Sep 2008. The US
government earned an additional profit of $22.7 billion, apart
from the bailout loan amount from AIG.
However, the Treasury still owned warrants that could help it
possess about 2.7 million shares of the company at $50 per share
and another set of 150 shares at $0.00002 per share, issued in
2008 and 2009, respectively. Last week, AIG bought both sets of
warrants for a total of $25 million.
Post the full repayment of its government bailout loan last
year, AIG is steadily moving toward attaining capital
flexibility. This is reflected by its financial leverage that
declined to 22% currently from 31% at 2010-end, whereas operating
return on equity (ROE) improved to 7.2% at 2012-end from 2.7% at
2011-end. Meanwhile, the latest warrant buyback, which closed the
final chapter of AIG receiving government aid, should further
improve the company's capital leverage.
In an attempt to lower its risk profile, AIG also intends to
repurchase bonds worth $1.25 billion from the open market.
Additionally, the sale of its aircraft leasing unit -
International Lease Finance Corp. (ILFC) by mid-2013, will likely
improve AIG's leverage, compared with its peer group. AIG's
ongoing efforts and positive results have also helped it earn the
confidence of the shareholders' and ratings agencies.
While any robust growth appears overly ambitious at present,
we believe a positive turnaround in the global economy and an
improved macro scenario is likely to pave the way for significant
growth of AIG. Currently, the company carries a Zacks Rank #3
Meanwhile, other outperformers of the insurance industry
XL Group Plc
EMC Insurance Group Inc.
), all of which carry a Zacks Rank #1 (Strong Buy).
AEGON N V (AEG): Free Stock Analysis Report
AMER INTL GRP (AIG): Free Stock Analysis
EMC INSURANCE (EMCI): Free Stock Analysis
XL GROUP PLC (XL): Free Stock Analysis Report
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