In an effort to boost shareholder confidence,
American International Group Inc.
) sanctioned a new share repurchase program worth $2.0 billion,
which will commence with immediate effect. However, the expiry of
the buybacks remains indefinite and depends on market and operating
This marks the second authorization in this year itself and
third one within a year, which was approved in Aug 2013 (worth $1.0
billion) and completed successfully. In Feb 2014, AIG had permitted
another $1.0 billion of stock repurchases, to be implemented
Meanwhile, the company bought back about 17.4 million shares for
$867 million during first-quarter 2014. An additional stock worth
$418 million was repurchased so far in second-quarter 2014, leaving
about $119 million of shares available for repurchases under the
Following the latest replenishment, AIG now has gross stock of
$2.12 billion remaining for buyback. The latest extension of the
share buyback also came soon after AIG hiked its dividend payout by
25% in Feb 2014, from the prior amount of 10 cents a share.
Strong Capital Resources
The amplified stock repurchases stem from AIG's strong capital
position and a moderately risk-free balance sheet, also signaling
earnings accretion from lower share count. The divestment of
International Lease Finance Corp. (ILFC) to
AerCap Holdings NV
) last month for about $7.6 billion has further boosted the
company's liquidity and capital flexibility.
At the end of Mar 2014, AIG's long-term debt also narrowed to
$39.5 billion from $41.7 billion at 2013-end. Previously, efficient
liability management initiatives helped debt-to-capital ratio
improve to 17.3% at 2013-end from 20.5% at 2012-end and about 31%
at 2010-end. Meanwhile, total investment portfolio and cash
position witnessed improvements. These reflect improved leverage
and superior capital adequacy to meet future obligations, thereby
boosting investors' confidence in the stock.
Currently, AIG and AerCap bear a Zacks Rank #3 (Hold). Some
better-ranked insurers include
OneBeacon Insurance Group Ltd.
Old Republic International Corp.
), both of which sport a Zacks Rank #1 (Strong Buy).
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AMER INTL GRP (AIG): Free Stock Analysis Report
ONEBEACON INSUR (OB): Free Stock Analysis
OLD REP INTL (ORI): Free Stock Analysis Report
AERCAP HLDGS NV (AER): Free Stock Analysis
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