In an attempt to lower its risk profile,
American International Group Inc.
) announced its intention to repurchase bonds worth $1.25 billion
from the open market, through a tender offer.
Accordingly, AIG plans to redeem some of its junior
subordinated debentures worth about $650 million and another set
of bonds with principal amount totaling $275 million. One more
set of sterling and Euros denominated debentures, valued at about
$325 million are also set for buyback.
The company appointed Credit Suisse Securities LLC of
Credit Suisse Group AG
JP Morgan Chase & Co.
) to jointly manage the tender offer.
Following 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% now from 31% at 2010-end. Although it is still
higher than the peer group, the latest announcement of bond
redemption and the sale of its aircraft leasing unit -
International Lease Finance Corp. (ILFC) -- by mid-2013 is
further expected to improve AIG's leverage.
Capitalizing on Opportunities in Israel
Notably, AIG decided to take full ownership in AIG Israel by
purchasing 49.99% stake from Aurec Gold Investments Ltd. early
this week. The company already owns the remaining 50.01% in this
Israel-based operation. This will terminate the joint venture
between AIG and Aurec that lasted over 16 years. However, the
deal awaits the approval of the insurance regulator in
AIG's insurance operations in Israel have been witnessing
significant improvement since 2001. Moreover, the decision to own
all of the Israeli operations blends well with the company's
long-term growth strategy of engendering higher earnings from the
rapidly emerging nations.
AIG is slated to release its fourth-quarter 2012 earnings
after the closing bell on Feb 21, 2013. The Zacks Consensus
Estimate for the fourth quarter is pegged at a loss of 9 cents a
share, given higher catastrophe losses from Hurricane Sandy.
However, earnings are expected to grow by about 269% over 2011 to
$3.77 per share in full-year 2012. Currently, the company carries
a Zacks Rank #4 (Sell).
AMER INTL GRP (AIG): Free Stock Analysis
CREDIT SUISSE (CS): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
MORGAN STANLEY (MS): Free Stock Analysis
To read this article on Zacks.com click here.