AIG Returned $2.6 Billion to Shareholders in 3Q16



Rewarding shareholders

American International Group (AIG) deploys cash flows on new offerings, organic expansion, and technology upgrades to increase its presence globally. The company also uses cash flows for returning capital to its shareholders through dividends and stock repurchases.

AIG declared its quarterly dividend of $0.32 per share in 3Q16 totaling ~$338 million, translating into an annualized dividend yield of 2.2%. Its dividend yields remained on par with other competitors, which form part of the Financial Select Sector SPDR ETF (XLF).

AIG’s competitors also engaged in repurchases and returned capital to shareholders. Chubb (CB) has a yield of 2.2%, Allstate (ALL) has a yield of 1.9%, and MetLife (MET) has a yield of 3.5%.

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Share repurchases

In 3Q16, AIG repurchased ~39.8 million shares, or 3.8% of total outstanding shares, for a purchase price of ~$2.3 billion. The company made additional repurchases of ~$946 million through November 2, 2016. In 3Q15, AIG repurchased 61.0 million shares for $3.7 billion, reflecting marginal declines over the past few quarters. Year-to-date, AIG has returned total capital of $10.6 billion, forming 17% of its current market capitalization.

On November 2, 2016, AIG’s board authorized an additional increase to the existing repurchase authorization of $3 billion, resulting in a remaining authorization of $4.4 billion.

AIG’s book value rose to $85.02 in 3Q16, compared to $75.10 in 3Q15 and $83.08 in 2Q16. The rise was mainly due to lower interest rates on existing leverage, higher earnings growth, and share repurchases. The company is currently trading at a price-to-book ratio of 68.4x.

In the next part of this series, we’ll study AIG’s restructuring initiatives, strategic actions, divestitures, and long-term strategy.


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