American International Group Inc

The U.S. Department of the Treasury holds auctions for three-year Treasury notes (or T-notes) each month. Three-year notes are at the short-end of the yield curve.

The US Treasury introduced two-year floating rate notes (or FRNs) in January 2014.

In this series Activist investor Dan Loeb’s fund, Third Point Partners LP, disclosed some of the positions traded during 3Q14 in its 3Q investor letter. In this series, we’ll go through the details of these positions and Third Point’s rationale for adding or exiting its stakes. In its 3Q letter, the fund said it “continued […]

Appaloosa Management significantly lowered its position in American Airlines (AAL) in the third quarter that ended in September 2014. The position accounts for 3.81% of the fund’s total third-quarter portfolio.

Berkowitz believes that Fannie Mae and Freddie Mac entities are highly valuable and expects them to generate earnings of at least~$21 billion a year.

The Baupost Group, LLC, is a hedge fund founded and run by Seth Klarman in 1982. Why sell Kinross Gold Corp. (KGC)?

Atlas Air Worldwide (AAWW) is an outsourced global provider of aircraft and aviation operating services for airlines, express delivery providers, freight forwarders, the United States military, and charter brokers.

The Baupost Group, LLC, is a hedge fund founded and run by Seth Klarman in 1982. Why sell American International Group (AIG)?

The US Department of the Treasury introduced two-year FRNs (floating rate notes) in January 2014. An FRN is a debt security. Its interest payment varies.

The Baupost Group, LLC, is a hedge fund founded and run by Seth Klarman in 1982. Why sell Yamana Gold Inc. (AUY)?

Market demand for two-year floating rate notes in September fell sharply to 24.7% of the accepted competitive bids—its lowest mark ever—compared to 43.6% at August’s auction.

The global financial crisis of 2008 proved to be the major mover of the financial markets in the last 20 years. Internet companies and the banking sector took a beating.

Primary dealer takedown was lower due to higher market demand. It was 36% of competitive accepted bids—down from 38.5% in February’s auction.

Appaloosa Management initiated a new position in NXP Semiconductors NV (NXPI) in the third quarter that ended in September 2014. The position accounts for 2.55% of the fund’s total third-quarter portfolio.

AIG (AIG) reported a net loss of $6.66 billion in 4Q17—compared to a loss of $3 billion in 4Q16.

Appaloosa Management upped its position in Whirlpool Corporation (WHR) in the third quarter that ended in September 2014. The position accounts for 4.29% of the fund’s total third-quarter portfolio.

The ten-year Treasury (IEF) note auction is of great interest to stock and bond (BND) market participants. Ten-year Treasury yields are benchmarks for many interest rates, including mortgages (IYR)(VNQ) and equity risk premiums (QQQ).

Appaloosa Management exited a position in Expedia, Inc (EXPE) in the third quarter that ended in September 2014. The position accounted for 0.99% of the fund’s total portfolio in the second quarter.

A company managing higher risk products must maintain a higher level of minimum capital compared to a company with a relatively lower level of risk.

An underwriting loss is not unusual for an insurance company. In a soft pricing environment, pricing of P&C products is low due to intense competition.

As customers use Internet-based aggregators to purchase insurance policies, insurers use online sales to interact directly with customers and reduce costs.

The impact of interest rate movements is lower in the P&C segment, as their products can be repriced annually to keep in line with interest rate movements.

For P&C insurers such as AIG and ACE, various mandatory requirements may drive sales of vehicle, workers’ compensation, and homeowners insurance.

Insurance premiums have grown at a modest pace after a dip in 2009 due to the financial crisis, which the industry was able to navigate.

P&C products have commoditized characteristics, resulting in sharp competition in the market and business cycles. AIG and ACE are key players in this space.

Policyholder liabilities, or policyholder reserves, represent the future claims that may arise for the pool of policies the insurer writes.

Financial market movements not only impact income from invested assets, but also the value of assets carried at fair value on an insurer’s balance sheet.

US insurance M&A activity picked up in 2014 after a two-year dip, as insurers try to capture growth opportunities in domestic and foreign markets.

Insurance ETFs are poised to gain from industry growth. As interest rates improve, insurers should see better earnings due to higher investment returns.

Essent Group Ltd. saw an IPO on October 31 2013 that raised $335 million. The company sold 19.7 million shares in the IPO at $17 per share.

Berkshire Hathaway announced its 1Q18 results on May 5. Buffett’s investment conglomerate posted a net loss of $1.1 billion, or $692 per share.

Berkshire Hathaway’s (BRK.B) Insurance segment saw subdued growth in the second half of 2017 on reinsurance losses.

In 1Q18, Berkshire Hathaway’s (BRK.B) insurance revenue fell YoY (year-over-year) to $14.6 billion from $22.9 billion.

In this series, we’ll look into Berkshire Hathaway’s 1Q18 expected divisional performance along with a variety of other factors.

Emerging markets such as China provide a great growth opportunity for property and casualty insurers.

AIG’s Canadian business unit, AIG Canada, announced on February 13, 2018, that it had made the list of Canada’s Top 100 Employers of the younger generation.

Analysts assigned four “strong buy” or “buy” ratings out of six for Berkshire Hathaway in February 2018.

AIG’s Institutional Markets segment witnessed a marginal rise in its net investment income from $152.0 million in 4Q16 to $160.0 million in 4Q17.

Chubb’s (CB) net income in 4Q17 was $1.5 billion compared to $1.6 billion in 4Q16. It saw a rise in net premiums earned, from $7.1 billion in 4Q16 to $7.2 billion in 4Q17.

Most countries tend to issue debt to fund their deficits and keep paying interest on these borrowings. These revenues are generated through taxes from companies and individuals.

Claims could subside The insurance sector (IYF) faced headwinds and losses in 3Q17 due to hurricanes across the US East Coast. Berkshire Hathaway (BRK.B), AIG (AIG), Prudential Financial (PRU), MetLife (MET), and other reinsurers faced headwinds and underwriting losses in 3Q17, which were partially offset by gains from debt and equity investments. In 4Q17, claims are […]

American International Group’s dividend per share rose 58% in 2016 and was flat in 2017.

Berkshire Hathaway (BRK.B) reported losses before tax of $963 million in 3Q17 compared to earnings before taxes of $1.4 billion in the corresponding period last year.

Berkshire Hathaway (BRK.B) has missed estimates in six out of seven quarters mainly due to the weaker performance of the insurance sector.

Discounted valuation American International Group (AIG) has a one-year forward price-to-earnings ratio of 20.4x, whereas its peers’ average ratio is 21.0x. National General Holdings (NGHC), Allstate (ALL), and Arch Capital Group (ACGL) have ratios of 18.8x, 15.1x, and 29.2x, respectively. AIG’s lower valuation is mainly due its significant catastrophe losses of $3 billion in 3Q17 and its […]

Higher losses American International Group’s (AIG) personal insurance division saw catastrophe losses of $297 million in 3Q17, compared with $27 million in 3Q16. The substantial rise in losses was mainly due to windstorm and hailstorm losses, which stood at $206 million in 3Q17 and $26 million in 3Q16. Over the last 12 months, AIG has had a […]

Net investment income and premiums American International Group’s (AIG) group retirement division saw its premiums fall marginally to $8 million in 3Q17 from $9 million in 3Q16. The division’s net investment income fell 5% from $554 million in 3Q16 to $524 million in 3Q17. This fall was mainly due to lower income from alternative investments. Whereas AIG […]

Assets under administration and premiums American International Group’s (AIG) individual retirement business saw its premiums fall 41% to $22 million in 3Q17 from $37 million in 3Q16. In 3Q17, the division’s assets under administration stood at $147.8 billion, due to positive equity markets and a favorable net flow related to index annuities. Whereas AIG has an enterprise value […]

Marginal fall American International Group’s (AIG) consumer insurance division’s total operating revenue fell 1% from $6 billion in 3Q16 to $5.9 billion in 3Q17. The marginal fall was mainly due to lower net investment income and premiums. The division’s premiums fell 2% to $3.2 billion in 3Q17 from $3.3 billion in 3Q16. Whereas AIG has a beta of […]

Total operating revenue In 3Q17, American International Group’s (AIG) commercial insurance division’s total operating revenue comprised net investment income and premiums. In 3Q17, AIG’s commercial insurance division’s total operating revenue fell to $4.6 billion from $5.4 billion in 3Q16, a 15% fall. This fall was mainly due to premiums falling 15%, from $4.5 billion in 3Q16 […]

Total expenses rise American International Group’s (AIG) total benefits, losses, and expenses rose a substantial 20% from $12.1 billion in 3Q16 to $14.6 billion in 3Q17. This rise was mainly due to policyholder benefits and losses rising. In 3Q17, AIG incurred policyholder benefits and losses of $10.3 billion, compared with $7.5 billion in 3Q16, a […]

Berkshire Hathaway Insurance segment is expected to see a YoY rise in revenues due to the sale of policies in automotive, property, and reinsurance offerings.

Chubb Limited (CB) reported net investment income of ~$1.5 billion in 1H17 compared to ~$1.4 billion in 1H16, reflecting a 9.6% increase. CB generated an 11% return on equity on a trailing-12-month basis.

According to Brian Duperreault, chief executive officer of American International Group (AIG), a company in any industry has to take the digitization path for long-term growth and success.

Brian Duperreault, chief executive officer of American International Group (AIG), has taken a major step by reshuffling the company into three units.

American International Group (AIG) is expected to announce its earnings for 3Q17 on November 2, 2017. Wall Street analysts have provided a high estimate of $0.90 for AIG’s 3Q17 EPS.

Berkshire Hathaway (BRK.B) saw subdued profits in its Insurance segment in 2Q17, mainly due to higher claims. The trend is set to get stronger in the second half of 2017

Chubb’s one-year forward PE ratio stands at 13.15x, compared with the peer average of 12.09x, which means that Chubb is trading at a premium valuation.

In 2017, MetLife (MET) is expected to declare a total dividend of $1.61 per share, representing an increase of 1.9% from the total dividend it declared in 2016.

US insurance giants (IYF) are expected to witness costs in the range of $20 billion–$65 billion stemming from the effects Hurricane Irma.

Hurricane Harvey devastated Houston in late August 2017, causing damages totaling $180 billion, but Irma could be even more expensive.

From January 2016–June 2016, AIG managed to report total operating revenues of $10.8 billion—a 15% YoY fall, primarily due to lower premiums in 1H17.

In 1H17, Prudential Financial (PRU) generated total revenues of $27.1 billion—a year-over-year decline of ~5.8%.

Wall Street analysts have given a one-year price target of $157.53 on Chubb (CB), an increase of 11.4% from the current price level.

Chubb’s (CB) life insurance division has posted net premiums written of $523 million in 2Q17 as compared to $527 million in 2Q16.

Chubb’s (CB) Overseas General Insurance division saw a decline in its net premiums written in 2Q17 from $2.01 billion as compared to $2.03 billion in 2Q16.

Chubb’s (CB) global reinsurance division has witnessed a substantial fall in its net premiums written in 2Q17 as compared to 2Q16.

Chubb’s (CB) North America Agricultural Insurance division witnessed a rise of 7.7% in its net premiums written in 2Q17 as compared to 2Q16.

Chubb Limited (CB) has witnessed a rise of 2.0% in its net premiums written in 2Q17 as compared to 2Q16.

Chubb’s (CB) North America Commercial Property and Casualty Insurance division witnessed a marginal fall in its net premiums written in 2Q17 as compared to 2Q16.

Chubb (CB) reported earnings per share (or EPS) of $2.50 in 2Q17, which beat Wall Street analyst estimates of $2.47.

American International Group (AIG) is covered by 18 analysts, out of which seven analysts gave “strong buy” ratings on the stock.

Wall Street analysts have given a one-year price target of $70.00 on American International Group (AIG), which reflects an ~14.1% increase from the current price.

In 2Q16, AIG reported operating general operating expenses (or GOE) of $2.4 billion, which the company reduced by $191.0 million. It reported GOE of $2.2 billion in 2Q17.

AIG is expected to declare dividends of $1.33 per share in 2017, reflecting a rise of ~38.5% from the total dividends declared in 2016.

In 2Q17, Prudential Financial (PRU) reported 2Q17 net income of $491 million compared to $921 million in 2Q16. Its 2Q17 earnings per share of $2.09 missed the estimate of $2.70.

AIG’s pretax operating income for personal insurance stood at $330 million in 2Q17. In 2Q16, it stood at $152 million.

American International Group’s (AIG) Consumer Business division reported pretax operating income of ~$1.3 billion in 2Q17 compared to $948.0 million in 2Q16.

In 2Q17, the pretax operating income of AIG’s Commercial Business division stood at $716 million compared to $941 million in 2Q16.

AIG is expected to post earnings per share of $1.22 in 3Q17, an ~20.3% decline from its 2Q17 earnings. AIG is expected to report revenues of ~$11.8 billion in 3Q17.

The US debt-to-GDP ratio now stands at 106.1%, which means that the total US debt is more than the annual US GDP.

The S&P 500 Index (SPY) recorded another lifetime high at 2,484.04 due to better-than-expected earnings in the first half of the previous week.

AIG’s Commercial division saw a loss ratio of 71.9 in 1Q17. AIG saw its book value expand ~2.5% in 1Q17 on a year-over-year basis.

In 4Q16, American International Group (AIG) spent $206.0 million on restructuring initiatives that target inefficiencies and expense reduction.

In this series, we’ll study AIG’s expected performance, investment profitability, operating divisions, expansion, balance sheet, dividends, and valuations.

Berkshire Hathaway (BRK-B) is expected to post EPS (earnings per share) of $2,829 per share in 4Q16 and $2,880 in 1Q17.

Closed-end funds have seen subdued originations over the past few quarters. Quality originations commanding higher yields continue to drive closed-end funds’ stock performances.

Berkshire Hathaway (BRK-B) saw underwriting revenues rise on a year-over-year basis in 3Q16 to $12.4 billion.

Berkshire Hathaway reported its third quarter earnings on November 5, 2016. The company missed analysts’ operating earnings per share estimates of $3,022 with reported EPS of $2,951.

American International Group’s (AIG) Consumer Insurance division recorded a rise in pretax operating earnings in 3Q16. The division’s pretax operating income rose to ~$1.4 billion compared with ~$657 million in 3Q15.

American International Group (AIG) has announced that it will spend $500 million on restructuring initiatives.

Prudential’s stock has risen by 16% in the past six months, mainly due to expectations of improved fundamentals and higher investment and underwriting income.

Berkshire Hathaway’s statutory surplus for its insurance businesses was $124 billion on December 31, 2015.

In 1Q16, Berkshire Hathaway’s (BRK-B) service and retailing division’s profits declined to $324 million from $384 million during the same quarter of 2015.

Interest rates are a key performance driver for life insurance companies, affecting their margins, hedging costs, and product sales.

In 2015, AIG continued its simplification process for its balance sheet. In 2016, AIG is expected to strengthen its balance sheet with higher operating cash flows.

AIG reported a pre-tax operating loss of $2.1 billion for its commercial insurance business in 4Q15 compared to a pre-tax operating income of $1.2 billion in 4Q14.

As AIG continues to decline, there are suggestions as well as speculation of an AIG sale. These speculations, although they seem unlikely to happen, can push AIG’s stock prices.

In 4Q15, AIG repurchased 53 million shares for an aggregate purchase price of $3.2 billion. It made additional repurchases of $2.5 billion through the end of February 11, 2016.

Berkshire Hathaway’s commercial lines business has expanded by 125% over the past five years to $5.6 billion through acquisitions and organic growth.