Significant Insider Buying at AIG

We have seen some very encouraging insider buying at AIG that I believe warrants attention.  AIG is one of the most misunderstood large cap companies that we see.  Most analysts and market participants are blinded by their recent history of liquidity failure, as opposed to the century long history of becoming one of the most respected, and most powerful companies in the world.

Currently the market capitalization of AIG is around $50 Billion.  They still owe $6.8 Billion to the US Treasury.  AIG has tremendous assets that aren’t adequately reflected at the current price.  They have an airplane leasing company ILFC, which they are looking to execute an IPO on valued at anywhere between $7-10 Billion, which should allow them to pay off the Treasury debt.  They still own about a third of the Asian insurance company they spun off AIG, which is worth about $13 Billion.  We believe AIG should earn between $6-8 Billion a year moving forward, particularly as P&C rates are firming up after one of the worst years for natural disasters in history.  If you net out AIA, ILFC, and the Treasury debt you are in essence buying the actual insurance company for about 5 times earnings.  To sweeten the pot even further they have substantial deferred tax assets that should add another $10 a share to book value as the company continues to produce profits.

AIG has instituted a small stock buyback which I expect them to increase once the US Treasury is fully repaid.  The US Government is the largest shareholder of the company and I think it might make sense for AIG to offer to buy the government’s stake, particularly with the elections coming in November, as government involvement in a private corporation is unattractive politically.  The key point is that we should get more clarity and as that occurs I expect the stock to go a lot higher!  Below is the information on recent insider purchases by the CEO whom I have a great deal of respect for:

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