American International Group Inc
President Brian Boyle of Boyle Capital says American International Group Inc (NYSE:AIG) is an example of an investment with activist involvement that has a clear and sensible plan to enhance value by returning capital to shareholders.
AIG was one of the poster children for the abuses of the financial crisis. They’ve spent a number of years working through their problems and repairing their reputation. They’ve had to sell a number of businesses along the way, and it remains a work in progress.
However, when you look at AIG today, it is a fairly simple story that comes down to management and its ability to execute. In early 2016, management announced an ambitious plan to return $25 billion to shareholders by the end of 2017. Over the past few quarters, we feel management has executed fairly well on that plan. However, waiting in the wings are Carl Icahn and John Paulson, both of whom have representation on the board of AIG.
Book value on AIG today is around $84 a share. Current share price is around $59. We believe that at the very least, AIG should trade at book value, given the type of franchise that they have. Icahn and Paulson have proposed that AIG sell off the life insurance assets, or at least parts of the life insurance business, and use that capital to buy back stock at a discount to book value.
