Author Topic: Bruce Berkowitz Has 26% Of The Fairholme Fund In AIG – Don’t You Think You Shoul  (Read 3420 times)

PlanMaestro

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AIG's Man in the 'Risk' Trenches
http://online.wsj.com/article/SB10001424053111904491704576574972537237478.html

"Peter is an astute evaluator of risk…and he figures things out very quickly," said Ajit Jain, who heads Berkshire Hathaway Inc.'s reinsurance business and has known Mr. Hancock socially and professionally for a decade. "He will recognize faster those things the insurance industry does poorly and be in a better position to find untapped potential."

If Mr. Hancock succeeds, he could be a shoo-in to become AIG's next chief executive when CEO Robert Benmosche retires, likely in 2012 or 2013, according to people familiar with AIG's management succession plan. Mr. Hancock "has been given an opportunity to fix the business and to potentially inherit the throne," said Jim Millstein, the Treasury Department's former chief restructuring officer who now runs Millstein & Co., a financial advisory firm.

Myth465

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Thanks for the comments guys, this one is looking interesting.

Uccmal

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I have been looking at 2014s Jan calls on AIG.  They look to be 20-50% undervalued.  I use BS as a guideline.  715 days, volatility 40 % and thats being conservative.  Risk Free - 4%.  Have a look.

Thoughts?

I am still analyzing AIG but have initiated a tiny call position.

Uccmal

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It's likely tied to my choice of volatility.  The stock price is 50% of its 52 week high, and 100% going back there.  Too much guessing at this game.

PlanMaestro

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Thomas Gallagher - Credit Suisse: Got it. Okay. Then can you talk a little bit, I guess this should be for David, can you talk a bit about your overall capital position today, I see you have north of $15 billion of liquidity resources at the holding company, but can you talk a bit about aside from the stakes in AIA and ILFC, which I realize are – at least I think about them as residual asset values that could be monetized into capital, but as it relates to capital levels that the insurance companies – is there any excess? I guess the other side question I had to that is the $11.6 billion of cash in short-term at the holding company, there is a footnote in your Q that said $8.7 billion in reverse repos is used to reduced unsecured exposures.[/b] I'm just not sure what that means, if you could elaborate?

Robert H. Benmosche - President and CEO, AIG: Sure, I'll cover parts of it and I'll ask Brian Schreiber, our Treasurer to comment on your last part there with respect to the reverse repos and the strategy behind that and the use of those. How we think about the capital management? You're right, we grew our cash and short-term and financial resource of the holding company to just north of $15 billion in the quarter. Again, we've renewed the bank facility, had a terrific stable of banks participating. We were very pleased with that participation. We also announced that we put in place an additional contingent capital facility, again building up contingent capital and contingent resources in order to again allow us the greatest degree of financial flexibility. I think we've talked quite a bit about historically the capital maintenance agreements that we put in place with all of our operating companies. Those agreements, I would say, continue to operate as designed, that the capital flows are coming to the holding company in accordance with what our expectations were with those capital levels. We don't report or haven't reported yet the RBC levels of the companies, but suffice it to say, our domestic life retirement savings companies remained very strong and in line with where they were at year-end, which was upwards of 500% RBC. The capital maintenance agreements levels were in the 350% range, and would expect Chartis likewise to be at or above its capital maintenance agreement threshold. So again, the underlying capital positions of our operating companies remains very strong . Again, I won't quantify a 'excess capital' that you can get a feel for, for that where we are there. Brian, you want to comment on the short-term investments and the use of the reverse repos?

Brian Schreiber - EVP, Treasury & Capital Markets: Sure. A key component of our capital and liquidity plan has been to reduce contingent liquidity risk at AIG, and as you know, AIG in the past had issued debt in foreign currencies and swapped that debt back to dollars. That exposed us to contingent liquidity risk from a strengthening dollar. We have net assets over a long capital in many of the currencies in which we've issued the debt. So, we've been able to unwind the swaps, eliminate the contingent liquidity risk, and effectively invest short-term in those currencies to (defies) that debt. So, we are economically hedged, and we've eliminated the contingent liquidity risk. We've chosen to go in reverse repos because it offers the best sort of risk-adjusted returns for the Company from a short-term investment standpoint. So, I hope that addresses your question.

Thomas Gallagher - Credit Suisse: Yeah, it does; just the follow-up, Brian. So should I be thinking about $8.7 billion still available fully utilizable by your Holdco, or is there some level of – are those funds encumbered in some way shape or perform? Like, I just want to understand how to think about – I heard the technical explanation, but I just want to know practically speaking, are those funds there for you, or is there some level of that those are encumbered?

Brian Schreiber - EVP, Treasury & Capital Markets: The cash apparent is not encumbered. It is a fungible asset that can be utilized how the parent company sees fit.
« Last Edit: February 08, 2012, 01:05:47 PM by PlanMaestro »

racemize

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I've looked at this one a few times in the last six months--however, it seems like previous underwriting was not all that good.  Presumably they will be a little more cautious going forward?  I'm starting to dig in and go through it again.

beerbaron

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I hate lifeco so much in this interest rate environment. Was it something like 6-7 years after the crash in Japan that LifeCo went bankrupt.. So if the Fed renew their commitment for 0% interest rate until 2015 we can expect blood in the streets.

BeerBaron

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