Re:AIG
There was an article in Barron's ( Monday/June 6 ) interviewing Chris and William Browne, Managing Directors, Tweedy Browne:
online.barrons.com
"Anything in the U.S. where you spy some value?
Chris: We have been pecking away at AIG. We came to two conclusions. One, insurance is still a great business. AIG breadth of distribution is international in scope, and you can make much better money in international insurance than in domestic insurance. They have been very, very good at managing their losses. If you have ever sued somebody insured by AIG, you are wasting your time.
William: Plus, they have a large life business, and the life business is, on average, more predictable.
Chris: In hindsight, however, no insurance company could have had earnings so smooth and so predictable, and so they managed the earnings a little bit. The other conclusion we came to was if they got fined by Spitzer and they paid the combined fine that Merrill Lynch, Morgan Stanley and all the brokers paid into settling their research settlement case, it would be a matter of 50 cents a share. Then life would go on.
What about life without Greenberg and some of his other lieutenants?
William: He was not doing the underwriting. There is obviously a structure in place. It could all unravel. We are willing to take the bet that won't be the case. They have in the past and probably will continue to underwrite in a fairly sensible fashion. Clearly, the company wasn't quite as profitable as most people thought. But this is an enormous organization with a huge structure in place, and I don't think the action of one man is going to result in a meltdown of its business franchise. Our expectation is that in a year's time, as the air clears, you will be looking at a business that is still best-of-class and trading at somewhere around 10 times earnings. We think that's a pretty attractive entry level."
I jumped in, buying a full position below $55.
Dislosure : still long AIG
Good Investing! |
