market folly

Continuing our coverage, today we're posting up more notes from the Value Investing Congress.  Below are notes and the slideshow presentation from Whitney Tilson & Glenn Tongue of T2 Partners.  They presented their idea of American International Group (AIG).

Spencer Capital aided in the presentation.  Bruce Berkowitz of Fairholme Capital presented AIG last year and T2 now likes it.  We've posted up Berkowitz's presentation on AIG before if you missed it.

Idea: AIG

•    Very much different from before crises
•    Worth at least 1x tangible net book
•    Will get easier to understand in the next year
•    Closed at $31.84 (yesterday) and is trading at 41% discount to book
•    US took ownership form 70% to 60% in today sale.
•    Chartis – 45MM clients
•    Sun America – 19MM clients – life insurance.
•    ILFC – global aircraft leasing business.  Comps are around 1x book.
•    Maiden Lane III – SPV.  Currently at $6.3 billion and on market for sale.
•    Large deferred tax asset position
•    August 2007 $170 billion market cap.  Trading at 1.75x book at that point.
•    Question is now how much will the US government make?
•    Peak of support is $182 billion form US – now about $45 billion investment at 3/31/12.
•    Sum of parts is $49 to $73 per share
•    Normalized earnings are ~$5 per share.
•    T2 thinks AIG will buy back shares
•    Management incentives are to understate book value.
•    Warrants are very attractive.


Question & Answer Session

P&C business?  Very large esoteric investments as well?  Yes AIG is still good at these big investments.  Government wants out - probably won't be out by election but the government is not in the business of holding AIG.


Embedded below is T2's presentation on AIG:




For more from this hedge fund, we posted up T2's recent letter to investors.

Be sure to click here for other presentations from the Value Investing Congress.