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Notorious insurance titan American International Group (AIG) is on the upswing today, after Moody's Investors Service reported late Monday that it expects AIG will be able to repay its government debt. The ratings agency observed that AIG has made progress with its restructuring plan, and the firm's latest quarterly earnings "show continued stabilization of the core insurance operations despite challenging market conditions."
The insurance issue has put many of its non-core assets up for sale during the past year to generate capital and pare its unwieldy size, but some of those plans have been iced by new CEO Robert Benmosche. Moody's likes the new chief's approach, with the firm observing, "We believe that the slower approach to restructuring could help AIG to generate more favorable values from its business portfolio than would be the case under rushed asset sales."
Moody's affirmed its long-term rating of A3 on the company, its seventh-highest rating, although the outlook is negative. Since its near-collapse last fall, AIG has received as much as $180 billion in federal aid, including upwards of $80 billion in loans.
Shares of the former Dow component spiked more than 6% out of the gate today, but the equity has since pulled back to a 3% gain. AIG is currently sandwiched between support at its 20-week moving average, and short-term resistance from its 10-week trendline and the round-number $40 region.
Meanwhile, in the options pits, at least one trader placed a new bullish bet on the stock following the Moody's report. At 11:07 a.m., a block of 1,000 contracts crossed the tape on AIG's December 35 call. The calls changed hands at the ask price of $5.20, sending implied volatility up 5.8% as a result. With AIG trading near $37.50 today, these bullish bets are already in the money.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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Reader Comments (Page 1 of 1)
11-11-2009 @ 8:48PM
Allen said...
Robert Benmosche is totally unqualified to head a company such as AIG. His brattish bleating that he is going to quit if he does not get his way, followed by his "decision" to stay on (after he came to his senses and realized that no one else would be stupid enough to hire him at anywhere near the money AIG is giving him - he is not worth it, so, yes, it is a gift.) serves as proof of his ineptitude. Hank Greenberg would have fired Benmosche in a heartbeat. Of course, we DO live in a country where the office of president requires no qualifications other than the ability to BS.