Soros Cuts AIG Stake as Jana Exits Insurer Investment Amid Rally
Soros Fund Management LLC cut its AIG stake by two-thirds in the first quarter to 2.89 million shares as of March 31, according to a regulatory filing yesterday. Jana Partners, run by Barry Rosenstein, exited its 3.5 million-share investment and Louis Moore Bacon’s Moore Capital Management LP also ended a wager on AIG.
AIG, led by Chief Executive Officer Robert Benmosche, rallied 10 percent in the first quarter, after ending a U.S. bailout in December by selling assets and repurchasing shares from the U.S Treasury Department. Benmosche, 68, is working to boost earnings by improving results at the property-casualty business and U.S. life insurance unit.
“It’s reasonable to take some money off the table,” Charles Sebaski, an analyst at BMO Capital Markets, said in a telephone interview. “There are no more Treasury selloffs. It’s a much more traditional story now.”
AIG has rallied 17 percent since the end of March, and hit a 28-month closing high of $46.08 on May 14. The Standard & Poor’s 500 Index, which reached a record yesterday, has gained 16 percent this year, while AIG is up 29 percent.
First-quarter operating profit beat analysts’ estimates as margins improved at AIG’s property-casualty unit and rising stocks helped lift investment returns. Benmosche has said he’d like to restore a dividend to attract investors, after bolstering the company’s credit rating.
“Eventually, hedge fund and catalyst-driven investors get replaced by more permanent owners of the company,” Josh Stirling, an analyst at Sanford C. Bernstein & Co., said in an interview. “The fact is, these guys are selling and other people are buying.”
BlackRock Inc., the world’s biggest asset-management company, and Vanguard Group Inc., the No. 1 U.S. mutual-fund company, are among the largest holders of AIG, according to data compiled by Bloomberg. Both added to their investments, as did Bruce Berkowitz’s Fairholme Capital Management LLC, which had the largest stake.
AIG is “leading the entire property and casualty industry to higher prices, better underwriting profits,” Berkowitz said in February. His AIG bet was part of a strategy to “embrace the hated,” or invest in firms that other investors shun, he wrote in a 2011 report.
Third Point LLC, the hedge-fund firm led by Daniel Loeb, cut its AIG stake by 27 percent in the first quarter to 13.5 million shares. David Tepper’s Appaloosa Management LP reduced its investment by 29 percent.
Baupost Group LLC, the Boston-based hedge-fund firm run by Seth Klarman, added 4.85 million shares of AIG, bringing its total to 11.9 million.
Analysts at Goldman Sachs Group Inc. downgraded AIG to neutral with a $46 price target in a May 7 research note.
“We see limited upside,” Goldman Sachs analysts including Michael Nannizzi wrote in the research note. “Following recent outperformance we believe that current shares now well reflect the fundamental story.”
The shares will probably rise, if not as quickly as they have so far this year, Sebaski said. He has a $53 price target and said adding a dividend and improving underwriting can help boost the stock.
“I still think it’s a good value,” Sebaski said. “There are a lot of positive catalysts that will be coming.”