Soros, Och-Ziff Cut AIG Holdings as Baupost Takes Stake

Billionaire George Soros and Och-Ziff Capital Management Group LLC scaled back investments in American International Group Inc. and Baupost Group LLC took a stake as the U.S. bailout of the insurer wound down.

The family office of Soros disclosed an investment of 8.9 million shares as of Dec. 31, down from 15.2 million three months earlier. Och-Ziff sliced its holdings to 15.3 million, after tripling its stake to 33.2 million shares in the prior three-month period. Och-Ziff said it also held options. Seth Klarman’s Baupost held 7 million shares of New York-based AIG, according to a filing issued yesterday.

AIG sold more than $65 billion in assets, including Asian insurers and a U.S. lender, to repay the bailout. The rescue ended in December when the U.S. government sold the last of its AIG shares.

“AIG’s recovery is inevitable,” Josh Stirling, an analyst at Sanford C. Bernstein & Co., said in a Jan. 28 research note. “We see a once-in-a-generation low-risk chance to buy a recovering franchise at a substantial discount.”

The insurer traded as high as $37.67 and as low as $30.64 during the fourth quarter, as Superstorm Sandy ravaged the U.S. Northeast. The storm cost AIG about $1.3 billion, the company said Dec. 7. AIG closed at $39.21 yesterday in New York.

Jon Diat, an AIG spokesman, declined to comment on investors in the insurer.

AIG’s Focus

Chief Executive Officer Robert Benmosche, 68, is focusing on the main U.S. life-insurance and global property-casualty units, working to attract investors betting the shares are underpriced. AIG, profitable in the first nine months of 2012, is scheduled to report fourth-quarter results on Feb. 21.

Soros’s firm managed more than $20 billion in the 1990s when it was the world’s largest hedge-fund group. The 82-year-old investor returned money to clients in 2011 and focused the firm on managing assets for his family.

Klarman is known for his emphasis on undervalued securities. He wrote the preface to the sixth edition of “Security Analysis,” the 1934 book by Benjamin Graham and David Dodd on value investing.

Fairholme Capital Management LLC holds shares and warrants on AIG worth about $3 billion, according to data compiled by Bloomberg. Lone Pine Capital LLC, the hedge fund run by Stephen Mandel Jr., and Highfields Capital Management LP, the Boston-based firm run by Jonathon Jacobson, reported new AIG stakes.

AIG rallied 7.7 percent in the last three months of 2012, pushing the stock’s gain for the year to 52 percent. The U.S. owned as much as 92 percent of AIG as part of the 2008 bailout, which grew in value to $182.3 billion.

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