American International Group: Financial Loser
The broad indexes ended with slight gains, as shares of Hewlett-Packard (HPQ) rose 3% to close at $14.16, amid rumors that activist investor Carl Icahn was building a position in the company's shares.
HP on Nov. 20 shocked investors by announcing a fiscal fourth-quarter net loss of $6.9 billion, or $3.49 a share which included an $8.8 billion write-down of goodwill, related to its purchase of Autonomy in August 2011 for $11 billion. The Autonomy purchase was the centerpiece of former H-P CEO Leo Apotheker's decision to transform the company from being primarily a hardware maker to becoming a software and consulting firm, the way International Business Machines (IBM) did.
While there's no telling what sort of strategy Icahn might demand of Hewlett-Packard, Richard St. recently wrote that the IBM model might not be such a bad idea.
Investors on Monday, were, of course, continuing to wait for President Obama and the Republican leadership of the House of Representatives to move forward with a budget deal to avert the Fiscal Cliff. Speaker of the House John Boehner (R-Ohio) had nothing to say about his meeting with President Obama, while the President in Detroit that he would not compromise on his insistence for a tax rate increase for couples earning more than $250,000 a year.
Sandy, a Sale and Another Sale
American International Group late on Friday announced that its "preliminary estimate" of losses from Hurricane Sandy would be $2.0 billion, net of reinsurance, or $1.3 billion after taxes. The company also said it expected to contribute $1 billion in capital to its AIG Property Casualty unit, after the unit had paid $2.4 billion in dividends to the holding company through the first three quarters of 2012.
AIG also said on Friday that the P&C unit had $49.6 billion in capital and that the parent company had total equity of $102.4 billion.
AIG on Monday announced a deal to sell "up to a 90% stake in International Lease Finance Corporation (ILFC), a non-core asset," to a group of investors led by Weng Xianding, the chairman of New China Trust Co. Ltd. for roughly $4.75 billion.
The transaction values ILFC at $5.28 billion. AIG said that it would "retain at least a 10% ownership stake in ILFC, allowing it to continue to participate in the growth of ILFC's unique franchise, including the benefits that the investor group will bring to the company."
AIG also said that "when the transaction meets the criteria for "held for sale" accounting treatment, AIG expects to record a non-operating loss of approximately US$4.4 billion, which includes a non-cash charge of approximately $1.8 billion associated with the utilization of tax net operating loss carry forwards from this transaction."