Insurance Weekly Notes: Prudential and AIG

-8.10%
Downside
113
Market
104
Trefis
PRU: Prudential Financial logo
PRU
Prudential Financial

The week ended October 3 was significant in terms of new business for Prudential (NYSE:PRU),  while a hearing related to AIG’s (NYSE:AIG) bailout during the financial crisis also began during the week. Below we take a look at the week for the two insurance giants.

Prudential

Bristol-Myers Squibb (NYSE:BMY) announced the settlement of $1.4 billion worth of pension obligations for about 8,000 of its U.S. retirees. As part of the agreement, Bristol will purchase a group annuity contract from Prudential. [1] Prudential recently also entered into an agreement with Motorola Solutions (NYSE:MSI) for the transfer of nearly $3 billion worth of pension obligations. For a detailed look at the two deals, see our article Agreements With Motorola, Bristol-Myers To Boost Prudential’s Retirement Business.

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The company opened trading at $89 but by market close on Friday slid to $87. We have a price estimate of $102 for Prudential’s stock, valuing the company at $47 billion. At the current market price, Prudential has a cap of around $40 billion.

See our full analysis of Prudential here

AIG

A U.S. Court of Federal Claims case is focusing on AIG’s bailout by the Federal Reserve Bank of New York, after the company faced a liquidity crisis and potential collapse as its multibillion-dollar bets on mortgage investments turned sour. Federal rescue funds that totaled nearly $184 billion, have since been repaid by the company. [2]

The company’s single largest shareholder at the time — Starr International Co. (headed by AIG’s former head Maurice R. Greenberg) – and other AIG shareholders have sought $40 million in damages, claiming that the government acquired a 92% stake in the company without adequately compensating the shareholders. However AIG has officially refused to be part of the lawsuit, but it will be interesting to see how the court rules regarding the massive bailout.

At the close of markets on Thursday, AIG’s stock was trading just above $53, down slightly over the week. We have a price estimate of $52 for the company’s stock, valuing the company at $75 billion.

See our complete analysis of AIG here

Notes:
  1. Prudential signs pension transfer agreement with Bristol-Myers Squibb, Prudential Press Release []
  2. Hank Greenberg Challenges AIG Bailout, Wall Street Journal []