Chart of the day, AIG edition

By Felix Salmon
October 25, 2012
Jessica Pressler's fantastic Robert Benmosche profile -- the man really shines through, in all his blustery glory.

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If you haven’t read it yet, you really must read Jessica Pressler’s fantastic Robert Benmosche profile — the man really shines through, in all his blustery glory.

So how well has Benmosche actually done, as CEO of AIG? He certainly put an end to a misguided fire sale after he arrived in the fall of 2009, and he deserves a lot of credit for that. And over the course of his tenure, the government has managed to unload nearly all of its stake in the company — at a profit, no less. That’s a notable achievement, too: I, for one, didn’t think it could be done and said as much in January 2010, five months after Benmosche took over.

It’s impossible to know how much of that is thanks to Benmosche, and how much is thanks to the Federal Reserve, which sparked a massive credit-market rally and which also held onto various bits of AIG nuclear waster until it could get a good price for them.

Either way, the results can be seen in the chart above, which was much harder to put together than it looks, and I’m very indebted to both Ben Walsh and Jonathan Weil for help with it. It shows AIG’s share price, in black, and also the value of the shares available to the public, in red. The green area is the value of the government’s stake in AIG, calculated as the value of the shares that the government ultimately ended up converting its stake into. Go back to the excellent column that Jonathan Weil wrote shortly after Benmosche took the reins, saying that the value of AIG was “either $5.1 billion or $26.5 billion” depending on what you were counting: the first figure is the red area, and the second figure is the combination of the red and green areas.

AIG’s market cap today is around $60 billion, more than double what the market thought the company was worth back in 2009. So that’s another Benmosche achievement. Then again, both the share price and the market capitalization are lower than they were in early October 2009, and much lower than they were in February 2011. The chart shows the government doing a great job in selling down its stake in the company; but there’s nothing particularly up-and-to-the-right going on here. After all, over the same period, the S&P 500 has risen more than 50%.

But here’s the thing: AIG might be worth roughly as much now as it was in January 2010. But back then, AIG’s valuation was a weird, fantastical thing, based on extrapolating a share price which represented only the tiny sliver of shares actually traded on the markets. I thought that the valuation was bonkers, most other observers did as well, and there were precious few people standing up to defend it.

Today, by contrast, AIG is a real company, with a justifiably positive valuation, based on a huge number of shares being traded every day. The company which had arguably the biggest balance-sheet black hole the world has ever seen has managed to come back from that brink, with the help of unprecedented government assistance, and is now a viable stand-alone business. That’s a huge victory for the people who made the decision to rescue AIG, not that they had much choice in the matter. And it’s surely a victory for Benmosche as well.

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