Adding further complexity for little upside
In our view, the Validus (VR) transaction adds further complexity to an already over-complicated business without providing significant EPS accretion. Although management is using cash on hand to acquire VR, our analysis suggests that this transaction is only mildly more accretive than buying back stock and only after accounting for the additional DTA utilisation. Following some very disappointing results over the past twelve months, investors would have been justified in anticipating a period of stability before management launched into a large acquisition. We have not changed our forecasts at this stage given closing is not expected until mid-2018. We retain our Neutral recommendation.American International Group is a holding company. Through its subsidiaries, the company provides a range of property casualty insurance, life insurance, retirement solutions, and other financial services. The company's businesses include General Insurance, which provides insurance products and services for commercial and personal insurance customers; Life and Retirement, which brings together a portfolio of life insurance, retirement and institutional products provided through a multichannel distribution network; and Other Operations, which include Blackboard U.S. Holdings, Inc., a subsidiary focused on delivering commercial insurance solutions using digital technology, data analytics and automation.
Formed in 2003 by an established team from Cazenove, one of the most respected investment banks in the UK, Atlantic Equities conducts and publishes fundamental, bottom up research on mid and large cap US companies.
Atlantic provide order execution through a wide range of DMA products and algorithmic trading suites.
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