AIG Shareholders Force Change of Chief

123jump.com Staff
16 Jun, 2008
New York City

AIG replaces its chief executive for the second time in less than four years as its stock has lost 50% of its value and real estate linked losses mount. Robert Willumstad, former chief financial executive at Citigroup has assumed the top position at AIG. The largest U.S. insurer has $1 trillion in assets and has reported two consecutive quarterly losses. The insurer was forced to raise $19 billion after denying for months that it needs additional capital.

[R]9:45AM New York – U.S. stocks edge lower as inflation worries keep market indexes trending lower. AIG replaces if chief for the second time in 40 months.[/R]

AIG Inc replaced its chief executive Martin Sullivan and appointed Robert Willumstad as the chief after losses at the insurance companies mounted in the last three years. Stephen Bollenbach, former chief of Hilton Hotels Corp is appointed as chairman.

AIG, decided to change leadership of the company after three prominent mutual fund managers who collectively control 100 million of its shares demanded management reorganization. AIG has reported two back-to-back quarterly losses and raised $nearly $19 billion after it first said it does not need additional capital.

The string of losses and stock decline of 50% in the last 40 months has rattled investors and some are openly wondering if AIG is too big for its sake. Investors have sought new leadership at Citigroup, Merrill Lynch, UBS, Credit Suisse and Wachovia Bank after financial institutions have declared losses of more than $390 billion related to loans to real estate.

Willumstad, formerly at Citigroup is no stranger to insurance business. At Citi, Willumstad as its chief financial officer had an intimate knowledge of insurance business Travelers. After he was passed over for the leadership position at Citigroup, when Charlie Prince replaced Sandy Weil after an accounting investigation at the bank, in 2005 Willumstad said that he prefer to run a public company rather than work as a second in command after 40 years working in the banking industry.

Investors at AIG may have to face more bad news in the coming months as real estate market weakens more. AIG controls $1 trillion of assets of which $25 billion is real estate related and $45 billion is linked to derivatives and financial contracts that are illiquid and do not have ready market for.

AIG stock ((AIG)) dropped 48 cents to $33.70 and has declined from its peak of $107 in October 2000.

Earnings review

Titan Machinery Inc, a retailer of agriculture and construction equipment stores reported first quarter revenues increased 47.70% to $152.6 million from $79.8 million a year ago. Net income in the quarter increased 76.47% to $3.4 million or 24 cents per diluted share compared to net income of $0.8 million or 12 cents per share, a year ago.

Titan Machinery Inc ((TITN)) in the last one year traded as high as $28.23 in June 2008 and as low as $9.18 in December 2007. Based on the yesterday’s closing price the company has a market cap of $375.08 million.

Motorcar Parts of America, Inc, a remanufacture and distributor of alternators and starters for import and domestic cars and light trucks reported fourth quarter revenues increased 14.3% to $35.9 million from $31.4 million a year ago. Net income in the quarter was $2.7 million or 22 cents per diluted share compared to net loss of $2.6 million or 32 cents per share, a year ago.

For the twelve months ended March 31, 2008, net income climbed to $4.6 million, or $0.39 per diluted share, compared with a net loss of $5.0 million, or $0.59 per share a year ago. Net sales for fiscal 2008 were $133.3 million compared with $136.3 million for the comparable period last year, which included $11.7 million of revenue from a segment that is discontinued.

Excluding the $11.7 million of net sales in fiscal 2007, net sales for the fiscal 2008 would have increased by $8.7 million, or 7%, on a year-over-year basis. The company estimates net sales in the fiscal 2009 of $150 million.

Motorcar Parts of America, Inc ((MPAA)) in the last one year traded as high as $13.25 in June 2007 and as low as $5.04 in March 2008. Based on the yesterday’s closing price the company has a market cap of $95.36 million.

Meade Instruments Corp, a designer and manufacturer of optical products reported fourth quarter revenues decreased 18.04% to $13.3 million from $15.7 million a year ago. Net loss in the quarter was $7.8 million or 34 cents per diluted share compared to net loss of $8.4 million or 43 cents per share, a year ago.

Net sales of $98.5 million for the full year ended February 28, 2008, compared to net sales of $101.5 million in the same period last year. The net loss for the full year of fiscal 2008 was $17.7 million compared with a net loss of $19.2 million for the full year of fiscal 2007. On a per share basis, the net loss for the full year of 2008 was $0.81 compared with a net loss per share loss of $0.98 for the prior year period.

Meade Instruments Corp ((MEAD)) in the last one year traded as high as $2.54 in July 2007 and as low as $1.00 in January 2008. Based on the yesterday’s closing price the company has a market cap of $28.68 million.

Asian markets review

In Tokyo Nikkei 225 Index closed higher 380.64 or 2.72% to 14,354.37, in Hong Kong Hang Seng index increased 437.39 or 1.94% closed to 23,029.69. In Australia ASX 200 index lower 6.40 or 0.12% to close 5,371.70. In Malaysia KL Composite index increased 8.71 or 0.71% closed to 1,238.06.

In South Korea Kospi Index increased 13.47 or 0.77% to close at 1,760.82, in Thailand SET index closed higher 4.95 or 0.63% to 787.59 and Indonesia JSE Index edged decreased 0.38 or 0.02% to 2,398.04. Sensex index in India increased 206.20 or 1.36% to 15,395.82.