Keefe, Bruyette and Woods appears to have developed a specialty in the "Government Owned Entities".
We covered their thinking on Fannie and Freddie in "KBW says Fannie, Freddie common shares worthless", "Fannie, Freddie shares dive on zero-value prediction" and "Fannie's And Freddie's Last Man Standing".
Here's the latest, from Bloomberg:
American International Group Inc., the insurer rescued by the U.S., was cut to “underperform” by KBW Inc. on the prospect that meeting government obligations will wipe out most of common shareholders’ value.
“The publicly traded shares are grossly overvalued,” said Cliff Gallant, a KBW analyst, in a note to investors today. “Under the current ownership and capital structure, we see little long-term value in the common shares.” Gallant said he expects AIG to fall to $6 in 12 months, compared with yesterday’s closing price of $44.51.
AIG turned over a stake of almost 80 percent to the U.S. in the 2008 bailout that swelled to $182.3 billion. The New York- based insurer has missed four rounds of dividend payments on a Treasury Department investment of more than $40 billion in preferred shares. Gallant said the Treasury is entitled to a 10 percent annual dividend from AIG, which posted a fourth-quarter loss of about $8.9 billion.
“Even if AIG does report earnings, the income will not be accruing to the common shareholder,” Gallant wrote. “After liquidity needs are met, AIG has a legal obligation to the preferred owners to pay this dividend, effectively eliminating any real earnings per share.” Gallant previously rated AIG “market perform.”>>>MORE