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Meeting Agenda

Meeting Agenda. Announcements Market Discussions Lecture: Valuation Methods Portfolio Update Pitch: AIG Important Dates. Announcements. Announcements. Announcements. Announcements. Announcements. Announcements. Free Wall Street Journal digital access for paid members

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Meeting Agenda

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  1. Meeting Agenda • Announcements • Market Discussions • Lecture: Valuation Methods • Portfolio Update • Pitch: AIG • Important Dates

  2. Announcements

  3. Announcements

  4. Announcements

  5. Announcements

  6. Announcements

  7. Announcements Free Wall Street Journal digital access for paid members Contact treasurer@usiteam.org to receive login information

  8. Announcements Fall Portfolio Challenge • Build and manage your own virtual portfolio • Compete with other McCombs students • Top three winners receive prizes in January $5 entry fee • Register at usiteam.org/events

  9. First USIT Social • Ultimate Frisbee • When: Tuesday 8:30 pm • Where: South Mall • Cost: Free!

  10. Announcements The Suggestion Box

  11. Announcements Workshops Every Thursday 7-8PM SAC2.120 • Topic this week: • Projecting Operating Results

  12. Market Update Why is Obamacare involved? Why did it shutdown? What’s the hold up?

  13. What happened to the debt ceiling?

  14. Market Update

  15. Market Update

  16. Market Update • Credit card debt is down $883M for August (seasonally adjusted) • Less credit card debt > less spending on stores and restaurants • Non-revolving debt is up $14.5B for August • More non-revolving debt means more spending on things like student loans and car loans

  17. Market Update- Twitter

  18. Market Update- Twitter $2.16 per timeline view $.30 per timeline view • Other Key Stats: • 65% revenue from mobile • 2011-2012 Revenue growth of 198% • EBITDA growth of 149% • Net loss decreased 36%

  19. Market Update- Tweeter

  20. Company Valuation Andrew Smith

  21. Two primary ways Intrinsic Relative Public company comparables Precedent transaction DCF

  22. Relative valuation Comps • Assemble peer universe • Spread the comps • Make ratios • EV/EBITDA • P/E • Industry specific ratios • 4. Benchmark to see if over/undervalued

  23. Relative valuation Precedent transaction • Look at past deals to see what ratios other similar companies were bought at • Ex: 10x EBITDA

  24. Problem? Pros Cons Market driven so the market environment in which you’re taking comps has direct effect on your result • Market driven comparison and not subject to assumptions like DCF

  25. Problem? Pros Cons Market driven so the market environment in which you’re taking comps has direct effect on your result • Market driven comparison and not subject to assumptions like DCF Fixed by using intrinsic valuation

  26. Intrinsic valuation - DCF

  27. Intrinsic valuation - DCF The value of a company is the present value of its future cash flows.

  28. DCF more detail Projections Revenue Free cash flow

  29. DCF more detail To estimate cash flows after 2016 Discount rate

  30. DCF more detail EV/fully diluted shares outstanding = Value per share

  31. Portfolio Update

  32. Portfolio Update

  33. FanyuMeng Niraj Parekh Matthew Rindelaub Connor Ruddick NicTacha Jeffrey Toobi

  34. INVESTMENT THESIS Undervalued/ Oversold Well-Established Presence Rising Interest Rates Improving Housing Market

  35. COMPANY OVERVIEW

  36. American International Group, Inc.

  37. Revenues & Growth • Premiums, fees, investments • Interest rates & reinsurance • Housing Market

  38. INDUSTRY OVERVIEW

  39. Porter’s Five Forces

  40. The Insurance Industry • Insurance services for: • Commercial • Institutional • Independent • Primary Services: • Property Casualty • Life and Retirement • Investment and Banking Services • Reinsurance

  41. Primary Competitors • Commercial • Largest in the US and Canada • Focused on Property Casualty • Largest in the US • Largest US based in Europe • Largest foreign insurer in Japan & China • 1st to market in many developing nations

  42. RISKS AND MITIGANTS

  43. Risks and Mitigants

  44. FINANCIAL VALUATION

  45. Comparables Analysis

  46. Book Valuation

  47. CONCLUSION

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