Investors in American International Group (NYSE: AIG) are enjoying some lift-off this morning as the insurer is up 1.6% just after 1 p.m. EDT. Though headlines this morning were singularly focused on one segment of the company's operations, the news shows a common focus of AIG's management that investors should be excited about for future opportunities for shareholder value.
This morning's news centers around a new deal between AIG's International Leasing Finance Corp, an aircraft leasing company, and Embraer, the world's largest manufacturer of commercial jets up to 120 seats. ILFC has finalized an order for 50 new jets from Embraer, with the option for another 50 jets at a later time.
Though this headline isn't anything exceptional for a jet leasing firm, the interesting twist comes from the fact that AIG has been trying to sell ILFC for the past few years and is currently waiting for a group of Chinese financial firms to close a signed deal for the operations for $4.2 billion. The Chinese consortium has already missed two deadlines, so investors and Wall Street are watching to see if the deal goes through after all.
AIG's and ILFC's management has already stated they are focused on getting the current deal closed, but are open to new deals or an IPO if it cannot be resolved. In the mean time, the purchase of new jets for the leasing company is in response to customer demand, signaling that management is still willing to make commitments that will help the company in the long term should the current deal fall through.
So why should investors care?
It may not seem like it, but the purchase of new jets for ILFC is just one more example of AIG's management's focus on the long-term success of the company. Though there is a deadline for the sale of ILFC at the end of the month, ILFC's current CEO, Henri Courpron, isn't leaving it up to the buyers to satisfy customer needs if the deal does go through. Instead, moving forward with the purchase shows investors that the company is willing to spend the time and resources to keep the operations viable for the long term regardless of the sale.
AIG's management as a whole has been displaying the same sort of resolve in other areas of the business, most notably with capital distributions. Though analysts and shareholders have been calling for dividends and share repurchases, the company has refrained from reinstating either until other goals are met.
CEO Robert Benmosche has focused the firm's attentions on reducing debt, which has already saved the company millions in interest expenses. By doing so, Benmosche has set up AIG for leaner operations that may produce greater earnings as the economy continues to improve and revenue growth progresses. Though investors may be sullen about having to wait longer for capital distributions, the aim of management to make a leaner, more viable company going forward should be a welcomed strategy.
Reading between the lines
Though the purchase of some new jets may not seem to imply any bigger motivations of a company, if you analyze the intention of management in even the smallest actions, you can see how the pieces all fit together. With a capable and focused group of executives driving the insurer forward, AIG is not only set for the short term, but it will be ready to take advantage of the opportunities presented in the coming years of economic recovery.
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