(Bloomberg) — Billionaire John Paulson’s hedge fund firm bought a position in American International Group Inc. in the first quarter valued at $800 million at the end of March, in his latest bet on the insurance industry.
The New York-based firm purchased 14.6 million shares of AIG, according to a regulatory filing, joining Andreas Halvorsen’s Viking Global Investors in establishing a new position in the company during the quarter.
Paulson & Co. has successfully invested in mortgage guarantor Radian Group Inc. in 2012 and 2013 as a way to bet on a U.S. housing rebound. The insurer closed at $17.91 Friday, compared with the $6 to $8 a share that Paulson has said he paid to build his stake. He also more than doubled his money on CNO Financial Group Inc. within four years of helping the life insurer recapitalize in 2009.
The new position in AIG comes as Chief Executive Officer Peter Hancock redeems high cost debt and increases the repurchase of shares, which trade for less than three-quarters of book value, a measure of assets minus liabilities. The company said April 30 that it would buy back another $3.5 billion of stock, following about $2.2 billion of repurchases in the first four months of the year.
“AIG’s capital management story appears to have upside,” Jay Gelb, an analyst at Barclays Plc, said in a May 11 note to investors.
The insurer may generate more funds for buybacks through an eventual sale of its stock in AerCap Holdings NV. The stake is valued at about $4.8 billion at Friday’s closing price and was obtained last year in AIG’s sale of International Lease Finance Corp. to the Schiphol, Netherlands-based company.