Meeting Agenda

Announcements Market Discussions Lecture: Valuation Methods Portfolio Update Pitch: AIG Important Dates

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The Suggestion Box

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WorkshopsEvery Thursday 7-8PMSAC2.120

Topic this week:• Projecting

Operating Results

Market Update

Why did it shutdown?Why is Obamacare

involved?What’s the hold up?

What happened to the debt ceiling?

Market Update

Market Update

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

Market Update- Twitter

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%

Market Update- Tweeter

Company Valuation

Andrew Smith

Two primary ways

Relative

Public company comparables

Precedent transaction

Intrinsic

DCF

Comps

1. Assemble peer universe2. Spread the comps3. Make ratios

- EV/EBITDA- P/E- Industry specific ratios

4. Benchmark to see if over/undervalued

Relative valuation

Precedent transaction

Look at past deals to see what ratios other similar companies were bought at

Ex: 10x EBITDA

Relative valuation

Problem?

Pros

• Market driven comparison and not subject to assumptions like DCF

Cons

• Market driven so the market environment in which you’re taking comps has direct effect on your result

Problem?

Pros

• Market driven comparison and not subject to assumptions like DCF

Cons

• Market driven so the market environment in which you’re taking comps has direct effect on your result

Fixed by using intrinsic valuation

Intrinsic valuation - DCF

Intrinsic valuation - DCF

The value of a company is the

present value of its future cash flows.

DCF more detailRevenue

Free cash flow

Projections

DCF more detail

Discount rate

To estimate cash flows after 2016

DCF more detail

EV/fully diluted shares outstanding

=Value per share

Portfolio UpdateHistorical Performance

Invested Capital Cash Exposure AUM Weekly Portfolio Return Cumulative Return Since 8/30/13 Exp-Adj Weekly Return Exp-Adj Cum. Return8/30/2013 $4,396.8 $9,716.0 31.2% $14,112.8 - 0.0% 0.0%9/6/2013 $7,739.3 $6,556.9 54.1% $14,296.2 1.3% 1.3% 2.40% 2.4%9/13/2013 $4,328.6 $9,922.9 30.4% $14,251.5 (0.3%) 1.0% (1.03%) 1.3%9/20/2013 $4,381.9 $9,922.9 30.6% $14,304.8 0.4% 1.4% 1.22% 2.6%9/27/2013 $5,911.2 $8,226.2 41.8% $14,137.4 (1.17%) 0.17% (2.80%) (0.3%)10/4/2013 $5,847.4 $8,226.2 41.5% $14,073.6 (0.45%) (0.28%) (1.09%) (1.4%)

Ticker Shares Cost Per Share Total Cost Basis Purchase Date PX_LAST Total Market Value Gain/Loss Gain/Loss % SectorAAPL US Equity 3 $486.11 $1,458.32 8/13/2013 $483.03 $1,449.09 ($9.23) -0.6% Information TechnologyADNC US Equity 50 $10.51 $525.50 8/13/2013 $11.05 $552.50 $27.00 5.1% Information TechnologyCBRX US Equity 125 $6.82 $852.13 8/14/2013 $7.14 $892.50 $40.38 4.7% Health CareENZN US Equity 200 $1.96 $391.00 8/13/2013 $1.68 $336.00 ($55.00) -14.1% Health CareIDT US Equity 55 $17.91 $984.85 8/14/2013 $19.10 $1,050.50 $65.65 6.7% Telecommunication ServicesSWKH US Equity 400 $1.13 $450.00 8/13/2013 $1.13 $452.00 $2.00 0.4% FinancialsU CN Equity 125 $4.64 $579.68 8/28/2013 $4.61 $576.79 ($2.88) -0.5% Basic MaterialsAGX US Equity 25 $21.67 $541.75 9/26/2013 $21.52 $538.00 ($3.75) -0.7% Industrials

Portfolio UpdateSector Exposures Dollar Amount % AllocationInformation Technology $2,001.59 34%Energy $0.00 0%Consumer Services $0.00 0%Consumer Goods $0.00 0%Financials $452.00 8%Industrials $538.00 9%Health Care $1,228.50 21%Utilities $0.00 0%Telecommunication Services $1,050.50 18%Basic Materials $576.79 10%

Sector Exposures + CashInformation Technology $2,001.6 14%Energy $0.0 0%Consumer Services $0.0 0%Consumer Goods $0.0 0%Financials $452.0 3%Industrials $538.0 4%Health Care $1,228.5 9%Utilities $0.0 0%Telecommunication Services $1,050.5 7%Basic Materials $576.8 4%Cash $8,226.2 58%

14% 0%

0%

0%

3%

4%

9%

0%

7%

4%

58%

Information Technology

Energy

Consumer Services

Consumer Goods

Financials

Industrials

Health Care

Utilities

Telecommunication Services

Basic Materials

Cash

Fanyu MengNiraj Parekh

Matthew RindelaubConnor Ruddick

Nic TachaJeffrey Toobi

INVESTMENT THESIS

Undervalued/Oversold

Well-Established Presence

Rising Interest Rates

Improving Housing Market

COMPANY OVERVIEW

American International Group, Inc.

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

INDUSTRY OVERVIEW

Rivalry within

Industry

Threat of New

Entrants

Bargaining Power of Buyers

Threat of Substitute

s

Bargaining Power of Suppliers

Porter’s Five Forces

Insurance services for:◦ Commercial◦ Institutional◦ Independent

Primary Services:◦ Property Casualty◦ Life and Retirement◦ Investment and Banking Services◦ Reinsurance

The Insurance Industry

•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

Primary Competitors

RISKS AND MITIGANTS

• Regularly outperforming industry• Strong industry dominance in key sectorsCompetition

• US monetary policy future is bright• Current rising ratesChanging

Interest Rates

• Conducts enterprise-wide stress tests under a range of different scenarios

• Restructuring away from risky investments

Volatile Market

Risks and Mitigants

FINANCIAL VALUATION

Comparables Analysis

AEG DB:ALVENXTPA:CS BRK.A CB SWX:ZURN AIG0.0

0.5

1.0

1.5

2.0

2.5

P/B

AEG DB:ALVENXTPA:CS BRK.A CB SWX:ZURN AIG0

2

4

6

8

10

12

14

16

18

P/E

AEG

DB:ALV

ENXTP

A:CS

BRK.A CB

SWX:Z

URNAIG

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

ROE

AEG

DB:ALV

ENXTP

A:CS

BRK.A CB

SWX:Z

URNAIG

0.02.04.06.08.0

10.012.014.016.0

Leverage Ratio (Assets/Equity)

Book Valuation

P/B Implied Price Discount

AIG Multiple $ 78.10 64%

Current Share Price $47.70

2012 2013 2014 2015 20160%

2%

4%

6%

8%

10%

12%

ROE

2012 2013 2014 2015 20160

20000

40000

60000

80000

100000

120000

140000

160000

Book Value

CONCLUSION

Pitch Team Sign-Ups

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Important Dates

• Thursday, October 10, 6-8PM- SCG Workshop #3

• Saturday, October 12: Last day to register for TXSPwww.usiteam.org/events

• Saturday, October 19: Texas Stock Pitch Competition