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Short Investors Take Notice of AIG and MetLife

by: Jessica Johnson September 16, 2008 | about stocks: AIG / MET    

Jessica Johnson

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Insurance stocks joined banks at the forefront of a second session of heavy selling on European equities markets on Tuesday, as investors continued to worry that Lehman Brothers (LEH) might not be the only big U.S. institution to be claimed by the current crisis, says the Financial Times.

AIG (AIG) sparked further concern as the insurer's credit ratings were downgraded and its shares tumbled 60% in New York overnight, as regulators permitted the company to access $20bn of assets from its own subsidiaries to use as collateral for a loan in an attempt to stave off a cash crisis.

Last Friday, 5.63% of AIG's Market Cap was on loan (%MCOL) to short investors, up from 3% on August 29. We will let you know what this figure stands at for Monday, tomorrow. Another insurer who has escaped the limelight of the global press is MetLife (MET), whose %MCOL has risen up a staggering amount from 11% on August 29, to 25% last Friday. Utilisation is at 75%.

In addition to insurance, MetLife also provides financial services with operations throughout the U.S., including life insurance, annuities, car and home insurance and retail banking. It is therefore not surprising that short investors have noticed this company. Just look at this graph of MET's %MCOL over the last six months.

click to enlarge

Met

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This article has 8 comments:

  •  
    Sep 16 11:07 AM
    Non-paper assets = "a good thing." ;) Looks like AIG may wiggle its way through simply because it has some.
    Reply
  •  
    Sep 16 02:00 PM
    Thanks for the nice graph! The stock price is rising at the same time as the short interest is rising.

    if there was ever a financial company with a "chicken little" attitude which should save it in this crisis it would be MET.
    Reply
  •  
    Sep 17 10:46 AM
    Gee!...do you think it's possible shorts in Met are up because the arb community is short Met against the spin-off of RGA stock last week?

    DO YOUR HOMEWORK!
    Reply
  •  
    Sep 17 11:01 AM
    Agree with investing57 comment. The title of the article "Short Investors Take Notice of AIG and MetLife" is very misleading. Why? MetLife (MET) does not have increasing short interest due to fundamental issues with the company. MetLife just completed the shareholder exchange for Reinsurance Group of America stock. On June 2nd, MetLife and Reinsurance Group of America proposed a deal that would cause MetLife to spin-off its majority position in Reinsurance. These types of deals bring in arbs causing short interest to increase. The spike in short interest occurred after this deal was cemented in late July. (see chart quantpartners.com/rese...) Firms are not shorting MetLife for fundamental reasons as this article seems to imply.

    Another problem with this article is terminology. What does “utilisation is at 75%” mean? I am curious about this term becasue in my 22 years on Wall Street I have never heard this term. Also, would love to have a definition of the term Market Cap on Loan (%MCOL)?
    Reply
  •  
    Sep 18 09:42 AM
    They own $800M in LEH+AIG debt. $-800M could wipe out 18.53% of their $4.317B net income. It is telling that they did not break out Lehman (unrecoverable) from AIG (recoverable). The collaterized loans to Lehman affiliates mean that they will inherit depressed real estate, not current book value, meaning a second writeoff six months later. Cash from operations is fat and rising, so they will be fine.
    Reply
  •  
    Sep 19 10:49 AM
    MetLife is a great "American" company, which has just opened an IT center in India while they lay off American workers as fast as they can. Just the kind of behavior that investors love to see, right? And they reiterate their slogan "People Count" on their website. What they mean is Indians count, Americans don't.
    Reply
  •  
    Sep 21 01:15 PM
    The United States government needed to take these measures in order to avert a major financial crisis around the world

    If you are long a position you must reveal your investment.Short selling should be the same

    The naked short rule was never enforced and without getting into details or naming names this action was sorely needed

    Many Americans who worked hard at Lehman and others were financially crushed by the mistakes of Jimmy Cayne and Stanley O Neill Richard Fuld Angelo Mozilo and others.Capitalism like love and war is not always fair.

    Destroying the US economy hurts all countries and don't think for one minute central banks across the globe were telling Paulson to do this.Some countries as they were covering their own short positions

    Smart money has been covering their shorts for weeks now and contrary to the outrage you hear from Chanos and others they knew as me and my partners did that this day was coming

    This summer this ban was put into place but afterwards the rules were flaunted and like reckless behavior of those who spawned the sub prime crisis

    The same reckless shorts got to full of themselves and started tearing down the system they claim to protect. Certain firms were attacked by shorts who were not bound by any rules

    The uptick rule is not feasible contrary to Jim Cramer's rantings .Trades happen much faster now and AIG traded over a billion shares the other day . This is not 1988

    Shorting is not made illegal and those who continue to short bloated pigs will still be allowed to as long as they follow the naked short rules.Short selling is a necessary part of the market but personal freedoms that kill the goose who lays the golden egg benefit no one

    There is a boatload of money on the sidelines and the housing and credit markets need its infusion

    Bernancke is ten times the Fed leader Greenspan was

    If the doctor told you to change your eating habits or die

    Would listen to him or continue to say no one is going to regulate my diet

    US Government made 3 billion on the Chysler bailout when Buffett was not yet a billionaire

    Paulson and Ben had no other choice
    Reply
  •  
    Oct 02 12:10 AM
    I have been employed by MetLife for 51 years and never missed a paycheck.A great & solid company.I never regretted a moment. Jim H. from Clifton,N.J.
    Reply
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