Paulson’s Hedge Fund Bets $800M on AIG

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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.

Hedge fund manager John Paulson, REUTERS/Jonathan Ernst

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.

Increased Stake

Paulson also increased its stake in T-Mobile US Inc. to one valued at $756 million. T-Mobile said this month it would start selling BlackBerry Ltd.’s Classic phone, rekindling a partnership that ended a year ago after a spat over iPhone promotions.

The firm exited its stakes in Equinix Inc., Alibaba Group Holdings Ltd. and Gold Fields Ltd., according to the filing. Paulson & Co. reduced its positions in Cablevision Systems Corp., Sprint Corp. and Puerto Rico’s biggest bank, Popular Inc.

Paulson’s hedge funds gained in April after successful wagers on energy, mergers and Greek banks. Its merger strategy, which comprises more than half of the firm’s $19.5 billion, rose 6.1 percent in the first four months of the year. A version that uses borrowed money climbed 13 percent.

Money managers who oversee more than $100 million in equities in the U.S. must file a Form 13F within 45 days of each quarter’s end to list those stocks as well as options and convertible bonds. The filings don’t show non-U.S. securities, holdings that aren’t publicly traded, or cash.

–With assistance from Noah Buhayar in Seattle and Doni Bloomfield in New York.