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

Announcements

Free Wall Street Journal digital access for paid members Contact to receive login information

Announcements Build and manage your own virtual portfolio Compete with other McCombs students Top three winners receive prizes in January Register at usiteam.org/events Fall Portfolio Challenge $5$5 entry fee

First USIT Social Ultimate Frisbee When: Tuesday 8:30 pm Where: South Mall Cost: Free!

Announcements The Suggestion Box

Announcements Workshops Every Thursday 7-8PM SAC2.120 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

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

$2.16 per timeline view $.30 per timeline view Other Key Stats: 65% revenue from mobile 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 universe 2.Spread the comps 3.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

The value of a company is the present value of its future cash flows.

DCF more detail Revenue Free cash flow Projections

DCF more detail Discoun t rate To estimate cash flows after 2016

DCF more detail EV/fully diluted shares outstanding = Value per share

Portfolio Update

Fanyu Meng Niraj Parekh Matthew Rindelaub Connor Ruddick Nic Tacha Jeffrey Toobi

Undervalued/ Oversold Well-Established Presence Rising Interest Rates Improving Housing Market

 Premiums, fees, investments  Interest rates & reinsurance  Housing Market

Rivalry within Industry Threat of New Entrants Bargaining Power of Buyers Threat of Substitutes Bargaining Power of Suppliers

 Insurance services for: ◦ Commercial ◦ Institutional ◦ Independent  Primary Services: ◦ Property Casualty ◦ Life and Retirement ◦ Investment and Banking Services ◦ Reinsurance

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 1 st to market in many developing nations Primary Competitors

Regularly outperforming industry Strong industry dominance in key sectors Competition US monetary policy future is bright Current rising rates Changing Interest Rates Conducts enterprise-wide stress tests under a range of different scenarios Restructuring away from risky investments Volatile Market

Comparables Analysis

P/BImplied PriceDiscount AIG Multiple $ % Current Share Price $47.70

Pitch Team Sign-Ups

Important Dates Thursday, October 10, 6-8PM- SCG Workshop #3 Saturday, October 12: Last day to register for TXSP Saturday, October 19: Texas Stock Pitch Competition