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

4. Announcements

10. Free Wall Street Journal digital access for paid members Contact treasurer@usiteam.org to receive login information treasurer@usiteam.org

11. 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

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

13. Announcements The Suggestion Box

14. Announcements Workshops Every Thursday 7-8PM SAC2.120 Topic this week: Projecting Operating Results

15. Market Update Why did it shutdown? Why is Obamacare involved? What’s the hold up?

16. What happened to the debt ceiling?

17. Market Update

19. 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

20. Market Update- Twitter

21. $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%

22. Market Update- Tweeter

23. Company Valuation Andrew Smith

24. Two primary ways Relative Public company comparables Precedent transaction Intrinsic DCF

25. 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

26. Precedent transaction Look at past deals to see what ratios other similar companies were bought at Ex: 10x EBITDA Relative valuation

27. 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

28. 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

29. Intrinsic valuation - DCF

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

31. DCF more detail Revenue Free cash flow Projections

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

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

34. Portfolio Update

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

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

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

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

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

44. 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

46. 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

48. Comparables Analysis

49. P/BImplied PriceDiscount AIG Multiple $ 78.1064% Current Share Price $47.70

51. Pitch Team Sign-Ups www.usiteam.org/membership

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