With the 2008 financial crisis firmly behind it, the AIA Group is brimming with confidence since its highly successful IPO last year. Mark E Tucker, the group’s chief executive and president, in his first interview in India, tells Manojit Saha and Niladri Bhattacharya that to reflect its true identity, the Indian life insurance business will be renamed Tata AIA Life. Edited excerpts:
Recent regulatory changes in India have hit growth and made promoters apprehensive. Do you think promoters’ ability to bring in more capital will hamper growth in the sector?
It is a medium- to long-term industry. The Indian industry is a little more than 10 years old, so it is in its infancy. If you are looking for some quick buck, it is not the industry to be in. However, if you are looking for a valuable return over time, it can prove to be a wonderful industry. It is important to build strong foundation as our liabilities go from 10 to 30 years — that’s the period we need to be thinking. Capital for growth is important and the key element there would be to ensure that the growth is profitable going forward. That should be the focus. For a company like us, capital is not an issue and we are committed to provide for the capital.
But life insurance companies sacrificed growth to book profits in the last one year...
In the early years, we went into Tier-I, -II, -III and -IV cities. Everyone was trying to build scale. So, the new regulation was just a pullback of that land-grab strategy, where we did build some scale but didn’t get the value. What we are seeing in India is a natural transition. For a new industry, none of these is surprising, but what surprises me is that people’s thinking is too short-term. If you were thinking for medium to long term and the perspective was that nothing was going to happen, it would have been a serious concern. But the Indian market is one of the most exciting markets in the world. The protection gap in India is around $7 trillion, so there is a massive opportunity here.
How do you see the regulations in India?
While the opportunity in India remains significant, there needs to be a balance among growing the industry, ensuring there is right financial inclusion, transparency and that customers are fairly treated. One needs to ensure that the industry grows. If we are forced to think for the short term, we cannot make that investment to support the government in a way that the insurance sector can benefit. There have been a number of changes. Our experience tells us, if you look at 15 different markets in Asia where we are present, the lowest margins are in India.
AIA partners with Tata Group in the life insurance business, while AIG is its partner in the general insurance business. Doesn’t it make sense to rename the life insurance venture as Tata AIA Life?
The intention is to do exactly that. Over the next six months, this will be done, and Tata AIA Life will be the new name. However, before that, we need to go through the right process. The life insurance company has nothing to do with AIG, it is a joint venture between Tata and the AIA, so the name should reflect the true identity.
How do you see the euro zone crisis affecting the Asian market?
Though markets are interconnected, Asia starts on a different platform. It starts with a positive GDP growth, strengthening current account, fiscal surpluses and a stronger banking system. So its ability to whither the crisis is that much better than Europe and the US. In the US, the number of indicators coming out with positive figures is picking up. Sixty per cent of the results coming out of the US is positive. In Europe, the situation is tougher and it will take longer to recover.
AIA has a large cash reserve, of around $5 billion. Are you looking at acquisitions?
There is no such plan as of now. We continue to look at tactical M&As wherever there are value opportunities and financials make good sense. If the crisis continues, some more opportunities may come up. But, having said that, we are also 99 per cent focused on organic growth.