Tata AIG to get $200m capital infusion

Shareholders of Tata AIG Life Insurance Company will infuse $200 million as capital over the next three years. This will take the capital base of the joint venture between the Tata group and AIG (American International Group) Inc from Rs 276 crore to well in excess of Rs 1,000 crore.

The additional capital will be brought into the country to support the company's upward revised business targets. It aims to cross business income of Rs 4,000 crore by calendar year 2007.

Tata AIG Life expects to capture 20 per cent of the private life insurance market, and thereby secure the number 2 slot among private life insurance players by 2007.

"Private insurance players are expected to garner 40 per cent market share of what would be then a Rs 26,000-crore industry in terms of new business income," said Ian J Watts, managing director, Tata AIG Life.

Any change in the shareholding pattern based on a higher cap on foreign direct investment (FDI) will have no bearing to the business targets, said Watts.

What it would only mean is that instead of AIG investing $52 million, it would end up infusing $98 million over the next three years when the FDI cap is raised to 49 per cent.

Like most other shareholders of insurance joint ventures, the Tatas and AIG are not likely to go for an initial public offering (IPO) should the FDI cap be raised. "If the shareholding pattern changes, the foreign partner (AIG) will increase its stake. We will then see if the shareholders will go for an IPO," said Watts.

Tata AIG Life has scaled up its business projections by almost two-fold. It has changed its business projections reflecting the team's ability to grow the company more aggressively, said Watts.

The two key factors enabling Tata AIG to achieve its growth targets would be capital and ability to expand its distribution set up. It intends to double its distribution network by 2007.

Tata AIG expects to do Rs 2,000 crore new business income by December 2007. "By this time, we expect renewal premium to have risen to Rs 2,000 crore, giving a total premium income of Rs 4,000 crore," he added.

Tata AIG closed its year (December 1-November 30) with a total premium income of Rs 253 crore, with new business income accounting for Rs 243 crore.

The growth in business targets will come on the back of the huge potential of uninsured and underinsured population and the strong growth of the Indian economy.

"No other market is as exciting as India today and any quality company would want a fair share of this market," Watts pointed out.