The Tatas will have to either buy out the 26 per cent stake in its life insurance joint venture or rope in another partner if Prudential UK buys out the Asian life insurance business of American International Group (AIG).
Agencies reported today that Prudential, UK’s largest insurer, is in talks to buy Hong Kong-based American International Assurance Co (AIA), AIG’s Asian life insurance unit, in a transaction that would be valued at about $25 billion, Sky News said. The deal could be announced as early as Monday.
The Tata Group has two joint venture partnerships with AIG, in life and non-life insurance. The US insurer holds 26 per cent stake each in both the ventures.
While the non-life business will not be affected, as the deal is expected to cover only the life insurance business, Prudential cannot hold stake in two life insurance ventures in India. The company already has a joint venture with ICICI Bank in life insurance.
This is because the insurance regulator does not allow either a domestic or a foreign player to have more than one joint venture in the same space. R Kannan, member, actuary, Insurance Regulatory & Development Authority (Irda), said: “We have not received any communication from the Tatas. But, if Prudential is indeed buying out AIG’s life business in Asia, our clear view is that no one company can have two insurance joint ventures in India in the same space.”
Neither AIG country head and CEO Sunil Mehta nor Tata’s spokesperson could be reached for comment. An industry source said the Tatas had shown interest in buying out AIG’s stake in the life business but had not approached the regulator so far.
Prudential holds 26 per cent stake in ICICI Prudential. While it is not present in the non-life insurance segment in India, Tata’s non-life insurance is part of AIU, another arm of AIG, which is not part of the buyout by Prudential UK.
In 2008, the US government had bailed out the beleaguered AIG after the US insurer suffered huge losses in the global financial slowdown. Last year, the US government decided to sell part of its stake in its Asian operation under AIA, an arm of AIG, through an initial public offer which would have helped AIG repay part of the bailout money.
Earlier both US’s Metlife and French insurer Axa were said to be in a race to buy out AIG’s Asian operation.
