The Tatas are said to be buying out the 26% stake held by American International Group (AIG) in their life insurance joint venture — Tata AIG Life.
The move follows the global buyout of AIG’s Asian life business by Prudential Plc on March 1 for $35.5 billion.
Under Irda guidelines, Prudential Plc, which is the foreign partner in ICICI Prudential, cannot hold stake in two life insurance ventures in India.
Tidjane Thiam, CEO, Prudential, has said the UK insurer plans to sell its stake in Tata AIG India to the Tatas.
Unconfirmed sources said the company could be valued at Rs 3,000-3,500 crore.
The Tatas are said to have approached the Insurance Regulatory and Development Authority (Irda) already on the nuances of the global deal, but Irda officials were not keen on being quoted on the company’s affairs at present.
No one in Tata AIG Life was willing to comment on anything regarding the deal or whether it had approached the regulator.
The options before the Tatas for the buyout include:
Make an initial public offer for the life venture
Rope in a clutch of private equity investors
Pick one from the usual line of suitors that includes Ergo, Liberty Mutual and other Japanese companies for the 26% stake.
“There was a strong case for the Tatas to buy out the 26% AIG stake in India and it could be cheap at present as valuations of insurance companies have fallen globally and AIG is no exception,” a top industry executive told DNA.
But forward sale of the 26% equity is unlikely to be done in a hurry.
“The Tatas may not be in a hurry to sell off the 26% stake and rope in a foreign partner. They could hold on for a while before roping in a partner of choice. Entry premiums for any foreign insurer partnering the Tatas would be high given the branding of the Tata AIG group,” an analyst said.
“The Tatas could run it alone for a while as they have gained the technical experience over the years to run an insurance company. It is unlikely the Tatas would choose to hit the market immediately as they may not get the right price discovery if the market knows that it is a desperate sale,” said the CEO of a leading life insurance company.
Tata Group has two joint venture partnerships with AIG in India, for both life and non-life insurance businesses. AIG holds 26% each in the two ventures. AIG’s global deal with Prudential is for the life insurance business only and hence the non-life business remains unaffected.
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