AIG plans to sell non-insurance business in India

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Mumbai, Oct 8: The shake-up in the core operations of American International Group (AIG), after its $85-billion bailout by the US government, will have its ripple effect in the financial conglomerate’s businesses in India.

Barring its two insurance joint ventures with the Tatas—Tata AIG Life Insurance and Tata AIG General Insurance—where it holds 26% each, AIG plans to put all its business units in India, including the nascent asset management business, on the bloc.

AIG had earlier decided that it would retain its commercial property/casualty and foreign general insurance businesses, while selling off some life insurance business. It was also seeking alternatives for its securities lending business.

However, AIG sources close to the development said that while it intends to sell life insurance assets, it wants to retain a continuing majority interest in its foreign life insurance operations, including in India. Currently, AIG has a range of business in India comprising aircraft leasing, real estate, private equity, consumer finance, and business processing outsourcing.

However, AIG’s insurance exposure in India remains the largest, and the rest of the business units are small but with long-term expansion plans. Also, AIG has not revealed the extent of its investments in its several Indian operations.

When contacted by FE, AIG’s Indian official refused to comment on the development, except saying that the insurance joint ventures with sound financials and customer base were working well and that the company would expand its operations.

Market sources point out that it may not be difficult to dispose of some businesses, including the asset management company, which has assets worth over $1 billion. This is because many foreign insurance companies are planning a foray into such business, and there will be many seekers. For instance, UK’s Aviva and Germany’s Allianz are working on plans to enter the Indian mutual fund business.

The company is being forced to sell assets to repay up to $85 billion in loans being received from the Federal Reserve Bank, from which it has already drawn $61 billion. AIG is paying hefty interest and fees on its loan and must repay the loan within two years.

AIG’s new CEO Edward Liddy has said the company would not sell its US commercial lines property/casualty business or its foreign general insurance. Its personal lines business, however, will be put up for sale, except for its private client operations, which it intends to hold onto.