Tata AIG has its task cut out, needs to infuse Rs 250 cr cap

HYDEREBAD/KOLKATA: Tata AIG Life, a joint venture between the Tata Group and American International Group Inc, may require a fresh Rs 250-crore capital infusion over the next two years to support its targeted business growth.

���The company will need Rs 250 crore of additional capital to meet its solvency requirements, going by the company���s business projections in the near term,��� said a senior government official close to the development.

���Currently, Tata AIG Life���s capital stands at $293 million (over Rs 1,300 crore) and the company���s solvency margin is 304% against the IRDA���s stipulation of 150%,��� Tata AIG Life managing director Trevor Bull told ET.

Solvency is the ability of an insurer to pay claims. It refers to excess of assets over liabilities that an insurer maintains, as a prudential measure in the interest of policyholders. The promoters also infused about Rs 90 crore, in equal proportion of their stake in the company, two months ago.



Mr Bull, however, did not comment on the capital requirement over the next two years, saying, ���Tata AIG Life does not comment on future investments and plans.��� However, the promoters of every life insurance company need to infuse fresh equity capital in step with business growth.

Nevertheless, AIG has a 26% stake in the JV with the Tatas and will have to bring in a proportionate share. Hence, AIG will have to infuse Rs 65 crore in Tata AIG Life over the next two years, while the balance will be infused by the Tatas. Sources said, ���It is a small figure for AIG even under present circumstances and infusion should not be a problem.���

A government official said: ���Given Tata AIG Life���s business projections of the JV for the current fiscal, we do not foresee any problems in the domestic partners infusing additional capital.���

The US insurer has been bailed out from possible credit downgrades, with the Federal Reserve providing a $85 billion stimulus package ��� a revolving credit facility for two years ��� to ensure that the company can meet its liquidity needs.

American taxpayers will now receive a substantial majority ownership interest in AIG.

But the US insurer, with over $1 trillion of assets, today maintained, ���Policyholders of AIG companies around the
world can rest assured that AIG���s commitments will continue to be honored.���

On its part, IRDA on Tuesday also made it clear that both Tata AIG Life and Tata AIG General Insurance have the ability to settle claims, going by an analysis of their accounts as on March 2008. IRDA is awaiting a report from these companies on the implications of the recent developments in AIG.

A top official of Tata AIG is understood to have already sounded out IRDA that it does not forsee any problem on the Indian business operations of its foreign partner, despite the crisis.