India's Tata Sons has been in talks to buy a stake in AIA, a major Asian unit of American International Group, according to sources close to the matter, as the US insurance giant seeks to sell assets after nearly collapsing last month.
Tata Sons, the holding firm of India's second-largest conglomerate, may pursue a variety of options, including taking a 49 percent stake in the unit, known as American International Assurance Company Ltd (AIA), the sources said. One banker not involved in the process said AIA, AIG's Singapore-based wholly owned subsidiary, is a $20 billion to $25 billion business.
But sources close to the matter cautioned that talks were at an early stage, and it was not yet clear if Tata would pursue the stake, or any other parts of the business. AIG declined to comment. Tata did not respond to a request seeking comment. Citigroup and Goldman Sachs are advising AIG on the sale of assets in Asia, and are involved with the AIA talks, sources close to the matter said. Both banks declined to comment. Sources did not want to be named because talks are at an early and sensitive stage.
Earlier this month AIG, crippled by losses on bad mortgage bets, said it would focus on its main insurance operations and put the rest of its businesses up for sale to repay up to $85 billion borrowed from the US government. AIG said it would keep its US property and casualty, and foreign general insurance businesses, and an ownership interest in its foreign life operations.
Blackstone Group LP and J.P. Morgan Chase & Co are the global co-ordinators for the divestiture programme. Other investment banks in certain regions have been appointed to co-ordinate asset sales. Reuters reported this month that AIG may sell parts of American Life Insurance Co (ALICO), which operates as a life insurer in more than 55 nations and regions, and a minority stake in AIA. AIA is a life insurer with more than 2 million policies in force.
According to its website, with branches and affiliates in most major countries throughout Asia outside of Japan, including China, Indonesia, the Philippines, Taiwan, and Thailand. It has 3,800 financial services consultants and 800 staff. Asia-based insurers and investors are being approached by AIG's advisers about buying a minority stake or various parts of AIA and other AIG units in the region, sources say.
Tata Sons already runs two insurance joint ventures with AIG - a life insurance and a general insurance company. Tata Sons owns 74 percent in both the ventures, which have been operational since 2001. The market value of Tata Sons' listed investments as of March 2007 was 1 trillion rupees ($20 billion). It also holds stakes in many of Tata Group's unlisted firms.
If Tata is not interested in taking a stake of up to 49 percent in AIA, it could seek to buy out AIG's stake in the Indian venture, which bankers familiar with the business said could be worth around $750 million. It was not immediately clear which other companies were looking at AIA. AIG said earlier this month it had received offers for its Philippine insurance businesses and announced plans to sell its Thai consumer finance units.
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