India has to make its systems more contemporary: Sunil Mehta
The past four years were tough for AIG in India. The US financial conglomerate set up its insurance business in partnership with the Tata Group in 2001 and then built several businesses, including software development, private equity and asset management. Following the subprime crisis in 2008 that hit the company and led to a $182.5-billion bailout by the US government, AIG’s India unit divested many businesses as part of a global restructuring exercise. Sunil Mehta, country head and CE, who joined AIG India from Citi Bank in 2000, is proud of staying with the company during the troubled times, and he talks about how it plans to bounce back. Edited excerpts from an interview with Abhineet Kumar:
AIG India has seen a slew of business exits, including life insurance, private equity and now mutual fund business in the process of being sold. How strong is AIG’s growth plan for India?
AIG continues to be committed to India, in line with its core global business strategies in insurance. AIG continues to have a strong presence in India through its joint venture with the Tatas in general insurance business. As regards the life insurance business, Tata AIG Life is now TATA AIA Life after the IPO of AIA through which AIG earlier held its life insurance business in Asia. But, AIG still owns a minority stake in AIA.
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The business restructuring in India was an integral part of the global restructuring process that we are accomplishing in line with AIG’s global strategy, which it has successfully implemented after 2008.
AIG, under its existing leadership, has delivered on its commitments to repay its obligations to the US government and rebuild a strong global insurance franchise. India is a market that cannot be ignored, and it remains so for AIG as well.
So, what would be AIG’s mainstay in India in the next five to 10 years?
After the 2008 situation, AIG had very clearly articulated that they want to be in core insurance business globally. I think that’s where the mainstay of AIG will be in India in the foreseeable future.
When you say your mainstay is going to be insurance business, do you mean it is going to be only the non-life business in India?
Yes, and I believe it is a great business proposition. The non-life business market will grow at a good pace, and so we will continue to participate in that business. The prospect of this industry continues to be very well. We’re still an under-insured market. Where else can you get a market of 1.2 billion people and an economy that is projected to grow at a strong pace in the long term?
Do you see the Indian economy reviving to what it was, say, two years ago, or do you feel that there would be slow growth?
I certainly see the potential for growth momentum to come back. Intrinsically, India continues to have strong economic fundamentals. We have to build strong and positive sentiment and believe in our ability to execute and deliver eight per cent-plus growth. By taking small steps, India will once again achieve this growth rate. India’s consumption, demand, demographics and the potential for infrastructure investments continue to be our key growth drivers. Financial sector reforms, including FDI in insurance and pension, will provide further confidence.
What are those specific changes, in your view, that will put our economy back on the track of expected growth?
While a lot has been spoken about policy framework, I think it eventually boils down to execution. We should really focus on de-bottlenecking and removing some of the impediments that we have on policy implementation and execution. That sort of move gives further impetus for projects which have been taking a bit longer to be implemented on the ground. So, that’s one in terms of execution.
The second is, we have spoken a lot about investment in hard infrastructure. But what about soft infrastructure? By soft infrastructure, I mean development of our institutional infrastructure, making it far more contemporary. The systems and process worked for us very well in the past. But with the size of the economy and the complexities that exist today, we have got to make our systems and processes far more contemporary.
Do you plan to enter some new businesses in India?
At this stage, AIG is committed to its core insurance business. India has a great potential; and from my personal perspective, I see great possibilities for growth of insurance and financial markets. And given an opportunity, we will continue to build businesses and deliver the promise that India offers.