US$ 194 bn US-based insurance major, American International Group (AIG) is reported to be in talks with the Tata group to buy a stake in Tata Asset Management Ltd (TAM).

With this development, the Tatas plans to buy out Dresdner's 20% stake in TAM, so as to create an entry point for AIG in the company. The move will strengthen ties between AIG and the Tatas. AIG already has a memorandum of understanding (MoU) to enter the life insurance business in India. However, this marks a shift from AIG's earlier strategy of partnering Infrastructure Leasing & Financial Services (IL&FS) for the mutual fund business, and the Tatas for the life insurance venture.

According to industry sources, AIG, by buying a stake in TAM, will be exposed to domestic asset management skills that it will require once its insurance business commences operations. AIG will have a 50% stake in TAM and will be responsible for running the business.

Global insurers are making forays in the Indian MF segment as they find a lot of synergy between the insurance and MF business. Both these line of businesses involve providing asset management services. Once the global insurance majors build a database of investors for their MF business, they can leverage the same for their insurance business.

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