Mumbai: Advertising has been the casualty of the blood bath at Wall Street. With bailout of the American International Group (AIG), the insurance group's corporate advertising has vanished from televisions across the US. The next casualty of the rescue could also be the sponsorship of the football shirts of the Manchester United Football club, valued around £56.5 million.
Market sources suggest that though there may not be any impact of the financial crisis in India, one impact is certainly going to trickle down, the downsized advertising and promotional budgets.
Reports suggest that AIG is already on the move to reduce its domestic operational costs in India, where Tata-AIG Life spends around three per cent of its revenues of Rs2,339 crore on advertising. TNS Media Intelligence has said that the parent company spent around $64 million in the US during the first half of the year on advertising, while in 2007 it spent around $118.7 million. The insurance giant's agency in the US is BBDO.
Tata AIG's agencies in India are Bates, which handles the creative, and Madison Media, which manages the media spend. Reports in the media have speculated that the advertising and promotional costs for Tata-AIG will be rationalized this year, though that has not been confirmed or denied officially by either the company or its agencies.
AIG is the biggest commercial insurer in the US and one of the biggest writers of life assurance besides it is the biggest provider of fixed annuities, a popular retirement savings product. Its global operations are vast and reach out to practically all corners of the world. The core of its financial problems stem from its investment bank where it acted as counterparty in a large number of swap and hedging transactions.
AIG lost $18 billion (Rs83,880 crore) over the last few quarters due to its risky transactions in mortgage securities and derivatives. Though it received a $20-billion funding lifeline on Monday where it was allowed to borrow from its subsidiaries, Standard and Poor's rating cuts had created more worries for the New York-based AIG.
In a bid to avoid damaging global economy and avert the worst crisis in the US financial system, the US Federal Reserve stepped in to take control of AIG by authorising the Federal Reserve Bank of New York to lend as much as $85 billion.