What to know so far about the Income-Allianz saga

SINGAPORE: The Singapore government has intervened to stop a proposed deal between German financial services company Allianz and Income Insurance after it dominated headlines in July and August.

The proposed transaction, which would have seen Allianz acquiring a majority stake in Income, had triggered a public outcry, with concerns about whether Income would continue its social mission.

While the government will not allow the proposed transaction to proceed, it said on Monday (Oct 14) that it is open to new arrangements if the concerns highlighted are fully addressed. 

What's happened so far?

In mid-July, Allianz announced it was planning to buy a majority stake in Income Insurance for around US$1.6 billion.

It said it would offer S$40.58 per share for a transaction value of S$2.2 billion (US$1.66 billion), for 51 per cent of the shares in Income Insurance.

NTUC Enterprise, meanwhile, currently has a 72.8 per cent stake in the insurance company. It has said it would remain a "substantial" shareholder if the sale goes through.

Though still pending regulatory approval, some public figures have raised objections against the proposed deal.

It's led to NTUC Enterprise and Income issuing clarifications and most recently, a lengthy statement rebutting claims related to stakeholders and shares.

The crux of the outcry was on how Allianz, as a large multinational, would not be fully aligned with the original mission of the Singapore company - to serve the needs of low-income workers. 

Singapore's lawmakers posed questions in parliament on Aug 6 on the affordability and accessibility of insurance for the mass market.

In response, Minister of State for Culture, Community and Youth Alvin Tan said at the time that the National Trades Union Congress (NTUC) has a track record of caring for workers and fulfilling its social mission "time and time and time and time again". 

Deputy chairman of the Monetary Authority of Singapore (MAS) Chee Hong Tat also said on Aug 6 that the central bank would hold Income and Allianz to account for their commitments to honour existing policies.

In a ministerial statement on Oct 14, Minister for Culture, Community and Youth Edwin Tong announced that the deal was off. 

"The government has assessed the proposed transaction and has decided that it would not be in the public interest for the transaction, in its current form, to proceed," he said in parliament. 

While the government will not allow the proposed transaction to proceed, it is open to new arrangements if the concerns highlighted are fully addressed, he added. 

Who are the main players, and what are they saying?

In its original announcement, Allianz said the majority stake in Income Insurance was expected to elevate its presence in the "fast-growing and attractive Singapore insurance market".

The German firm's group CEO Oliver Baete then spoke up in the aftermath of the pushback, saying Allianz was "not in Asia to buy top line; we want to build a resoundingly profitable business".

The company was "not in the business of selling products that don't provide what we call minimum value to clients", he added. 

NTUC Enterprise, meanwhile, talked about strengthening Income's long-term competitiveness.

It revealed at the time that Income lost out on "several key contracts to its global and regional competitors" despite putting in competitive bids, proving that "strong and continuous capital support and resilience" are needed for growth.

The proposed deal with Allianz would thus allow Income to tap the global company's expertise in asset management and technology and product development.

But it also reiterated that it intended for Income to continue to be an important, financially profitable and socially responsible business, in line with its purpose of "empowering financial well-being for all".

Ongoing social commitments, such as participating in national insurance programmes and helping the low-income among others, would have continued under the proposed deal. 

NTUC Enterprise chairman Lim Boon Heng said at the time that Income would continue to provide affordable insurance for lower-income customers. 

Income's life insurance market share has been "less than 10 per cent in the past 10 years", he noted. 

Hence, Allianz's offer to be a majority shareholder would have enabled Income to be even more relevant and resilient over the long term, to serve families in Singapore, and fulfil its obligations to its policyholders, Mr Lim said.

Mr Tong posted on Facebook about the matter on Aug 6, noting that NTUC Income Co-op became a corporate entity in 2022, citing increasing challenges in the insurance sector. 

This was raised previously to the Registry of Co-operative Societies (RCS) under the Ministry of Culture, Community and Youth (MCCY).

Mr Tong said RCS had then advised all parties that this was a matter for NTUC Income and its members to collectively determine and resolve.

NTUC Income had done so and following consultations, members voted overwhelmingly in favour of corporatisation, Mr Tong said, adding that RCS was satisfied from a regulatory perspective that due process was followed. 

On Aug 6, labour chief Ng Chee Meng weighed in, saying in a statement that NTUC would ensure Income upholds its commitment to keep premiums affordable for two existing low-cost schemes for union members.

Months later in October, Mr Tong said MCCY is not confident that the proposed transaction would not affect Income, or the co-op movement as a whole to carry out its social mission. 

It is not in the public's interest for the deal in its current form to proceed, he added. 

He clarified that the government does not have concerns over Allianz’s standing or suitability to acquire a majority stake in Income, but is only concerned over the “terms and structure” of this specific transaction, with the context of the preceding corporatisation exercise. 

The government intends to amend the Insurance Act to provide "clear statutory basis" for MCCY’s views to be considered in applications related to insurers that are either a co-op or linked to a co-op, said Mr Tong. 

Given the “time sensitivity”, Mr Chee will table the amendments in parliament “on an urgent basis”, and the Bill will be read a second and third time on Wednesday. 

Who's spoken up against the deal?

Former NTUC Income CEO Tan Kin Lian has also criticised the deal, saying it would not help Income fulfil its social mission, and that Allianz would be in control with a goal to "maximise the return for their shareholders".

Ambassador-at-large Tommy Koh also publicly objected to the deal in two Facebook posts, saying that Income was "not a loss-making company in need of rescue" and that "nothing is sacred and everything is for sale". 

But it is Mr Tan Suee Chieh who has been perhaps most publicly vocal, penning two lengthy social media posts and two open letters to date.

He was CEO of NTUC Income from 2007 to 2013, before he became Group CEO of NTUC Enterprise from 2013 to 2017.

Mr Tan called the deal a "breach of good faith" given that the assurance from NTUC Enterprise to remain as majority shareholder was used to alleviate concerns about the corporatisation.

This was among several key concerns he raised in the first open letter dated Aug 2 to MAS, where he asked government regulators to step in.

On NTUC Enterprise becoming a corporate entity, Mr Tan was concerned that the laws governing corporations would not necessarily bind it to hold its shares in NTUC Income permanently.

He also said NTUC Enterprise and Income did not stay true to commitments allegedly made to him during the corporatisation exercise.

In response, NTUC Enterprise and Income issued a joint statement on Sunday night, noting that Mr Tan had "cast aspersions on the stakeholders in relation to this proposed transaction".

They said shareholders and policyholders had been engaged to clarify any questions prior to an Extraordinary General Meeting (EGM) on the corporatisation exercise.

Mr Tan "neither attended the information sessions nor the EGM", and that resolutions were passed with 99.99 per cent of shareholders voting in favour.

Even if NTUC Enterprise's votes were excluded, minority shareholders voted "overwhelmingly in favour".

The two entities also pointed to a letter Mr Tan had quoted, which was from NTUC Income to him and dated Feb 10, 2022. 

According to the letter, NTUC Income confirmed that, notwithstanding the corporatisation, NTUC Enterprise would continue to be the majority shareholder of Income Insurance.

But the extract should be set in full, said NTUC Enterprise and Income, emphasising that the former's role as the major shareholder was also stated as "subject always to the interests of Income, which must remain paramount".

"Indeed, the interests of Income Insurance must always remain paramount, and it is in that context that NTUC Enterprise has always acted, which ultimately resulted in this proposed transaction with Allianz," the joint statement said.

After the announcement on Oct 14, Mr Tan Suee Chieh welcomed the government’s decision to reject the proposed deal. 

"This outcome underscores the importance of speaking up on matters of public interest and ensuring that the values of trust, integrity, and governance remain at the forefront of our decision-making processes," he wrote in a post on Facebook. 

What do some of the terms in the deal mean?

In NTUC Enterprise and Income's response to Mr Tan Suee Chieh on Aug 4, where the two entities attempted to lay out the context and full facts, it was noted that co-operative shares are issued and redeemed at their par value, and that they are not equity shares.

To break it down, firstly, in a co-operative with share capital, members may be required to hold shares as part of their membership. 

A co-operative cannot issue shares to a person unless he or she also agrees to become a member. 

These shares are not traded in the open market and do not hold a "market value". 

Par value represents the minimum amount of money that shareholders must pay to the company for each share they own.

In the case of NTUC Income, this was S$10 per share. 

Redeemable shares, or preference shares, come with a "buy-back" option. This means that a company or in this case, a co-operative, may buy back the shares from the shareholder at a fixed price and date. 

Redeemable co-operative shares did not qualify as capital under new insurance regulatory requirements, said NTUC Enterprise and Income. 

As such, NTUC Enterprise subsequently converted all its shares to permanent shares, which cannot be withdrawn. 

As part of the corporatisation, Income then decided voluntarily - even though there was no mandate nor obligation to do so - to convert all shareholders’ co-operative shares to Income Insurance shares on a one-for-one basis.

That way, minority shareholders now hold equity shares, which provide long-term financing for a corporation, giving them ownership and entitlement to a portion of the profits.

Addressing Leader of the Opposition Pritam Singh’s question on the topic, Mr Tong said in October that that Mr Tan, then group CEO of NTUC Enterprise, had said at an Income board meeting on Nov 21, 2014, that the latter was confident that his board would agree to a request to extend this undertaking not to redeem to an indefinite period. 

At the time, Mr Tan also said that NTUC Enterprise was prepared to convert its shares to the new class of irredeemable shares once the legislation was passed. 

But the letter that was eventually sent from NTUC Enterprise to Income on Feb 11, 2015, said that the shareholding in NTUC Income is “thus committed over the long-term, and there is no intention of withdrawing the share capital to be subscribed”. 

This means that there was no specific commitment that the shares would not be redeemed indefinitely, said Mr Tong in parliament on Oct 14. 

“Neither was there a commitment that the shares would not be transferred to someone else,” he said, adding that NTUC Enterprise’s 2015 commitment is “no longer relevant in today’s context”.