NTUC Income co-op to become corporate entity amid 'intensifying headwinds' in insurance sector

SINGAPORE: NTUC Income on Thursday (Jan 6) announced plans to convert itself into a corporate entity, citing the need to be more competitive amid “intensifying headwinds” in the insurance sector.

Currently a co-operative under the NTUC umbrella, the insurer said converting into a company governed by the Companies Act will allow it to “achieve operational flexibility and gain access to strategic growth options to compete on an equal footing with other insurers locally and regionally”.

Its existing insurance business and assets will be transferred to a new company called Income Insurance Ltd.

The transfer has been approved by the Monetary Authority of Singapore, said chief executive officer Andrew Yeo at a media briefing. Income has also registered the new company with the Accounting and Corporate Regulatory Authority.

The corporatisation exercise is expected to be completed in the second half of this year, subject to regulatory approvals and other customary closing conditions. The co-operative will be liquidated thereafter.

The insurer stressed that the move, which only changes its legal form, will have no impact on staff or existing holders of its insurance policies.

“INTENSIFYING HEADWINDS”

Income said “significant shifts” have been under way in its operating environment, such as a mature domestic market and evolving regulatory expectations and requirements.

Competition has also stiffened, especially with the entry of new technology players.

Despite its status as a co-operative – defined as membership-based enterprises that operate on the principles of self-help and mutual assistance – Income is subjected to similar regulatory demands, sector competition and challenges like any other commercial insurers in Singapore, Mr Yeo said.

“Going forward, we are foreseeing intensifying headwinds,” the chief executive added.

For one, it anticipates increased capital needs in order to continue with its roll-out of new digital products, while exploring other capabilities to “future-proof” the company, Mr Yeo said.

It is also on the lookout for opportunities beyond Singapore after having expanded into Indonesia, Vietnam and Malaysia in October last year.

As a co-operative, it can only tap on capital from institutional members, which must be co-operatives and trade unions. “To that end, only NTUC Enterprise’s capital is classified as tier one capital to fuel Income’s capital adequacy ratio,” said Mr Yeo.

After the corporatisation exercise, Income will no longer face restrictions on its institutional investors, giving it “more flexibility in accessing capital to grow its business”.

“We do foresee that there will be increasing need for capitalisation as we fuel our growth plans and therefore, corporatisation is definitely a necessary step.”

Asked if Income is already in discussions with any potential investors, Mr Yeo replied that “there’s nothing on the horizon” for now but the planned move will position the insurer “to be ready for any opportunities”.

“NO IMPACT” ON POLICYHOLDERS

Income, which was first established in 1970 with the objective of providing affordable insurance for workers, currently has 2 million policyholders. 

The coverage, benefits and terms of existing policies will not change, Mr Yeo said.

Asked if customers may see higher premiums moving forward, he stressed that Income will remain “steadfast in terms of (its) purpose to enhance customers’ financial well-being”. 

Income also said it “remains committed to its purpose and mission” and has pledged S$100 million over 10 years to sustainability causes, including environmental and social ones.

Its organisational structure and business operations will not change, Mr Yeo said, adding that no one will be retrenched and existing staff benefits and roles will remain. Income currently employs 1,800 employees.

The co-operative will be liquidated after it transfers its insurance business, assets and liabilities to the new company. Shares in the new company will be distributed to ordinary and institutional members of the co-op who are shareholders, according to the number of co-op shares that they hold.

As such, co-op shareholders will hold the same number of shares in the new company as in the co-operative.

The new company will issue share certificates to all shareholders, which is anticipated to take place in the second half of the year when the corporatisation exercise is completed.

NTUC Enterprise will remain the majority shareholder of the new company, Mr Yeo said.

“(Income’s) current board and management team will continue to steer and grow the new company aligned to its purpose, leveraging Income’s strong brand equity and business growth plans,” he added.

Income’s distribution channels and business partners are also expected to “continue on the same contractual terms and conditions”.

The insurer will organise an extraordinary general meeting to seek members’ approval for the proposed corporatisation exercise. It will also hold information sessions and publish a notice of intention to inform its members.

Its chairman Ronald Ong said the current COVID-19 pandemic has proven the importance of being agile and adapting to challenges. 

“The board and the senior leadership team at Income recognise that we cannot afford to stand still. Income needs to continue to transform so that we can remain relevant, competitive and do well in our business in the long run,” he said.

“Only then will we be able to serve our customers better and safeguard the interests of our stakeholders while staying true to our purpose.