Minister for Culture, Community, and Youth Edwin Tong has raised concerns about Allianz Europe BV’s pre-conditional voluntary general offer (VGO) to acquire Income Insurance Limited.
He said the proposed deal, announced in July 2024, is not aligned with the public interest in its current form.
Tong explained that the Singapore government had conducted a thorough review of the transaction and found several issues that could undermine Income Insurance’s social mission.
Established in 1970 as NTUC Income Insurance Cooperative Limited, Income Insurance was Singapore’s first labour movement cooperative, aimed at providing affordable insurance to workers. The organisation was corporatised in 2022 to strengthen its capital base and meet tightening regulatory requirements, allowing it to compete more effectively in the insurance market.
The government initially supported the corporatisation to give Income Insurance access to capital markets and strategic partnerships for long-term growth. However, Allianz’s proposal includes capital optimisation measures that involve reducing Income Insurance’s capital by S$1.85 billion within three years of the acquisition.
This move, according to Tong, contradicts the rationale behind the exemption granted to Income Insurance in 2022, which allowed it to carry over S$2 billion in surplus during corporatisation – a surplus that otherwise would have been directed to the Cooperative Societies Liquidation Account (CSLA).
The capital extraction plan raised significant concerns about Income Insurance’s financial stability and its ability to continue fulfilling its social mission.
Tong noted that although both Allianz and NTUC Enterprise (NE), which holds a 72% stake in Income Insurance, have assured that the social mission will remain intact, there are no binding structural provisions in place to guarantee this after the deal.
The minister stressed that while the government does not object to Allianz’s involvement as a majority shareholder, the proposed transaction, in its current structure, could jeopardise Income Insurance’s ability to serve the public effectively.
He pointed out that the government remains open to alternative proposals, including new arrangements with Allianz or other partners, as long as the concerns are addressed and the public interest is protected.
If successful with the acquisition of a majority stake in Income Insurance, Allianz would become the fourth largest composite insurer in Asia.
In light of these concerns, the Singapore government plans to amend the Insurance Act (IA) to ensure that the Ministry of Culture, Community, and Youth (MCCY) can provide input on future deals involving insurers linked to cooperatives.
This amendment would require the Monetary Authority of Singapore (MAS) to consider MCCY’s views when evaluating applications for control or ownership changes involving such entities. The proposed changes are scheduled for parliamentary debate in October 2024.
While the government recognises the need for Income Insurance to secure a financially strong partner, it has emphasised that the terms of any partnership must uphold the company’s broader social responsibilities.
