blocked by the Singapore government NTUC Enterpriseproposal to sell income insurance It transferred its shares to Allianz, citing concerns about the structure of the deal.
This decision was taken despite the fact that there is no dispute that Allianz is a suitable partner.
The government has submitted a bill to amend the Insurance Act to Congress. Monetary Authority of Singapore (MAS) Withhold approval of transactions involving current or former cooperative insurance companies if the public interest is at risk.
Minister Edwin Tong explained: ministerial statement Although the government says it will support strong partners to strengthen Income’s capital base, the structure of the deal raised concerns, particularly given the guarantees made upon Income’s incorporation in 2022.
The government highlighted that it was unclear how the deal would impact on Income’s social mission and the core principles it pledged to uphold as it transitioned from a co-operative to a corporate entity.
Income Insurance was incorporated in 2022 and transitioned from NTUC Income Co-operative Ltd to corporate structure.
The move is aimed at helping insurers become more competitive in an increasingly stringent regulatory environment and attract strategic partners.
In the process, Income carried forward S$2 billion in surplus, which was granted an exemption by the Ministry of Culture, Community and Youth (MCCY) to support business continuity.
However, with no clear plan to ensure that the funds continue to support Income’s social mission, the government is now wondering how this surplus will be used under the Allianz contract. There is.
The proposed sale included: Allianz acquires 51% stake in Income for S$2.2 billionhas plans to streamline operations and optimize capital, and expects to return S$1.85 billion in capital to shareholders within three years of the transaction.
This potential capital extraction raised concerns as it contradicted Income’s previous representations to MCCY that the corporatization was aimed at strengthening its capital position.
In response to these concerns, the government decided to intervene, believing that the agreement, in its current form, could undermine the social mission of both Income and Singapore’s co-operative movement.
Although financial soundness requirements have been met, the government’s focus has moved beyond regulatory capital ratios to include the broader implications for Income’s role as a social enterprise.
Income Insurance acknowledged the government’s decision and promised to consider the proposed amendments to the Insurance Act.
The company confirmed that it will work closely with relevant stakeholders to consider next steps.
NTUC Enterprise echoes this statement, saying:
“NTUC Enterprise has consistently acted with integrity to protect the interests of Income Insurance’s shareholders, policyholders and employees. Allianz’s proposal will make Income Insurance even more relevant and resilient over the long term. We believe that we can fulfill our social responsibilities and fulfill our obligations to policyholders.
NTUC Enterprise will carefully consider the impact of Minister Edwin Tong’s Ministerial Statement and the amendments to the Insurance Law and will work closely with relevant stakeholders to determine the next course of action. ”
Allianz, one of the world’s largest insurance companies, said it respects the government’s position and will work with Income and NTUC Enterprises to review the deal structure.
“We believe in the importance of partnering with Income Insurance, a company that shares Allianz values.
And our commitment to customer excellence will benefit Singapore’s customers and society. ”
The insurance company said in a statement:
The bill to amend the Insurance Law, which was tabled on October 14, 2024, will be further debated in Parliament on October 16, 2024.
This change will enable MAS to consider broader public interest issues when assessing transactions involving cooperative insurers, ensuring that future transactions meet both financial health and social objectives. guaranteed to be in accordance.
Featured image credit: Edited from pexel
