Allianz to consider revising proposed Income deal; respects Singapore government’s position

SINGAPORE: German insurer Allianz said it will “consider revisions to the proposed transaction structure” to acquire a majority stake in Income Insurance, after the Singapore government intervened to block the deal on Monday (Oct 14).
“We respect the government’s position and will assess the situation with Income Insurance and NTUC Enterprise,” it said in a statement late on Monday.
“We are convinced that partnering with Income Insurance, a company that shares Allianz’s values and commitment to customer excellence, will benefit Singapore’s customers and society.
“We will now work closely with the relevant stakeholders to consider revisions to the proposed transaction structure.”
Similarly, Income Insurance said on Monday that it “respects” the government’s decision and will work closely with the relevant stakeholders to “study and decide on the next course of action”, taking into account the upcoming amendments to the Insurance Act. 
It noted “the government’s concern about the terms and technical construct of the deal, and respects the need to amend the Insurance Act to provide a clear statutory basis for its review and approval involving such applications”.  
“Income Insurance has consistently acted in good faith to safeguard the best interests of its stakeholders, including policyholders and shareholders. It remains committed to empowering the financial well-being of Singaporeans.”
NTUC Enterprise, which currently has a 72.8 per cent stake in Income, also said in a statement on Monday that it will “work closely with relevant stakeholders to decide on the next course of action”.
It said it “believes that Allianz’s offer will enable Income Insurance to be even more relevant and resilient over the long term, to fulfil its social commitments, and meet its obligations to its policyholders”. 
Under the proposed transaction, which was announced on Jul 17, Allianz would have acquired a majority stake in Income for about US$1.6 billion.
It then said it would offer S$40.58 per share for 51 per cent of the shares in Income Insurance.
NTUC Enterprise said at the time that it would remain a “substantial shareholder” if the sale went through. 
The announcement triggered a public outcry, with concerns over whether Income would continue its social mission. 
Culture, Community and Youth Minister Edwin Tong told parliament in a ministerial statement on Monday that the government had “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 the Ministry of Culture, Community and Youth (MCCY) is not confident that the proposed deal would not affect Income, or the co-op movement as a whole to carry out its social mission.
“We find it difficult to reconcile the proposed substantial capital reduction, soon after the transaction is completed, with Income’s representations to MCCY during the corporatisation exercise that it was aiming to build up capital resources and enhance its financial strength,” said Mr Tong. 
Income, a former co-op, was corporatised in 2022. In doing so, it sought to be exempted from Section 88 of the Co-operative Societies Act, and thus was allowed it to carry over approximately S$2 billion in surplus to the new corporate entity, said the minister. 
The proposed capital reduction in the Income-Allianz deal “runs counter” to the premise for why the exemption was given, he added. 
“If not for the ministerial exemption in 2023, Income co-op’s accumulated surplus of some S$2 billion would have gone to the CSLA after being wound up, to benefit the co-op movement in Singapore as a whole.” 
“MCCY has not seen any arrangement within the present transaction to account for the estimated S$2 billion surplus that was carried over to the new corporate entity, due to the exemption,” he added. 
“There is no clarity on how this sum will be directed towards advancing Income’s social mission.” 
Hence, the ministry is not satisfied that Income will be able to continue fulfilling its social mission after the proposed transaction, said Mr Tong. 
“There are no clear binding provisions or structural protections in the deal to ensure that Income’s social mission will be discharged.” 
However, Mr Tong added that the government is open to new arrangements, whether with Allianz or any other partners, as long as the concerns highlighted are fully addressed.
The government understands and accepts that the strategic purpose behind Income’s corporatisation exercise and potential partnership with Allianz was to strengthen it and make it more financially sustainable in the longer term, stressed the minister. 
In its statement on Monday, Income Insurance said it appreciates the government’s understanding of the “strategic purpose” behind its corporatisation exercise in 2022 and acknowledgement that its proposed partnership with Allianz was to strengthen its position “for the long run”.