In an open letter to the Monetary Authority of Singapore (MAS) on Aug 2, Tan Suee Chieh, former NTUC Income (now Income Insurance) CEO and NTUC Enterprise CEO, had said that NTUC Enterprise injected $630 million into NTUC Income from 2015 to 2020 in return for shares at a par value of $10 per share. "The consequence of those capital injections was that NTUC minority shareholders at the time had their shares diluted. Indeed, as a result of those capital injections, NTUC Enterpise’s shareholding in NTUC Income increased very significantly from 30% in 2015 to 70% in 2020."
NTUC Enterprise clarifies in an Aug 4 response that co-operative shares are purchased and redeemed at their par value, and hence they are not equity shares. The value of the co-operative shares of NTUC Income (the co-operative that became Income Insurance after it was corporatised in 2022) were valued at par or $10 per share when its ordinary members injected capital between 1995 and 2004 and also when NTUC Enterprise made its capital injections totalling $630 million in NTUC Income between 2015 and 2020, without reference to prevailing net asset value.
Redeemable co-operative shares did not qualify as capital under new insurance regulatory requirements and to support NTUC Income’s capital adequacy ratio, as they are not permanent capital. NTUC Enterprise subsequently converted all its shares to permanent shares when the Co-operative Societies Act (CSA) introduced a new class of irredeemable shares in 2018. The Edge Singapore explained why this was necessary here.
Conversion to permanent shares was only open to institutional members and not ordinary members of any co-operative as the CSA required Income Insurance to maintain ordinary members’ flexibility to redeem at any time.
"As part of corporatisation, Income Insurance decided voluntarily to convert all members’ cooperative shares, pari-passu, to Income Insurance shares on a 1-for-1 basis. As such, minority shareholders of Income Insurance now hold equity shares which entitle them to the economic interest in Income Insurance, and they can unlock the full value of their shares. As a positive consequence, minority shareholders’ voting rights increased from 0.3% to 26.2%. Hence, the rights of minority shareholders have been protected. The minority shareholders voted overwhelmingly in favour of corporatisation," NTUC Enterprise says.
Additionally, Tan said in his open letter: "When NTUC Income became a corporation in 2022, I was concerned that the laws governing corporations would not bind NTUC Enterprise to its commitment to hold its shares in NTUC Income permanently despite assurance from NTUC Income in writing that NTUC Enterprise was committed to a majority shareholding."
See also: Income Insurance: open letter, global backdrop, redeemable and irredeemable shares
NTUC Enterprise says it "has publicly expressed its commitment to Income". "It has confirmed that, notwithstanding the corporatisation, it will continue to be the majority shareholder... and will continue to provide its financial and other backing to Income pursuant to its 2012 letter of responsibility, as required by the regulator, subject always to the interests of Income, which must remain paramount."
If minority shareholders choose to accept Allianz’s offer of $40.58 per share, if and when it is approved by the regulator, minority shareholders would be accorded priority to tender their shares ahead of NTUC Enterprise, says the latter.
The offer price represents annualised return (inclusive of dividends and bonus issues) of between 10% to 39% over their holding period (or 3.3X to 28X their original investment). As a reference, the 30-year STI annualised returns is 4.3%.
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Follow The Edge Singapore’s coverage of Allianz and Income Insurance:
- May 23: Singapore’s Income Insurance considering partnerships or stake sale
- June 14: Income Insurance and Allianz hold 'transaction' talks, latest possible Singapore insurance M&A
- July 17: Allianz offers $40.58 per Income share, representing premium of 37.3% over NAV
- July 25: NTUC Enterprise says it remains ‘fully committed’ to Income Insurance in clarification statement
- July 30: NTUC Enterprise issues further clarification statement, stresses its commitment to Income Insurance
- Aug 3: Income Insurance: open letter, global backdrop, redeemable and irredeemable shares
- Aug 5: Former NTUC Income and NTUC Enterprise CEO rebuts NTUC Enterprise’s points
- Aug 6: Income-Allianz deal saga: From a minority shareholder’s perspective
