NTUC Enterprise has issued another clarification statement in addition to the first statement on July 25.
In a July 30 statement, NTUC Enterprise said it always aims to have the best interests of Income Insurance and its stakeholders, especially its policyholders.
“Income Insurance must grow and thrive as an enterprise to better discharge its obligations to policyholders in the longer term,” it says.
In addition, the circumstances between the founding of Income Insurance and today are “vastly different”.
“While the goal of providing affordable insurance remains, the competitive landscape has changed with more than 40+ global, regional and local insurers vying for growth in a mature Singapore insurance market,” says NTUC Enterprise.
“This is demonstrated by the fact that, despite putting in very competitive bids, Income Insurance lost out on several key contracts to its global and regional competitors, such as in bancassurance, the Dependants’ Protection Scheme, and group insurance for a large public organisation,” it adds.
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Referring to the pre-conditional offer announcement by Allianz on July 17, NTUC Enterprise stressed that the proposed transaction will enable Income Insurance to tap on Allianz’s global insurance franchise, asset management capabilities, as well as other expertise.
“Income Insurance remains firmly committed to delivering the social outcome of protecting families financially against key risks in life. This social objective remains unchanged since its founding in 1970 by the NTUC,” says Lim Boon Heng, chairman of NTUC Enterprise. Lim had sought to reassure Income Insurance’s policy holders that it will continue to “provide affordable and accessible insurance options to the underserved and lower-income customers” in NTUC’s July 25 statement.
“A stronger Income Insurance, to be anchored by both Allianz and NTUC Enterprise as institutional shareholders, upon successful closing of the proposed VGO, can better offer competitive and affordable products, including those for the masses and the lower income,” he adds this time.
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Furthermore, NTUC Enterprise says it will remain a “responsible steward” of Income Insurance, noting that it has done so “over the years”.
It adds that it had been protecting the interests of Income Insurance’s policyholders through several initiatives including proposing that the Singapore government amend the Co-operative Societies Act to enable Income Insurance to create a class of irredeemable shares.
When this was implemented, NTUC Enterprise converted its shares in Income Insurance to irredeemable shares so that it could be classified as Tier 1 capital to count towards its capital adequacy ratio (CAR), it adds. “Otherwise, shares of co-operative societies are redeemable and therefore classified as contingent liabilities according to international accounting standards,” it points out.
“NTUC Enterprise has always ensured that Income Insurance is placed on a solid base for it to discharge its commitments… NTUC Enterprise provided several capital injections, totalling $630 million between 2015 to 2020, to ensure that Income Insurance is adequately capitalised. This included a capital injection of $100 million during the Covid-19 pandemic in 2020, which was particularly important for the solvency of Income Insurance at that time,” continues the statement.
With that, Income Insurance will continue to be a “financially profitable and socially responsible business”, says NTUC Enterprise.
“As more and more leading businesses embrace stakeholder capitalism in their corporate purpose, social enterprises and co-operatives can no longer claim that they are unique in doing good. Every enterprise must earn its cost of capital to be financially sustainable in the long term. There is a misperception that NTUC Enterprise and Income Insurance have become profit-oriented,” says chairman Lim.
“From the start, NTUC co-operatives like Income Insurance and Welcome (now FairPrice) generated surpluses, so that they could be financially sustainable, fulfil obligations to policyholders, reinvest to grow, attract talent, distribute dividends to shareholders, and rebates to members. Going forward, NTUC Enterprise intends for Income Insurance to continue to be an important financially sustainable and socially responsible business, in line with its enduring purpose of empowering financial well-being for all,” he adds.
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In addition, he notes that the co-operative model is no longer effective for Income Insurance’s ambition and plans to deliver its social outcomes.
“Going forward, Income Insurance will be backed by not one, but two institutional shareholders, NTUC Enterprise will remain a substantial shareholder to provide direction towards the social outcomes, in line with the principle doing good and doing well,” he concludes.
On July 17, Allianz announced that it intends to offer $40.58 per share to Income Insurance’s shareholders as it seeks to acquire at least 51% of the shares in the latter.
The offer price represents a 37.3% premium to Income’s net asset value (NAV) of $29.55 per share. Allianz’s offer puts the total transaction value at around $2.2 billion or EUR1.5 billion.
Income Insurance, on June 14, said that it was in discussions with Allianz on a transaction pertaining to the former’s shares.
On July 23, former diplomat Tommy Koh shared his concerns over the offer via a Facebook post.
“Income started life as a cooperative of NTUC like Fairprice. The idea was to offer insurance to the people at affordable rates. A few years ago it was made into a company and ceased to be a cooperative,” he recalled.
“Now we are told that it may be sold to a German insurance company. I don’t think it’s a good idea to sell Income. It was founded to serve a social purpose and a social need. They remain valid today. I wish to argue that Income and Fairprice should never be sold,” he added.
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
- Aug 3: Income Insurance: open letter, global backdrop, redeemable and irredeemable shares
- Aug 4: NTUC Enterprise explains the difference between redeemable and irredeemable shares to former CEO
- 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
