I have been a shareholder of NTUC Income (now known as Income Insurance Ltd) for more than 30 years since 1991. After purchasing an Endowment Policy from NTUC Income, I was given the option to purchase a small number of shares. The dividend yield of 6% was quite respectable then.
Thereafter, in 2002, I believe, we were given the option to subscribe up to a maximum of 5,000 shares at a par value of $10 per share. Many individual shareholders took up this opportunity and subscribed in full. The 6% dividend yield was decent and the safety of capital was not much of an issue at it's a Government-linked cooperative.
Also, when Mr Tan Kin Lian, the then-General Manager (now known as CEO) and his management team gave 15% bonus shares every five years. This, I believe, was to compensate for the reducing purchasing power of money as NTUC Income shares can only be redeemed at the par value of $10 no matter how long one holds be it 30, 40 or 50 years! It is also to reward loyalty.
Sadly, Mr Tan Kin Lian stepped down as CEO of NTUC Income and a new management team took over. To the disappointment of shareholders, they discontinued this fair practice of granting 15% bonus shares every five years. My intuition is that the management team could have felt they may have to work that much harder to generate a 6% dividend yield on an ever-increasing number of shares.
I've raised many issues at NTUC Income AGMs, including looking after the interests of individual shareholders. The minutes of the various AGMs is a testament to that. I must say that the chairman and the board were always quite patient and gave us adequate time to air our views and answer our questions to the best of their ability.
Sometime in the FY2010 to FY2013 AGM, a list of shareholders were disclosed at the end of the annual report. I was surprised to note that two-thirds of the shareholders are actually individual shareholders but only two independent directors are on the board to represent these individual investors. I raised this issue at the AGM and highlighted that the two independent directors representing us are not known to us and have not engaged us on how they planned to protect our interests. I proposed that more board seats be given to independent directors representing the interests of individual shareholders bearing in mind the majority of ownership was held by individual shareholders collectively.
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My instinct tells me that this could be one of the reasons why a substantial capital injection of $630 million was made by NTUC Enterprise from 2015 to 2020 to dilute minority shareholder interests substantially1.
The book value was about $40 per share but the subscription price was only $10 per share. When I raised this issue about fairness at the AGM, the board said that this substantial amount was irredeemable capital and it was necessary for NTUC Income. I told the board that to be fair to the other shareholders, this irredeemable option should also be offered to other shareholders and it's up to the shareholders whether to take up the offer. As individual shareholders had limited voting rights which were not commensurate with the number of shares we held, the resolution to allow NTUC Enterprise to further invest in NTUC Income was easily passed. Thereafter, the ownership by NTUC Enterprise has shot up from about 30% to a staggering 72.8% now!
At several NTUC AGMs, I have highlighted the reducing purchasing power of money and the $10 invested in the 1990s is not of the same value as in the 2020s. Many of the investors are now in retirement and if we can unlock the value of their investment it will come in handy in their retirement years.
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I had written a letter to the board on how we can unlock the value for shareholders. I made a proposal to have an investment window, say quarterly, at NTUC Income Portal, on a "willing buyer-willing seller" basis and upon any successful transaction NTUC Income can charge a small admin fee. Sadly, this genuine proposal was not accepted by the board as time and again they would emphasise that NTUC income is a cooperative and not an exchange.
In the lead-up to the corporatisation exercise in 2022, I must give credit to the management team for going through a due consultation process with shareholders and keeping them well-informed. At the EGM held in mid-2022, shareholders gave a resounding mandate of 99.99% to corporatise NTUC Income thereby providing avenues to unlock shareholder value.
The recent offer of $40.58 provided by Allianz is reasonable. However, as a Singaporean, I feel sad that an entity formed by our founding fathers to carry out a noble ideal to provide affordable insurance and investment needs for the common Singaporean is now being proposed to be substantially owned by a foreign entity.
Perhaps, the deal could be structured such that Allianz can own up to 49%of NTUC Income and the majority to remain in the hands of NTUC Enterprise and other shareholders.
An IPO is a better idea
Another better idea would be for Temasek to take up to 51% stake at $40.58 and the remainder to be offered to the public as an Initial Public Offer to be listed on the Singapore Exchange S68 . As Great Eastern Holdings G07 is on the verge of being privatised, Income Insurance Ltd would be a good replacement and also give a boost to the local bourse.
Our well-respected founding father, S Rajaratnam, once said: "Singaporeans were in danger of becoming a people who knew the price of everything and the value of nothing." We need to take pride in our own homegrown and long-cherished institutions and bring it to greater heights. Singapore has survived and thrived against all odds and we should look at all ways to build a better and brighter Singapore.
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S Nallakaruppan is a Chartered Accountant and the President of The Society of Remisiers (Singapore)
1. NTUC Enterprise has explained that the injection was to shore up risk-based capital or RBC ahead of regulatory changes and the new shares were irredeemable compared to the redeemable shares that minority retail investors owned.
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 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
