Proposed Income-Allianz Deal: NTUC entered partnership in good faith

NTUC and NTUC Enterprise (NE) had supported the Income-Allianz deal in good faith, said NTUC Deputy Secretary-General Desmond Tan in Parliament on 16 October 2024.

He added that Income holds special significance for the Labour Movement as its first co-operative and played a vital role in offering affordable insurance for workers and Singaporeans.

“When NTUC Enterprise briefed the NTUC Central Committee about the proposal, it was difficult for the unions to learn that NE was planning to sell a majority stake in Income to Allianz. But we understood the challenges the Income faced.

“Minister Chee [Hong Tat] has also acknowledged that NTUC had acted in good faith and in the interest of workers and members. In fact, if you look at it, the Government and NTUC share the same strategic intent and broader objectives for Income and the co-op movement,” Mr Tan said.

He reiterated Income’s pledge of $100 million over 10 years from 2021 to provide social mobility among the lower-income and support the well-being of seniors, such as through the Income Future Development Programme, the Income Family Micro-Insurance Scheme, and the Income OrangeAid.

Mr Tan said that the proceeds from the deal would have enabled NTUC and NE to continue doing good in other areas, such as eldercare amidst an ageing population.

He also said that Income has committed to carefully studying the implications of the statement by Minister for Culture, Community and Youth (MCCY) Edwin Tong and the amendments of the Insurance Act and will work closely with the relevant stakeholders to decide on the next course of action.

“From the outset, NTUC's objective was to build a stronger Income so that it can Do Well and it can Do Good. The Labour Movement, which includes NTUC and the enterprises, are united in our purpose and we will continue to do right by our people and what is necessary for the longer-term interest to serve workers and the people of Singapore.”

Mr Tan’s statement comes after Mr Tong said in Parliament on 14 October 2024 that the Government had assessed the proposed Allianz-Income deal and decided that it would not be in the public interest for the deal to proceed in its form.

NTUC also held a dialogue to address the concerns of union leaders on 16 October 2024 at the NTUC Centre with Deputy Prime Minister Gan Kim Yong, Mr Tong and Second Minister for Finance Chee Hong Tat.

In a Facebook post following the dialogue, NTUC Secretary-General Ng Chee Meng said: "NTUC respects and accepts the Government’s decision that the transaction cannot proceed in its current form. Our unwavering focus is on the well-being of our workers, and we will continue to put our workers first in all we do."

Mr Gan, also in a Facebook post following the dialogue, said that the ministers explained during the dialogue the Government's concerns with the terms and structure of the deal.

"As there were commercial sensitivities involved, we were unable to discuss our concerns openly with NTUC ahead of time, before tabling the Insurance (Amendment) Bill in Parliament," he added.

Why the Government is blocking the proposed transaction

Mr Tong said that the Government was concerned about how the proposed deal might affect Income in continuing its social mission.

As part of its social mission, Income provides accessible and inclusive insurance.

It also has a suite of products to cater to the financial needs of specific underserved segments, such as SpecialCare Autism and Down syndrome, Care4MigrantWorkers, and products that provide coverage for mental health conditions.

Under the proposed deal, Allianz would be a majority shareholder with a 51 per cent stake in Income.

Why the Government did not intervene earlier

Mr Tong said that when the proposed transaction was announced on 17 July 2024, the Monetary Authority of Singapore (MAS) did not have reason for concern as Income, in its proposed transaction, was expected to continue to meet regulatory capital requirements.

He added that MCCY had no prior knowledge of the proposed transaction before the public announcements.

Mr Tong said that when the Government first saw the announcements, it accepted the intention of the transaction, which was to strengthen Income.

“We saw that Income would be engaged in a strategic partnership with a major reputable player [Allianz] in the industry. This would strengthen Income’s capital base and allow it to have more access to capital,” Mr Tong explained.

However, he added that following the 6 August 2024 Parliament sitting, MAS saw that Income’s financial plan could be relevant to MCCY’s views on the proposed transaction.

It was at that point that MAS shared the information with MCCY, including the terms of the proposed transaction.

After reviewing the information on the proposed transaction, MCCY became concerned.

Mr Tong said that the Government found that there was sufficient basis for it to intervene in the proposed transaction to protect the public interest.

While NTUC Enterprise had promised to uphold its social mission should the deal go through, Mr Tong said that there are no clear binding provisions or structural protections in the deal to ensure that Income’s social mission will be discharged.

NTUC Enterprise was set up in 2012 as a holding entity for the various social enterprises under the Labour Movement.

NTUC Enterprise is also a co-op and currently holds about 72 per cent of Income’s shares.

Exemption during corporatisation

Income Insurance, a former co-op known as NTUC Income, was corporatised in 2022.

The reason for converting NTUC Income from a co-op to a corporate entity was to strengthen its capital and finances to carry out its business better, explained Income in a statement in 2022.

Mr Tong said that during the corporatisation process, Income sought to be exempted from Section 88 of the Co-operative Societies Act (CSA), which allowed it to carry over approximately $2 billion in surplus to the new corporate entity.

The corporatisation exercise was completed on 6 April 2023.

In Allianz’s proposal for a majority stake in Income, the German insurer projected that Income would return some $1.85 billion in cash to its shareholders within the first three years after completion of the transaction.

Mr Tong said that the Government finds it difficult to accept the proposed substantial capital reduction of $1.85 billion soon after the transaction is completed.

He added that the proposed capital reduction contradicts the premise that the $2 billion surplus was allowed to carry over when Income was corporatised.

Mr Tong also said that if not for the ministerial exemption in 2023, Income’s accumulated surplus of $2 billion would have gone to the Co-operative Societies Liquidation Account to benefit the co-op movement in Singapore as a whole.

How can the Government intervene in corporate deals

As Income is a corporate entity, it is no longer subject to the jurisdiction of the Registrar of Co-ops.

The approval of the proposed transaction rests with MAS under the Insurance Act.

There is currently no provision in the Insurance Act for MAS to consider the views of MCCY when it relates to an insurer that is either a co-op or linked to a co-op.

As such, a Bill was also tabled in Parliament on an urgent basis on 14 October 2024 to amend the Insurance Act.

The Bill will allow the minister-in-charge of MAS to consider the views of the minister responsible for the administration of the CSA.

The Bill was passed in Parliament on 16 October 2024.

While Mr Tong said that the Government cannot allow the proposed transaction to proceed, it is open to new arrangements that Income may wish to pursue, whether with Allianz or other partners, as long as the concerns are addressed.