Income Insurance needs adequate capital in order to stay financially sustainable, National Trades Union Congress (NTUC) leaders said on Monday (Aug 5), following public unhappiness over its proposed sale of a majority stake in the insurer to German financial giant Allianz.
In a joint statement, NTUC president K Thanaletchimi and secretary-general Ng Chee Meng said that Income will continue to offer two low-cost schemes to union members and keep premiums "affordable for policyholders, especially those in the lower-income segments".
The first is NTUC Gift, a group insurance policy for members of NTUC-affiliated unions and associations, with premiums fully paid by NTUC and co-payment from the affiliated unions. The second is Income Insurance Luv life insurance, a group term life insurance policy for NTUC members.
"NTUC will ensure that Income upholds this commitment," said Thanaletchimi and Ng.
In response to queries from The Business Times, Income said Luv covers 14,000 lives, while Gift covers 800,000 union members.
The joint statement comes after Allianz said on Jul 17 that it plans to acquire 51 per cent of Income at S$40.58 per share. The deal amounts to some 1.5 billion euros (S$2.2 billion).
NTUC Enterprise Co-operative (NE) currently owns around 72.8 per cent of the insurer, represented by about 78 million shares out of the total 107.2 million shares as at Dec 31, 2023, based on Income's annual report. The balance is held mainly by retail investors.
In Monday's statement, Thanaletchimi and Ng said: "For Income, the key to financial sustainability is capital adequacy."
They noted that the insurer's capital buffers have repeatedly come under pressure - from the Asian Financial Crisis in 1997, through Sars in 2003 and the Global Financial Crisis in 2009, to the Covid-19 pandemic.
"NTUC Enterprise itself has put significant amounts into Income over the years. Between 2015 and 2020, including when Covid-19 hit us, NTUC Enterprise injected a total of S$630 million into Income," they said.
"As a shareholder, NTUC Enterprise will continue to support Income. But it cannot do so alone."
That is why Income was corporatised in 2022, so the insurer would have greater access to capital. Post-corporatisation, Income explored options with both foreign and local financial and non-financial institutions.
"Retaining majority shareholding and keeping Income locally owned would have been ideal, but unfortunately, there was no alignment of interests," said the labour leaders.
Income eventually found Allianz's credentials to be "the strongest, with the interests of both sides aligned".
"A strong industry leader would give Income the backing of two strong shareholders," they added.
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The pair noted that Income was a key pillar of Singapore's social infrastructure in its developing years - but the landscape has changed dramatically since then.
When Income was set up in 1970, most workers were uninsured, and Income could provide much-needed insurance protection at affordable rates, leveraging NTUC's affiliated unions.
In contrast, Singaporeans today - including lower-income workers - are well served by national insurance programmes and a "competitive and well-regulated insurance industry". Public healthcare is subsidised, while the government provides universal healthcare coverage with MediShield Life.
Meanwhile, Income's market share has fallen to less than 10 per cent by value, based on data by the Life Insurance Association.
"In this fiercely competitive environment, it became plain that Income can only continue to fulfil its social mission if it has access to additional resources and the ability to scale," said the labour leaders.
For Income to meet its long-term commitments to policyholders, it has to be sufficiently capitalised now and "well into the future".
The offer from Allianz will help to secure this, with the NTUC Central Committee supporting NE's consideration of the Allianz offer, said Thanaletchimi and Ng.
The NTUC statement comes after much public scrutiny, as the general public and policyholders questioned if the deal would affect Income's ethos of providing affordable insurance to low-income workers.
On Sunday, NE and Income fended off criticism of the deal from former CEO of Income and NE Tan Suee Chieh. In a statement, they said that the proposed sale prioritises the interests of Income's minority shareholders.
This was after Tan sent a letter to Monetary Authority of Singapore (MAS) chairman Gan Kim Yong, asking regulators to step in and reject the sale. In the letter, he accused NE of reneging on its commitment when it was allowed to raise its stake in the insurer at par value of S$10 per share and at the expense of dilution to minority shareholders.
Tan has since sent a second open letter on Monday, rebutting the points from NE and Income. He said that NE and Income's joint statement on Sunday was "completely wrong" in stating that NE's undertaking to hold on to the shares was not for an indefinite period, as the statement referred to by NE and Income from a 2014 board meeting had been lacking context.
He invited MAS to ask both NE and Income to produce all relevant board meetings and board papers covering the discussions, so that MAS and the public can "judge the matter for themselves".
He added that NE had made a "clear commitment not to redeem in perpetuity the additional shares, which were to be issued to it at par value".
Said Tan: "Sixty-three million shares were eventually issued upon that undertaking. That undertaking should be honoured."
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This article was first published in The Business Times. Permission required for reproduction.
