Allianz-Income deal: NTUC Enterprise, Income Insurance rebut former CEO's criticisms

SINGAPORE - NTUC Enterprise (NE) and Income Insurance late on August 4 rebutted an open letter by former NTUC Income chief executive Tan Suee Chieh, in which he had criticised and objected to an offer by German insurer Allianz to buy a controlling stake in Income Insurance, and called on the Government to stop it.

Referring to Mr Tan’s Aug 2 letter to Monetary Authority of Singapore (MAS) chairman Gan Kim Yong, which was posted on social media, NE and Income noted that “in raising his objections, he has cast aspersions on the stakeholders in relation to this proposed transaction. These aspersions are not well-founded and, indeed, unfair”.

Allianz on July 17 offered to buy a controlling stake of at least 51 per cent in Income, valuing a potential deal at $2.2 billion. At $40.58 a share, the offer price represents a 37.3 per cent premium over Income’s net asset value per share of $29.55 as at Dec 31, 2023.

Should the deal go through, NE will retain a substantial stake of up to 49 per cent in Income, depending on how minority shareholders tender their shares.

NE now holds a 72.8 per cent stake in Income while some 16,000 minority shareholders, including institutional investors, hold the remaining 27.2 per cent.

Mr Tan was NTUC Income CEO from 2007 to 2013 and NE Group CEO from 2013 to 2017.

In his letter on Aug 2, Mr Tan said that NE increased its stake in Income between 2015 and 2020, when the insurance provider was still a co-operative, with a series of capital injections totalling $630 million at a par value of $10 instead of at market value. This diluted the share of minority shareholders.

NE and Income rebutted this, noting that as a co-operative at the time, Income’s shares were not traded in the open market. Instead, the shares were bought and redeemed at a par value, or assigned fixed value, of $10 per share, and did not have a market value.

The value of the co-operative shares were given a par value of $10 when its ordinary members infused capital into Income between 1995 and 2004 and also when NE injected $630 million into Income between 2015 and 2020, NE and Income said in their statement.

Mr Tan said in his letter that NE had committed not to redeem its $630 million worth of shares in Income in perpetuity, as this would safeguard the co-op’s social mission of providing affordable insurance to low-income workers in the long term, among others.

He added that NE’s commitment not to redeem its capital was fundamental to Income allowing it to obtain its shares at par value, which were seen to be undervalued, and raising its stake in Income from 30 per cent to 70 per cent.

NE and Income noted that Mr Tan’s claim is erroneous, saying that NE had committed in a 2012 letter to MAS to supporting Income so that it would always maintain a sound liquidity and financial position.

NE had also offered not to redeem its shares in Income as a solution to having its capital contributions counted towards Income’s capital adequacy requirements and solvency position.

It added that it had given an undertaking not to redeem the capital injected into Income to keep it solvent, for at least ten years. “It is clear from this statement that NE’s commitment was not for an indefinite period,” it said.

NE subsequently converted all its shares in Income to permanent shares in 2018 to support Income’s capital and solvency adequacy position. 

NE and Income said that since Income was corporatised in 2022, minority shareholders have benefited from the conversion of their co-op shares to equity shares on a 1-on-1 basis, enabling them to realise the full value of their shares as opposed to them being capped at par value.

Should minority shareholders accept Allianz’s offer at $40.58 per share if the deal is approved by MAS, they would be given priority to tender their shares ahead of NE. NE and Income added that Allianz’s offer price is between 3.3 times to 28 times their original Income investment.

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NE and Income said Mr Tan’s claims that both had gone back on the commitment to a majority shareholding in Income after it was corporatised are “untrue”.

They added that Income shareholders and policyholders were engaged prior to an extraordinary general meeting (EGM) on the corporatisation of Income in 2022, and that Mr Tan neither attended the information sessions nor the EGM, where resolutions on the corporatisation exercise were passed with 99.99 per cent of shareholders voting in favour.

Back then, an independent committee for Income had explored an outright sale, initial public offering or strategic partnership.

As an IPO was not an attractive option due to market conditions, NE and Income held discussions with several financial and non-financial institutions for a strategic partnership. They said both foreign and local partners were explored and Allianz’s credentials were the strongest, while its interests were the most aligned with Income.

NE and Income also assured in their latest statement that should a deal with Allianz go through, Income will continue participating in national insurance programmes and honour the terms of existing policies.

It will also continue providing products such as LUV and GIFT, SpecialCare Down syndrome and Autism, Care4MigrantWorkers, Silvercare to cater to the needs of the vulnerable and the underserved, and honour its social mission is to provide affordable, inclusive insurance to all Singaporeans.

In a Facebook post on August 4, Minister of Culture, Community and Youth Edwin Tong said: “As business enterprises with social missions, co-operatives must first be financially sustainable. Social enterprises have to achieve this, not as an end in itself, but in order to better serve their members and social causes in a fast-changing economic environment.”

He noted that Income had provided the necessary disclosures to members and given ample opportunities to members to seek clarification on the corporatisation plans. “Eventually, members voted overwhelmingly in favour of corporatisation.”

From a regulatory perspective, therefore, the Registry of Co-operative Societies is satisfied that due process was followed in that corporatisation exercise, he said.

Mr Tong added that the Government values NTUC’s social mission. “We look forward to NTUC (and its enterprises) continuing with its social mission to uplift the lives and livelihoods of workers in Singapore.”

This article was first published in The Straits Times. Permission required for reproduction.