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Singapore Govt blocks NTUC Income and Allianz deal after public outcry

The Singapore government has blocked a proposed deal between NTUC Income and Allianz, citing public interest concerns. The S$2.2 billion transaction sparked widespread opposition over fears that the insurer would deviate from its mission to serve low-income workers.

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The Singapore government has blocked a proposed deal between NTUC Income and German insurance giant Allianz, citing concerns over NTUC Income’s social mission and its potential deviation from the cooperative movement’s principles.

The deal, announced on 17 July 2024, would have allowed Allianz to acquire a 51% stake in NTUC Income for S$2.2 billion (approximately US$1.6 billion).

Despite NTUC Enterprise’s assurance that it would retain a “substantial” minority stake, the proposal faced significant public opposition, leading to the government’s intervention.

In a ministerial statement to Parliament on 14 October 2024, Edwin Tong, Singapore’s Minister for Culture, Community and Youth (MCCY), confirmed that the government had assessed the transaction and deemed it not in the public interest to proceed in its current form.

The primary concerns revolved around the potential impact of a capital extraction that could undermine NTUC Income’s ability to continue its social mission of providing affordable insurance to low-income Singaporeans.

NTUC Income’s Corporatisation and Strategic Objectives

NTUC Income, originally established in 1970 as a cooperative under Singapore’s labour movement, underwent corporatisation in 2022 to improve its ability to meet increasing regulatory and financial demands in the insurance sector.

The organisation, which provides essential insurance services to over 1.7 million customers, has traditionally focused on underserved segments of society.

NTUC Income, Singapore’s one and only insurance co-operative, was corporatised in 2022 into Income Insurance Limited “to achieve operational flexibility and gain access to strategic growth options to compete on an equal footing with other insurers locally and regionally”.

Shareholders were assured at the 2022 annual general meeting that NTUC Enterprise will continue to be the majority shareholder of the new company post-corporatisation.

During the corporatisation process, NTUC Income was granted an exemption from Section 88 of the Co-operative Societies Act (CSA), which allowed it to carry over approximately S$2 billion in surplus funds from its cooperative structure to the new corporate entity.

This surplus was intended to enhance its financial capacity and support its continued social mandate. However, the proposed deal with Allianz, which included provisions for capital extraction, raised concerns that this surplus might be used in ways that did not align with NTUC Income’s mission.

Mr Tong stated that while the government acknowledged the strategic rationale behind NTUC Income’s search for external capital and partnerships, the terms of the Allianz deal, particularly the planned return of S$1.85 billion in capital to shareholders within three years of the transaction, contradicted the purpose of the exemption granted during corporatisation.

Public Opposition and Government Review

Public reaction to the proposed sale has been predominantly negative, with many questioning whether NTUC Income could continue its focus on affordable insurance if Allianz became the majority shareholder. Under the proposed terms, NTUC Enterprise would no longer have the ability to nominate the chairman of the new company, further diminishing its influence. Mr Tong emphasised that the government’s concerns were not about Allianz’s reputation or capability as an investor but were related to the broader implications for NTUC Income’s ability to meet its social objectives.

Following an initial review by the Monetary Authority of Singapore (MAS), which examined the prudential aspects of the transaction, MCCY conducted its own assessment, raising concerns over the capital extraction and the lack of clear, legally binding provisions to ensure that NTUC Income’s social mission would be protected after the deal.

Mr Tong pointed out that despite NTUC Enterprise’s commitment to maintaining its social mission in “good faith,” the transaction provided no structural safeguards to guarantee this.

Implications for the Cooperative Movement

The government also expressed concerns about the broader implications for the cooperative movement in Singapore. NTUC Income, as a former cooperative, was held to certain obligations under the CSA, and its transition to a corporate entity in 2022 was closely monitored to ensure that it would not stray from these commitments.

The proposed Allianz deal, according to Mr Tong, lacked sufficient safeguards to ensure that NTUC Income would continue to serve its original purpose of benefiting low-income workers and underserved segments.

Mr Tong highlighted that NTUC Income’s exemption from Section 88 of the CSA was granted on the understanding that the surplus funds would be used to strengthen the organisation’s financial base and support its social mission.

However, the capital reduction proposed in the Allianz deal undermined this premise, with no clarity on how the remaining funds would be directed towards the cooperative’s objectives.

Legislative Changes and Future Options

In response to these concerns, the government plans to introduce amendments to the Insurance Act (IA) to provide MCCY with a formal role in reviewing transactions involving former cooperatives, such as NTUC Income.

This would ensure that future deals take into account both prudential concerns and the cooperative’s social mission. Mr Tong confirmed that the amendments would be tabled urgently in Parliament, with readings set for 16 October 2024.

Despite the government’s rejection of the current deal, Mr Tong left the door open for NTUC Income to pursue future partnerships with Allianz or other investors, provided that the concerns raised are addressed.

“We are open to any new arrangement which NTUC Income may wish to pursue, as long as the concerns highlighted in this transaction are addressed,” Mr Tong stated.

Public Outcry and Concerns

The controversy surrounding the deal largely revolved around concerns that Allianz, as a multinational corporation, would not be aligned with NTUC Income’s mission to serve the needs of lower-income Singaporeans.

NTUC Income was established with a clear mandate to provide affordable insurance options, especially for those in the labour movement and the lower-income segments of society.

Several prominent voices spoke out against the transaction.

Former NTUC Income CEO Tan Kin Lian expressed concerns about the potential shift in NTUC Income’s priorities, stating that the proposed deal could undermine its original purpose.

Similarly, ambassador-at-large Tommy Koh and former Group CEO of NTUC Enterprise Tan Suee Chieh voiced their opposition.

Mr Tan Suee Chieh went as far as to call the deal a “breach of good faith” and urged government regulators to intervene.

The key fear was that Allianz’s corporate objectives, which are driven by profit motives typical of global insurers, would lead to a reduction in NTUC Income’s commitment to affordable and accessible insurance for Singapore’s working class.

There were worries that under Allianz’s ownership, insurance premiums could increase, pricing out low-income individuals who depend on NTUC Income’s services.

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