Tommy Koh and Tan Suee Chieh: Merger with Allianz not the right outcome for NTUC Income

SINGAPORE: On Wednesday (27 Nov), Professor Tommy Koh and former NTUC Income CEO Tan Suee Chieh voiced their renewed opposition to NTUC Income’s proposed merger with German insurance giant Allianz in an op-ed published in The Straits Times.

Prof Koh, special adviser to the Institute of Policy Studies at the National University of Singapore (NUS), and Mr Tan, who is also past Group CEO of NTUC Enterprise, applauded the government’s decision to block the merger.

However, they voiced concern over Allianz’s statement that negotiations for the deal were still ongoing.

They urged NTUC Income to abandon the negotiation for merger entirely, describing it as a threat to the organisation’s 50-year legacy. They reiterated that NTUC Income should stand alone as an NTUC social enterprise.

As an alternative, they proposed that NTUC Enterprise or another purpose-driven organisation acquire the 30% of NTUC Income shares currently held by individual shareholders, thereby ensuring the company retains its mission-driven focus.

NTUC Income’s Historical Role

The op-ed highlighted NTUC Income’s founding in 1970 as a cooperative under the vision of C.V. Devan Nair, with support from then-Finance Minister Dr Goh Keng Swee.

Established to address workers’ insurance needs, Income became a cornerstone of NTUC’s broader social enterprise initiative alongside NTUC FairPrice.

“They have lived up to the mantra, to do well in order to do good, ” wrote Koh and Tan, reflecting on the organisation’s success in balancing financial prudence with its social mission.

Concerns About the Allianz Merger

The proposed merger, 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).

Koh and Tan argued that the deal would significantly erode Income’s autonomy, transforming it into a profit-driven entity incompatible with its social enterprise roots.

They cited Allianz’s objective to ‘build a resoundingly profitable business,’ with CEO Oliver Bäte expecting a ‘double-digit return on investment over time,’ as a direct threat to Income’s core mission of serving Singaporeans’ needs.

Koh and Tan highlighted that just two years prior, Income had convinced the regulator to allow it to retain a surplus fund of S$2 billion to strengthen its capital base for growth and to fulfill its social mission.

“Contrary to this assurance, Income-Allianz’s merged entity proposes to reduce its capital and for $1.85 billion to be distributed to the shareholders over the next three years.”

“This proposal is in breach of the undertaking given by Income to the regulator. Instead of strengthening the capital base, it will have the opposite effect,” they said.

The op-ed also highlighted NTUC Income’s leadership in several insurance segments, including a 22% market share in health insurance and 17.5% in motor insurance.

Koh and Tan argued that this demonstrated Income’s resilience and relevance despite its modest 10% share in the life insurance market.

A Way Forward

Acknowledging that 15,000 individual shareholders, who own 30% of Income, might view the merger as an opportunity to cash out, Koh and Tan proposed an alternative solution.

They suggested that NTUC Enterprise or another mission-driven organisation acquire these shares to ensure Income remains focused on its social objectives.

They emphasised that the company’s $2 billion surplus must be safeguarded for social causes and not distributed to maximise shareholder returns.

A Broader Vision for NTUC Income

Looking ahead, Koh and Tan urged NTUC Income to redefine its mission to address emerging social challenges, such as ageing, mental health, and support for disadvantaged groups like lower-income workers.

“There is no pressing need for Income to expand into neighbouring countries or pursue a global presence,” they added.

They pointed to successful social enterprises in Canada and Europe as models for balancing financial sustainability with social impact.

“Income should not fritter away its legacy of doing good over more than half a century, ” they concluded.

Singapore Govt blocks NTUC Income and Allianz deal after public outcry

In a Parliament sitting on 14 October, Edwin Tong, Singapore’s Minister for Culture, Community and Youth (MCCY), confirmed that The Singapore government has blocked the proposed deal between NTUC Income and Allianz, after 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.

In response, Allianz expressed respect for the government’s decision and indicated its willingness to revise the deal structure in collaboration with stakeholders.

NTUC Enterprise, which holds a majority stake in Income, also acknowledged the government’s concerns while supporting the strategic purpose behind the partnership.

Income-Allianz Merger Talks Continue

In a 14 November bourse filing, Income and Allianz confirmed that discussions on their merger deal are still ongoing, with no assurance of a finalised transaction.

Both parties noted they are reviewing the implications of concerns raised in the ministerial statement and upcoming amendments to the Insurance Act.

The announcement of the merger in July had sparked public criticism, with apprehensions over whether Income would remain focused on its social responsibilities.

The government stated openness to new arrangements with Allianz or other partners, provided that the outlined concerns are addressed and safeguards are implemented.