Allianz withdraws offer for majority stake in Income Insurance following Govt opposition

Allianz SE has announced its decision to withdraw a proposed S$2.2 billion (US$1.6 billion) voluntary cash general offer to acquire a 51% stake in Singapore-based Income Insurance Limited.

The withdrawal follows the blocking of the proposed deal by the Singapore Government, which raised concerns over the capital extraction plan, deeming it inconsistent with the insurer’s social mission and the public interest.

The acquisition, initially announced on 17 July 2024, was intended to elevate Allianz to the position of Asia’s fourth-largest composite insurer, up from ninth.

However, the deal faced mounting challenges, including public backlash and heightened regulatory scrutiny, despite enjoying the support of NTUC and parts of the establishment.

A turning point came during the parliamentary sitting on 14 October 2024, when Minister for Culture, Community, and Youth Edwin Tong criticized the transaction and announced plans to amend the Insurance Act to block the deal in its current form.

In his statement, Minister Tong revealed for the first time that the deal included a controversial S$1.85 billion capital extraction plan, which would have diverted substantial reserves from Income Insurance.

He argued that this plan prioritized shareholder returns over Income’s founding principles of providing affordable insurance access.

Furthermore, he emphasized that the plan contradicted commitments made during Income Insurance’s corporatisation in 2022, when NTUC Income, its predecessor, had been granted special government exemptions to restructure while retaining its social mission.

Minister Tong, however, acknowledged that while the current deal could not proceed, the government remains open to new proposals from Income Insurance, whether with Allianz or other potential partners, provided its concerns are fully addressed.

On 16 October 2024, Parliament passed an urgent bill amending the Insurance Act, effectively halting the deal.

With Allianz’s latest statement, the deal has been definitively scrapped.

Through its subsidiary Allianz Europe B.V., Allianz announced today that it respects the government’s decision and has withdrawn its offer.

Despite the setback, Allianz reiterated its long-term commitment to Singapore as a strategic financial hub in Southeast Asia.

Renate Wagner, Allianz’s Board Member for the Asia-Pacific region, expressed disappointment but emphasized the group’s confidence in Singapore’s insurance market and its plans to strengthen operations across the Asia-Pacific region.

“We still believe the combination of Allianz and Income Insurance would result in two strong businesses being brought together for the benefit of Income Insurance’s policyholders and a growing portion of Singapore’s customers. We regret having to make this decision but we will, without question, carry on supporting the Singapore insurance market’s continued growth and success.”

The withdrawal marks the end of months of negotiations between Allianz and Income Insurance, during which the companies explored shared values and potential synergies.

Allianz had initially pledged to invest S$100 million over ten years to support social mobility initiatives and maintain Income’s social mission.

However, critics remained unconvinced, citing concerns that the capital extraction plan and reduced ownership by NTUC Enterprise Cooperative Limited would weaken Income’s ability to serve low-income policyholders.

The proposed deal would have seen Allianz acquire 54.67 million shares, reducing NTUC Enterprise’s stake from 72.8% to 21.8%, relegating it to a minority shareholder.

NTUC Enterprise stood to gain S$2.22 billion from the sale of these shares, in addition to S$403 million from the controversial capital extraction plan, bringing its potential total cash proceeds from the transaction to S$2.62 billion.

NTUC Enterprise, which did not disclose the capital extraction clause in its announcements or defence of the deal, also faced criticism for its handling of the transaction.

Deputy Secretary-General Desmond Tan disclosed in October that NTUC’s central committee had not been informed of the capital extraction plan until its public revelation.

This raised questions about governance, particularly since NTUC Secretary-General Ng Chee Meng sits on the board of NTUC Enterprise, which owns Income Insurance.

NTUC had initially expressed strong support for the deal, with its President K Thanaletchimi and Ng Chee Meng publicly endorsing the transaction in an official statement on 5 August 2024.