Tommy Koh urges Income, NTUC Enterprise leaders to apologise for failing to honour commitment on S$2B surplus

SINGAPORE: Professor Tommy Koh, special adviser to the Institute of Policy Studies at the National University of Singapore (NUS), has strongly urged the leaders of Income Insurance and NTUC Enterprise (NE) to apologise to the Government for failing to honour their earlier undertaking. This was in reference to the exemption granted by the Ministry of Culture, Community and Youth (MCCY) during Income’s corporatisation, which allowed the accumulated surplus of S$2 billion to remain with Income instead of being transferred to the Co-op Societies Liquidation Account. The exemption was granted on the condition that the surplus would be used to strengthen Income’s capital base. However, Allianz’s proposed plan for Income to reduce its capital and return S$1.85 billion to shareholders contravened this understanding, which Professor Koh described as a breach of trust.

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

Last Monday, Allianz SE announced its decision to withdraw its proposed S$2.2 billion voluntary cash general offer to acquire a 51% stake in Income Insurance. The withdrawal came after the Singapore government blocked the proposed deal, citing concerns over the capital extraction plan and deeming it inconsistent with Income’s social mission and the public interest. In its statement, Allianz expressed confidence in its suitability as a strategic partner to support Income Insurance’s growth and mission for the benefit of Singaporeans. However, the company stated that its decision to withdraw the offer “underscores Allianz’s financial discipline.” In an opinion piece published in The Straits Times on 23 December, Prof Koh disagreed, asserting that Allianz’s decision was not based on financial discipline but rather on the Government’s opposition to the sale and the strong public sentiment against the deal.

Prof Koh Criticises Income and NTUC Enterprise

Separately, Prof Koh expressed surprise that the leaders of Income and NE continue to defend their decision to sell a majority stake in Income to Allianz. In a statement issued on 16 December, NE explained that the search for a strategic partner was conducted to enhance Income’s financial resilience, particularly during crises. "Insurance first needs to be competitive and earn its risk-adjusted cost of capital and secondly, needs to meet regulatory capital adequacy requirements, especially during unforeseen shocks and crises, " NE stated. The organisation asserted that these measures are crucial to safeguarding the long-term interests of Income Insurance’s policyholders and are aligned with the insurer’s overarching purpose. In response, Prof Koh reiterated his view that the proposed transaction was not a merger of equals but an acquisition. With a 51% stake, Allianz would gain control of Income, undermining its social mission. "It is therefore not credible for Income and NE to continue to insist that the transaction would not jeopardise Income’s social mission." Prof Koh also cited MCCY Minister Edwin Tong, who told Parliament in October that his ministry was dissatisfied with Income's ability to continue fulfilling its social mission after the proposed transaction. “We find it difficult to reconcile the proposed substantial capital reduction, soon after the transaction is completed, with Income’s representations to MCCY during the corporatisation exercise, that it was aiming to build up capital resources and enhance its financial strength.” Despite NE's claim that the deal was intended to enhance Income Insurance's financial resilience, it brought significant financial gains for NE. These included a S$403 million payout from the planned S$1.85 billion capital reduction and a windfall of S$2.62 billion, comprising S$2.22 billion from selling shares to Allianz at S$40.58 each and S$403 million from the capital extraction—assuming it sold all necessary shares for the 51% acquisition. During the passing of the amendments to the Insurance Act on 16 October, Members of Parliament raised concerns about how removing capital from Income Insurance aligned with the stated goal of enhancing its financial resilience, with ministers' responses failing to directly address the question.

Prof Koh Urges Income Leaders to Prioritise Organic Growth Over Strategic Partnerships

Moving forward, Prof Koh advised the leaders of Income and NE to cease attempts to sell Income to a larger insurance company. Instead, he urged them to focus on organic growth, emphasising that Income is a highly successful social enterprise that does not require a strategic partner. Prof Koh also raised concerns about a potential conflict of interest, noting that the chairman of Income also serves as the chairman of Morgan Stanley. While the chairman explained that he did not participate in the board’s decision to appoint Morgan Stanley as financial adviser, Prof Koh argued that the appointment was inappropriate. "He should have advised his board not to appoint his bank because it gives rise to an appearance of conflict of interest."