Income could still find other buyers but investors may be cautious, say analysts after Allianz withdraws offer

SINGAPORE: Income Insurance could still look for other buyers after German insurer Allianz withdrew its offer to acquire a majority stake, but potential investors may now tread with caution, experts said.

Allianz's announcement on Monday (Dec 16) comes after the Singapore government intervened to block the proposed deal in October.

Under the proposed transaction, which was announced on Jul 17, Allianz would have a 51 per cent stake in Income for S$2.2 billion (US$1.6 billion).

The announcement triggered a public outcry, with concerns over whether Income would continue its social mission.

In turn, the government said the proposed transaction, in its current form "would not be in the public interest", but that it was open to new arrangements if the concerns highlighted were fully addressed.

Experts told CNA that finding alternative buyers is still on the cards for Income after Allianz's withdrawal. But they noted that these investors should be aligned with Income's long-term vision.

Moreover, the ideal partner would not only support Income financially but also bring in expertise, technology and innovation to modernise its operations and position the company for sustainable growth in a competitive insurance market, said Associate Professor Shinichi Kamiya from Nanyang Business School's division of banking and finance. 

Such partners can be international firms looking to establish a presence in the Singapore market as the country remains an attractive insurance hub due to its strong regulatory environment and access to the broader Asian market.

If a global partner cannot be secured, local players like DBS or Temasek may emerge as alternatives, said Assoc Prof Kamiya, who is deputy director of the Insurance Risk and Finance Research Centre at Nanyang Technological University (NTU).

But he noted that while the likes of DBS and Temasek have the financial capability to invest in Income, their contribution to its strategic transformation may be "more limited" compared to a global insurer like Allianz. 

"The key question here is not whether a buyer can be found, but whether Income can secure the right partner - one capable of driving operational innovation, such as leveraging artificial intelligence, enhancing product development and expanding digital capabilities for long-term growth," he added. 

Similarly, Professor Lawrence Loh of the National University of Singapore’s business school said that Income "should be open" to being acquired as long as its social mission is assured and the S$2 billion in surplus retained during corporatisation is safeguarded.

In 2022, Income sought and received an exemption from the Co-operative Societies Act, letting it carry over the surplus to the new corporate entity.

Prof Loh, who also pointed to DBS, said the bank may consider the acquisition to strengthen its portfolio in insurance, adding that a local acquirer may be "more acceptable" to stakeholders.

But he added that any DBS decision should be made on commercial grounds. 

At the same time, finding another buyer who is both willing and able to address the concerns raised in the previous deal will not be straightforward, said assistant professor of economics Goh Jing Rong from the Singapore Management University.

The government’s decision to step in and Allianz’s retreat highlight the importance of ensuring that any future transaction aligns with Income’s social mission and its cooperative roots, he said. 

"Such requirements may narrow the pool of interested investors willing to accept these conditions," added Asst Prof Goh.

Yet, he acknowledged that this does not preclude the possibility of another acquirer emerging, particularly one with a longer-term outlook or a strong alignment with social objectives.

"HEIGHTENED CAUTION"

The Income-Allianz saga, however, could cause global insurance companies to now be cautious when investing in local firms given the recent legislative rectification, said NUS' Prof Loh. 

"But if there’s a market, they will come," he said. 

In Assoc Prof Kamiya's view, the German insurer's withdrawal is unlikely to deter other international investors immediately, though it does highlight certain complexities that can arise in transactions with traditional Singaporean firms. 

This includes possible government oversight or intervention.

"While it may not discourage investments outright, future investors may approach similar deals with heightened caution and conduct more thorough assessments of regulatory and strategic risks," added Assoc Prof Kamiya. 

SMU's Asst Prof Goh thinks otherwise. He said the situation with Income was unique and tied specifically to cooperative-linked insurers.

"Recent legislative changes are narrowly focused and do not affect other Singaporean companies," he added. 

"In fact, I feel that the government’s transparent and decisive handling of the deal - balancing openness with thorough regulatory oversight - may actually bolster confidence in Singapore’s reputation as a fair, reliable and well-regulated place to invest."

WHAT IF THERE ARE NO BUYERS?

At least in the short term, Allianz's withdrawal will not significantly impact Income's operations given that the company is well-established and continues to operate effectively, said Assoc Prof Kamiya. 

But there may be challenges in its growth trajectory in the long term.

"Without an external partner to inject fresh ideas, technology, and resources, Income may struggle to innovate and keep pace with a rapidly evolving insurance industry," he said. 

Areas such as technological advancements, digital transformation and product differentiation could remain underdeveloped, which would place the company at a competitive disadvantage, Assoc Prof Kamiya added. 

Income may even have to consider diversifying to other financial products. But it "may not have the financial prowess" to do so and is a "distraction" from its core business of insurance, noted NUS' Prof Loh. 

"It may have no choice but to grow organically or sell more aggressively," he said.

Asst Prof Goh was more optimistic, pointing out that Income could still continue as a standalone entity as it appears to be well-capitalised. 

Rather than competing with established players for mass market share in the competitive insurance industry, Income should continue to concentrate on its target demographic, he said. 

It should leverage its experience and comparative advantages to provide affordable policies to lower-income workers. 

"By staying true to its mission, Income can continue to perform well without needing to compete aggressively for mass-market share," he said. 

"In other words, not securing a buyer does not equate to failure. If managed properly, it can reinforce Income’s unique role as a mission-driven player in Singapore’s insurance landscape."