Allianz withdraws offer to acquire Income Insurance after Singapore government intervention

SINGAPORE: German insurer Allianz announced on Monday (Dec 16) that it has withdrawn its offer to acquire a majority stake in Income Insurance after the Singapore government raised concerns about the proposed transaction.

Under the proposed deal, Allianz would have acquired a 51 per cent stake in Income for about S$2.2 billion (US$1.6 billion). NTUC Enterprise, the parent company of Income, said at the time that it would remain a "substantial" shareholder if the sale went through.

However, the arrangement triggered a public outcry over whether Income would be able to continue its social mission. 

The government stepped in on Oct 14 to block the transaction, with Culture, Community and Youth Minister Edwin Tong telling parliament that the deal in its current form "would not be in the public interest".

The government was, however, open to new arrangements if the concerns highlighted were fully addressed.

Allianz said at the time that it would consider revising the deal.

On Monday, Allianz said in a media release that its move to scrap the deal was made in light of the Singapore government's Oct 14 decision.

"Allianz remains convinced it is the right partner to support Income Insurance's continued growth and its strategic mission for the benefit of Singapore's people, but the decision to withdraw its offer at this time underscores Allianz's financial discipline," it said.

"The extensive discussions which Allianz and Income Insurance have had over the last months have further highlighted the shared values between the two groups."

Member of Allianz's board of management, Renate Wagner, said the insurer respects the Singapore government's decision. 

"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," she added.

NTUC Enterprise said in a separate media release on Monday that it acknowledges Allianz's decision to withdraw its offer in view of the legislative changes that affected the deal.

"The search for a strategic partner for Income Insurance was conducted to bolster its financial resilience, especially in times of crisis. That means that Income 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," it said.

"This is critical in order to protect the interests of Income Insurance’s policyholders over the longer term and is also in line with Income Insurance’s purpose.

"While Income Insurance’s capital adequacy ratio is currently at a healthy level, NTUC Enterprise recognises the need to be prepared for a more turbulent and volatile world given the possibility of future economic crises and pandemics."

During the COVID-19 pandemic in 2020, for instance, NTUC Enterprise had to inject S$100 million and have another S$300 million on standby to safeguard the solvency of Income Insurance.

In addition, NTUC Enterprise said Income Insurance had to issue S$800 million in subordinated bonds.

"If the COVID-19 pandemic had been prolonged, and more capital had been needed, NTUC Enterprise alone may not have been able to meet Income Insurance’s further financial needs. That was the key reason for considering an additional strategic partner for Income Insurance."

NTUC Enterprise added that it will take time to study how to address the government’s concerns, and to consider all strategic options that can further strengthen Income Insurance’s financial resilience.

The Allianz-Income deal was first announced on Jul 17.

Public scrutiny was focused on how Allianz, as a large multinational company, would not be fully aligned with the original mission of the Singapore entity, which is to serve the needs of low-income workers. 

Income was a co-op which was corporatised in 2022.

Mr Tan Suee Chieh, who was CEO of NTUC Income from 2007 to 2013 before becoming Group CEO of NTUC Enterprise from 2013 to 2017, called the proposed Allianz deal a "breach of good faith". He noted that when there were concerns about the corporatisation, NTUC Enterprise had given the assurance that it would remain as majority shareholder.

Others who spoke up against the deal include former NTUC Income CEO Tan Kin Lian and ambassador-at-large Tommy Koh.

Mr Tong told parliament on Oct 14 that the government understands that the proposed deal with Allianz was to make Income more financially sustainable in the longer term, and that it also does not have concerns over Allianz’s standing or suitability to acquire a majority stake in the insurer.

The government is only concerned with the "terms and structure" of the specific transaction.

Prime Minister Lawrence Wong reiterated this point, saying in a Facebook post: "To be clear, the government supports having a strong partner for Income, so as to strengthen its capital base and market position."

Mr Wong added that the government's concerns were with the structure and terms of the transaction, "particularly in the context of assurances which Income had given to MCCY (Ministry for Culture, Community and Youth) when the former was corporatised in 2022".

The government also said on Oct 14 that it intends to amend the Insurance Act to provide "clear statutory basis" for MCCY’s views to be considered in applications related to insurers that are either a co-op or linked to a co-op.