MAS will make sure terms & conditions of existing policies will not change if NTUC Income-Allianz deal goes through: Chee Hong Tat

A slew of questions were raised in parliament on Aug. 6 regarding the sale of NTUC Income's majority stake to Allianz.

This came after Tan Suee Chieh, a former chief executive officer (CEO) at Income and, subsequently, NTUC Enterprise, sent an open letter to the Monetary Authority of Singapore (MAS) chairman, Gan Kim Yong.

The letter sent on Aug. 2 voiced concerns that Allianz's possession of majority shares would "erode" NTUC Income's Singaporean-centric social mission, which is to provide affordable, inclusive insurance to all locals.

While NTUC Enterprise and Income Insurance issued a joint statement on Aug. 4 refuting the former CEO's points, his concerns were still echoed in parliament days after through questions raised by multiple Members of Parliament (MPs).

The concerns were subsequently addressed by Alvin Tan, the Minister of State for Culture, Community and Youth, and Chee Hong Tat, the Second Minister for Finance.

MAS will "hold Income and Allianz" accountable

Chee, who sits on the Monetary Authority of Singapore's (MAS) Board of Directors, sought to address concerns harboured by existing policyholders.

He assured that policyholders' long-term policies are safe and will be adequately protected.

"That is what MAS will focus on, that we will make sure the terms and conditions of the existing policies will not change after the proposed deal has gone through.

And that is something that we will hold Income and Allianz to, and that is something that will be part of our regulatory approval."

To prevent any conflict of interest, MAS requires the majority of Income's board members to comprise of directors independent of the shareholders, management, and business relations.

When assessing applicants for management and business relations, MAS will also consider their background, skill set, and experience.

On whether there was a conflict of interest regarding the appointment of the proposed deal's financial adviser, Chee said MAS "reviewed and was satisfied" with the relevant processes Income's board had in place.

"The chairman of Income's board had recused himself. The decision to enter into the deal was made by the board comprising a majority of independent directors," Chee shared.

Keeping Singaporeans in mind

Tan, on the other hand, reiterated the government's commitment to preserving the affordability and quality of goods and services for Singaporeans.

He cited a few examples of what the government has done to support co-operatives.

These include amending the Co-operative Societies Act, providing resources and training opportunities, and dolling out grants via the Central Co-operative Fund (CCF).

Such measures are regularly reviewed to ensure their relevance, Tan said.

Allianz "committed" to honouring social mission

Tan went on to reiterate that Allianz is "committed" to honouring NTUC Income’s existing policies, participating in national insurance programmes, and continuing its charity commitments.

This includes pledging S$100 million over 10 years from 2021 to drive social mobility among the low-income and support seniors' well-being.

NTUC has also promised to keep premiums affordable for Income’s low-cost schemes for union members.

He reiterated NTUC's earlier statement, which assured that they would stay true to their social mission amid the changing tides.

Income needs to be sustainable

While Tan touted the cooperative's long-standing social mission, he caveated that "social enterprises must themselves be sustainable".

He explained that a social enterprise unable to sustain itself financially would require government subsidy, which in turn might fall on taxpayers' shoulders.

"The current situation for Income cannot be sustained," he stated plainly.

He spoke of the competitive insurance industry in Singapore:

"Income’s capital buffers have repeatedly come under pressure. NTUC Enterprise has supported Income with capital injections and will continue to do so. But NTUC Enterprise cannot do this on its own. That is why Income sought to corporatise in 2022, so that it could consider more options to access more capital."

He added that NTUC's preference was to keep a majority stake and local ownership, but with Income unable to find a willing partner, it ultimately decided that the deal with Allianz provides the "best alignment of interests".

Tapping into the resources and networks of two stakeholders would allow NTUC to stay afloat and continue fulfilling its social mission.

Background on sale

NTUC Income Insurance was established in 1970 as the first and only co-operative society in Singapore.

It prides itself on its founding premise, which aims to offer low-income workers affordable premium insurance coverage and affordable insurance for all.

On Jul. 17, German insurance Allianz announced its intention to purchase a majority stake in Income Insurance for about S$2.2 billion, which will see them pocketing 51 per cent of shares.

NTUC Enterprise will remain a significant shareholder, with a 72.8 per cent stake in Income Insurance as of now.

In line with what Tan and Chee said in parliament, Chairman Lim Boon Heng had said that the sale would allow the company to "compete more effectively" with the help of a "global player with proven insurance and asset management capabilities".

NTUC Income and Insurance also said that capital resilience is necessary to provide affordable, inclusive insurance on a sustained basis.

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Top images via MDDI, NTUC and Allianz