Income claims chairman recused himself from appointing Morgan Stanley as adviser in Allianz deal

Income Insurance said in a statement on Saturday (27 July) that Mr Ronald Ong, the chairman of Income Insurance, had recused himself from the board’s decision to appoint Morgan Stanley as the exclusive financial adviser for the sale of NTUC Enterprise’s shares in the company to German MNC Allianz.

This announcement followed vocal concerns raised about a potential conflict of interest due to Mr Ong’s roles at both Income Insurance and Morgan Stanley.

“Morgan Stanley was appointed as Income Insurance’s financial advisor after a considered selection process.”

“They were appointed based on their prior insurance transaction credentials, the experience of their deal team, and their deep understanding of Income Insurance.”

Income Insurance clarified that an audit committee had reviewed the appointment before the board’s approval.

The insurer emphasized that none of its directors are connected to Allianz, ensuring independence in their recommendation regarding the offer.

“In line with good corporate governance, the board will establish an independent board committee chaired by the lead independent director and wholly comprising independent directors, to select and appoint an independent financial adviser,” Income Insurance added.

“The advice of the independent financial adviser to the board on whether to recommend shareholders to accept or reject the offer will be set out in the composite document.”

Controversy Over Ong’s Many Hats in Controversial Deal

The deal, which positions Allianz to become the largest shareholder in Income Insurance, has stirred public concern. Allianz announced on 17 July its intention to purchase 51 per cent of Income Insurance’s shares, offering S$40.58 (US$30.20) per share, with a transaction value of S$2.2 billion.

Currently, NTUC Enterprise holds a 72.8 per cent stake in Income Insurance and will remain a substantial shareholder if the sale proceeds. However, this move has sparked backlash, with critics fearing it may compromise Income’s commitment to Singapore’s workers.

Concerns have also been raised about a potential conflict of interest involving Mr Ong and his long history with Morgan Stanley, which had been appointed the deal’s exclusive financial adviser.

Mr Ong has been with Morgan Stanley for more than 24 years and currently serves as the Chairman and CEO for Southeast Asia.

His dual roles have prompted questions about the integrity of the decision-making process behind the appointment of Morgan Stanley as the financial advisor.

Mr Ong was co-opted to the Board of NTUC Income Insurance Co-operative Limited on 23 August 2018 and later elected as a non-independent non-executive director on 24 May 2019.

Since 1 August 2022, he has been the Chairman of the Board and Board Executive Committee of Income Insurance Limited.

Additionally, he serves as a Board Member of NTUC Enterprise Co-operative Limited, the majority owner of Income Insurance.

Professor Mak Yuen Teen, a corporate governance expert and former Vice Dean of the NUS Business School, expressed his astonishment on LinkedIn.

“So his firm is the financial adviser, and he’s chairman of Income and chair of its exco, and director of Enterprise. I certainly hope he’s not involved in the decision to appoint MS [Morgan Stanley] as financial adviser as MAS CG guidelines for FIs state that directors should recuse if they have a conflict of interest,” he wrote.

Retired banker Chris Kuan also voiced his concerns on Facebook, highlighting the potential conflict of interest involving Mr Ong and other key figures in NTUC Enterprise.

Kuan stated, “Thanks to a Biz Times report, we now know that Income’s chairman is on the board of NTUC Enterprise, the majority owner who sold to Allianz. Income’s deputy chairman is NTUC Enterprises’ CEO. NTUC Enterprises’ best interest may not be in the best interest of Income. Having these executives from NTUC Enterprises in key decision-making positions of Income in the event of a sale is a clear conflict of interest and can only be resolved if the two of them recuse themselves from the decision to sell 51% of Income.”

When Income Insurance corporatised in 2022, shareholders were assured that NTUC Enterprise would continue as the majority shareholder. This assurance was documented in the minutes of the Annual General Meeting of NTUC Income Insurance Co-operative Limited in May 2022. “Post-corporatisation, NTUC Enterprise will continue to be the majority shareholder of the new company, Income Insurance Limited,” the minutes stated.

Former NTUC Income CEO, Tan Suee Chieh also voiced against the sale, stating in a Facebook post, “Income has not only reversed its 2022 commitment to maintain NE as the majority shareholder, but NE would also crystallise a significant capital gain through the sale of its shares. This gain, I argued in 2022, should be more fairly distributed to those shareholders who invested before NTUC Enterprise’s capital injection in 2015-2020.”

Serving as CEO from 2009 to 2013, Mr Tan had cautioned against the corporatisation of NTUC Income in 2022, calling for provisions to protect NTUC Income’s mission.

He advocated “for a fairer distribution of equity gains for shareholders who invested before NTUC Enterprise’s capital injection, but without success.” He brought his concerns to the Monetary Authority of Singapore, which shared them with the Registrar of Cooperatives. However, the Registrar of Cooperatives declined to intervene.