NTUC Enterprise and Income Insurance rebut former CEO’s criticisms over Allianz acquisition

NTUC Enterprise and Income Insurance have issued a joint statement in response to an open letter from former NTUC Income CEO, Mr Tan Suee Chieh, addressing his concerns about the sale of a majority stake in NTUC Income to German MNC Allianz Europe B.V.

The joint statement, released on Sunday evening, aimed to clarify the context and provide assurances regarding the proposed transaction.

NTUC Enterprise and Income Insurance’s Joint Statement

NTUC Enterprise and Income Insurance issued a rebuttal to Mr Tan’s open letter, which was posted on Facebook on Friday.

In his letter, Mr Tan urged the Monetary Authority of Singapore (MAS) to intervene in the transaction, raising several criticisms about the deal. The joint statement from NTUC Enterprise and Income Insurance described Mr Tan’s assertions as “unfounded and unfair,” stating the importance of setting out the full context and accurate facts.

Allianz announced on 17 July that it planned to buy a majority stake in Income Insurance for about US$1.6 billion. Allianz offered S$40.58 per share, valuing the transaction at S$2.2 billion (US$1.66 billion) for a 51% stake in Income Insurance. NTUC Enterprise currently holds a 72.8% stake in Income and will remain a substantial shareholder if the sale proceeds.

The joint statement emphasized that cooperative shares were redeemed at their par value of S$10 per share, not at market value.

This applied to both the capital injections made by ordinary members between 1995 and 2004 and those made by NTUC Enterprise from 2015 to 2020. The statement highlighted that these capital injections were necessary to support NTUC Income’s capital adequacy ratio in light of new regulatory requirements, ensuring financial stability and resilience in a competitive insurance market.

NTUC Enterprise reiterated its commitment to maintaining a majority shareholding in NTUC Income, subject to the interests of Income Insurance. It had previously, during the NTUC Income’s Annual General Meeting in 2022, promised shareholders that it would continue to be the majority shareholder of the new company after the incorporation of NTUC Income.

They highlighted that the conversion of shares to irredeemable status under the Cooperative Societies Act in 2018 was a strategic move to bolster capital adequacy.

Additionally, the joint statement assured stakeholders that Allianz, as a majority shareholder, would continue NTUC Income’s social initiatives, including participation in national insurance programs and community investments. Allianz’s strong financial backing and ESG track record were presented as assurances of their commitment to the social mission.

Furthermore, the statement indicated that minority shareholders would benefit from the sale, with an offer of S$40.58 per share, representing a substantial return on their investment. Minority shareholders would have priority in tendering their shares ahead of NTUC Enterprise.

Response to Mr Tan Suee Chieh’s Open Letter

Mr Tan’s open letter to MAS raised several critical concerns.

He highlighted that NTUC Enterprise obtained shares at a par value of S$10 each from 2015 to 2020, significantly below their true economic value, resulting in the dilution of minority shareholders’ stakes.

Specifically, he noted that NTUC Enterprise’s shareholding in NTUC Income increased from 30% in 2015 to 70% in 2020 due to these capital injections, significantly diluting the shares of ordinary members.

Mr Tan emphasized that NTUC Enterprise had committed not to redeem its shares to safeguard NTUC Income’s social mission.

This commitment was fundamental to NTUC Income allowing NTUC Enterprise to obtain shares at par value.

He argued that the recent sale to Allianz contradicts this commitment, as NTUC Enterprise had assured both the public and him in writing that it would remain the majority shareholder to protect the social mission of NTUC Income.

Additionally, Mr Tan expressed doubts about Allianz’s ability to prioritize NTUC Income’s social mission over its profit motives, questioning how Allianz, a commercial profit-making entity, would uphold the cooperative’s founding principles and social commitments.

Analysis: Addressing Core Concerns

The joint statement from NTUC Enterprise and Income Insurance provided extensive background information and context but did not fully address the core concerns raised by Mr Tan Suee Chieh.

While the statement explained the par value redemption of shares, it did not directly address the significant dilution of minority shareholders’ stakes due to capital injections at par value. The focus on regulatory compliance and capital resilience overshadowed the economic impact on minority shareholders.

The joint statement emphasized NTUC Enterprise’s conditional commitment to maintaining a majority shareholding, subject to the interests of Income Insurance. This clarification may be seen as providing context rather than directly refuting Mr Tan’s concerns about the permanence of shares and safeguarding the social mission.

Although the joint statement provided assurances about Allianz’s commitment to NTUC Income’s social mission, it lacked binding guarantees. This response might be seen as addressing the concern superficially without ensuring long-term adherence to the social mission.

Overall, the joint statement appeared to justify past actions and provide reassurances about future commitments rather than directly confronting the issues highlighted by Mr Tan. This approach may be perceived as answering for the sake of answering without thoroughly resolving the underlying concerns of dilution of shares and the true economic value of the capital injections.