NTUC supports sale of Income Insurance to Allianz amid criticism and public outcry

The National Trades Union Congress (NTUC) has expressed its support for the sale of a majority stake in Income Insurance, formerly known as NTUC Income, to the German insurer Allianz.

The announcement — shared by NTUC Secretary General and former People’s Action Party Minister Ng Chee Meng, comes amid significant public outcry and criticism, including concerns raised by notable figures such as former NTUC Income CEO Mr Tan Suee Chieh and Ambassador-At-Large Dr Tommy Koh.

Commitment to Workers: NTUC

Since its inception in 1961, NTUC has claimed to be dedicated to protecting and uplifting workers’ lives and livelihoods.

In its statement, NTUC reaffirmed its commitment to workers, highlighting key initiatives such as the Progressive Wage Model and the Job Security Council, which it states have safeguarded wages and employment during challenging times like the COVID-19 pandemic.

NTUC emphasized that its mission to support workers remains at the core of its operations.

NTUC underscored the need for financial sustainability and capital adequacy for Income Insurance.

According to the statement, Income’s capital buffers have faced pressures from several financial crises, including the Asian Financial Crisis in 1997, SARS, and the Global Financial Crisis in 2009.

Despite significant injections of capital from NTUC Enterprise, including S$630 million between 2015 and 2020, NTUC noted that Income’s market share in the life insurance segment has declined to less than 10 per cent over the past decade.

Strategic Partnership with Allianz

Income’s corporatisation in 2022 was aimed at exploring strategic options for accessing capital. NTUC Enterprise decided that Allianz was the best fit due to its strong credentials and alignment of interests.

NTUC Enterprise’s choice was said to be driven by the need to ensure Income’s longevity and its ability to meet long-term commitments to policyholders. NTUC Enterprise claims that Allianz’s offer will help secure the financial future of Income.

Public Concerns and Criticisms

The NTUC Central Committee, which was briefed on the decision, acknowledged the concerns and emotional attachment of the public and union leaders to Income.

The statement reflected on Income’s historical role in providing insurance protection at affordable rates to the Pioneer Generation and the evolving needs of Singaporeans over the past 55 years. NTUC emphasized that Singaporeans now benefit from heavily subsidised public healthcare and comprehensive national insurance programmes like MediShield Life and CPF Life.

Following the announcement of the proposed sale, there has been significant backlash from the public, with netizens expressing scepticism and concern over the sale. Critics argue that the sale contradicts previous commitments and question the ability of a profit-driven multinational like Allianz to uphold Income’s original mission of providing affordable insurance.

One user commented, “This is not an excuse to sacrifice national interest,” while another questioned, “Why sell 51% and claim to still have the heart to ensure the new merger will continue to emphasize social causes?” The comments reflect a broader apprehension about the implications of the sale for NTUC Income’s mission and values.

Dilution of ordinary members’ shares

In particular, Mr Tan Suee Chieh, who served as CEO of NTUC Income from 2007 to 2013 and as Group CEO of NTUC Enterprise from 2013 to 2017, has raised significant criticisms about the deal. In a letter last Friday, Mr Tan urged the Monetary Authority of Singapore (MAS) to intervene in the potential transaction, highlighting several concerns.

Mr Tan pointed out that NTUC Enterprise obtained shares at a par value of S$10 each from 2015 to 2020, significantly below their true economic value.

This, according to him, resulted 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. He questioned how Allianz, a commercial profit-making entity, would uphold the cooperative’s founding principles and social commitments.

Despite these criticisms, NTUC assured that its social mission remains unchanged.

It claims that NTUC Enterprise will retain a substantial stake in Income, while Allianz has committed to honouring existing policies, participating in national insurance programmes, and continuing charity commitments.

NTUC highlighted that Income’s long-term commitments to policyholders can only be met if it is sufficiently capitalised.

Mr Ng wrote in his Facebook post, “I fully appreciate the concerns and feelings shared by many about the proposed income deal with Allianz. We believe the offer is good for Income, good for its policyholders, and will enable us to fulfil our mission from a stronger position.”

However, despite all the assurances, there does not appear to be any legally binding agreement for this assurance to be upheld, just like how NTUC Enterprise renegaded from its earlier promise in 2022 to hold majority shares in NTUC Income after it is corporatised from a cooperative insurance.