Tan Suee Chieh: Insurance cooperatives can thrive without private acquisition

SINGAPORE: In his latest argument against the potential sale of NTUC Income to German MNC Allianz Europe B.V., Mr Tan Suee Chieh, former NTUC Income CEO challenged the assertion that NTUC Income must be sold to a publicly listed company to thrive, suggesting that similar cooperatives around the world have successfully maintained their social missions without such transactions.

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.

In a Monday (5 August) Facebook post, he highlighted several global examples of insurance cooperatives and social enterprises, including from the UK, Canada and Sweden that have prospered and made significant social impacts while remaining independent.

For instance, Folksam in Sweden, established in 1907, generates US$5.0 billion in revenue and serves 4 million policyholders, known for its climate impact leadership and has been the most sustainable investor in Europe for over 30 years.

Co-operators, founded in Canada in 1945, reports US$4.3 billion in revenue and serves 3 million policyholders.

Mr Tan noted that its strategy centres on cooperative identity and community resilience, positioning it as a leader in embedded insurance in Canada, with numerous awards for sustainability and record profits.

MAIF, established in France in 1934, has a revenue of US$4.4 billion and serves 4 million policyholders.

It was the first insurer in France to be declared a ‘mission-driven business’ in 2020 and remains focused on teachers, who are integral to its governance.

MAIF has been ranked number one in customer experience across all industries in France for 19 consecutive years.

Mr Tan also highlighted Wawanesa, the largest mutual insurer in Canada.

Operating since 1896 and originally serving farmers, Wawanesa now achieves US$3.4 billion in revenue and serves 2 million policyholders. The firm is praised for its customer satisfaction and focus on community.

NFU Mutual in the UK, founded in 1910 by farmers, currently has US$2.7 billion in revenue and 1 million policyholders.

It distributes a mutual bonus to members annually, amounting to £250 million last year, and has been consistently awarded for its home and motor insurance for 17 years. It is also listed among the top 50 places to work in the UK.

Lastly, P&V in Belgium, founded in 1907 by a trade union, generates US$2.0 billion in revenue.

Mr Tan noted that P&V focuses on inclusivity and extends beyond insurance, leading in ecosystem insurance, resilience, and socio-economic impact.

Mr Tan wrote, “These examples demonstrate that it is possible for insurance cooperatives or social enterprises to thrive and deliver significant social impact without needing to be acquired by larger, listed companies.”

Mr Tan highlights NTUC Enterprise’s broken commitment to safeguard NTUC Income’s social mission

Mr Tan was CEO of NTUC Income from 2007 to 2013, before he became Group CEO of NTUC Enterprise from 2013 to 2017.

In a letter last Friday, Mr Tan urged the Monetary Authority of Singapore (MAS) to intervene in the potential Income transaction, raising several criticisms about the deal.

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.

NTUC Enterprise and Income rebut Tan Suee Chieh’s open letter, calling his claims ‘unfair’

NTUC Enterprise and Income Insurance later issued a joint statement accusing Mr Tan of “casting aspersions on the stakeholders in relation to this proposed transaction.”

They stated, “These aspersions are not well-founded and, indeed, unfair. It is important that we set out the context and full facts accurately.”

The statement emphasized that cooperative shares were redeemed at their par value of S$10 per share, rather than 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.

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.