He Ting Ru confronts rationale of Income sale with facts that it is actually doing well

On Tuesday (6 August), Ms He Ting Ru, Workers’ Party Member of Parliament for Sengkang GRC, posed several critical questions in Parliament concerning the proposed sale of Income Insurance to the German multinational company Allianz.

Last month, Allianz announced that it was planning to buy a majority stake in Income for S$2.2 billion (US$1.6 billion). It said it would offer S$40.58 per share for 51 per cent of shares in the company.

The proposed deal, which will result in NTUC Enterprise losing its majority share, was met with concerns from members of the public and experts, who were worried that Income — formerly NTUC Income as a cooperative insurance company — would lose sight of its roots as a co-operative and social enterprise.

Discussions about the deal took up the bulk of question time during Tuesday’s sitting, with Members of Parliament (MPs) raising questions about Income’s social mission and MAS’ assessment as a regulator.

Minister of State for Culture, Community, and Youth Alvin Tan addressed Parliament, discussing the financial sustainability of social enterprises and the competitive landscape of Singapore’s insurance market. This comes in the context of the proposed sale of Income to German multinational company Allianz.

Minister Tan emphasized that if a social enterprise cannot sustain itself financially and requires government subsidies, it may be necessary for the government to take over such services. “Taxpayers must also be prepared to pay their share of taxes to fund the service,” he added.

NTUC Enterprise previously noted that a social enterprise model alone could not support growth in Singapore’s evolving insurance environment, citing Income’s loss of key contracts to global and regional competitors. The organization pointed out that the circumstances in which Income was founded in 1970 are vastly different from today’s landscape—a sentiment echoed by Mr Tan.

“It is now a very competitive market with many options available to Singaporeans. The government has also significantly strengthened our social support system,” Mr Tan stated, highlighting heavily subsidized public healthcare, as well as MediSave, MediShield Life, MediFund, and CPF Life.

He noted that the premiums for several of Income’s schemes are not the most affordable in the market. “The point is that Singaporeans, including lower-income workers, are well served by our national insurance programs and our competitive and well-regulated insurance industry,” he said. “All these provide Singaporeans with wider choices and better value in insurance services and products.”

Deputy chairman of the Monetary Authority of Singapore (MAS) Mr Chee Hong Tat also said the central bank would hold Income and Allianz to account for their commitments to honour existing policies.

Mr Chee, who is also Transport Minister and Second Minister for Finance, said MAS believes that a competitive market is the most effective way to “meet the insurance needs of Singaporeans” and facilitate access to affordable insurance options and good service over the longer term.

For existing policyholders, MAS expects Income to fulfil its obligations under the terms of its existing contracts. “Should the proposed deal be approved, there will be no change to the terms and conditions of existing insurance contracts,” Mr Chee assured.

Governance and Controls

Ms He highlighted a past criminal case involving Allianz in the US, where the company faced allegations of defrauding investors, resulting in its US subsidiary pleading guilty to criminal securities fraud. She inquired if the Monetary Authority of Singapore (MAS) had looked into this issue and whether MAS was satisfied that Allianz’s corporate governance and controls had been strengthened. Given that Income Insurance serves 1.7 million Singaporeans with significant market shares in motor, property, and health insurance, Ms He emphasized the importance of ensuring there are no residual concerns.

In response, Mr Chee clarified that the Allianz Global Investors entity involved in the US criminal case is not linked to the entity entering the deal with Income. He explained that the US issues were related to specific products not managed or offered by the Allianz entity in Singapore. The US Department of Justice investigation did not reveal any misconduct involving other entities within the Allianz Group, including the Singapore entity.

Employment and Operational Review

Ms He raised concerns about potential redundancies and job losses, noting Allianz’s announcement of a strategic and operational review aimed at enhancing the value of existing businesses. She pointed out that Income Insurance employs approximately 1,900 people and asked if the government was aware of any discussions about possible job losses. She also questioned whether MAS would consider seeking guarantees from Allianz regarding the employment situation of existing employees as part of its regulatory assessment.

Mr Chee acknowledged that such reviews are common in mergers or acquisitions aimed at improving efficiency. However, he stated it was premature to discuss potential job losses as the proposal had not yet been approved. While he emphasized that MAS does not directly regulate employment practices but expects compliance with employment laws, he did not directly address whether MAS would seek guarantees from Allianz regarding the employment situation of existing employees. He assured that in cases of unfair treatment, the Ministry of Manpower and NTUC would support the affected workers.

Financial Sustainability of Income

Lastly, Ms He referred to a report by Zero One Research from December 2023, which noted that the capital adequacy ratio of Income was approximately 193% under the RBC2 framework, significantly exceeding the minimum required level of 120% under Singapore’s Insurance Act. She sought clarity on whether there were concerns about Income’s sustainability given this healthy buffer.

Mr Chee responded by explaining that the healthy state reported by Ms He was due to NTUC Enterprises injecting additional capital into Income. He stressed that this does not imply immediate financial problems but ensures long-term strength to meet obligations and protect policyholders’ interests. He emphasized that insurance is a long-term business and having a strong insurer is crucial for future stability.

While Mr Chee addressed concerns about governance and financial sustainability with detailed explanations, providing assurance about Allianz’s governance and the long-term strength of Income, his response on employment and operational review did not directly address the query about seeking employment guarantees from Allianz, leaving some concerns unresolved.