MAS asserts no conflict of interest in appointment of Morgan Stanley as financial advisor in Allianz deal

The Monetary Authority of Singapore (MAS) has assured itself that there is no conflict of interest in the appointment of Morgan Stanley as the financial advisor for the sale of a majority stake in Income Insurance to Allianz.

This was said by the Second Minister for Finance and Deputy Chairman of MAS, Mr Chee Hong Tat, on Tuesday in response to parliamentary questions regarding the deal.

According to Income’s statement on 17 July, Morgan Stanley was named the exclusive financial advisor to Income Insurance on the purchase offer by Allianz Europe of 51% of Income’s shares for approximately US$1.6 billion. The offer includes S$40.58 per share, resulting in a transaction value of S$2.2 billion (US$1.64 billion) for 51 percent of the shares in Income Insurance.

NTUC Enterprise, currently holding a 72.8 percent stake in Income, will remain a substantial shareholder if the sale is finalized but will no longer be the majority shareholder.

The proposed sale of Income Insurance to German multinational financial services company Allianz has sparked significant public discontent and raised serious questions about corporate governance within the organization.

Industry experts and concerned citizens have voiced worries about potential conflicts of interest and the future of the homegrown insurance company.

Mr Chee addressed the MPs’ concerns, stated, “MAS has reviewed and was satisfied with the relevant processes Income’s board had put in place to address conflicts of interest. With respect to the appointment of his financial adviser on this proposed deal and the decision to enter into the deal with Allianz, the chairman of Income’s board had recused himself.” He further added, “The decision to enter into the deal was made by the board, comprising a majority of independent directors.”

Corporate Governance Questions

Morgan Stanley’s role as the exclusive financial advisor for the transaction was put under scrutiny due to the involvement of Mr Ronald Ong, the Chairman of Income Insurance Limited, who also holds a high-ranking position at Morgan Stanley.

Mr Ronald Ong has been with Morgan Stanley for over 20 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.

Concerns about potential conflicts of interest were highlighted by authoritative voices in corporate governance.

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 advisor, 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 advisor 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, 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.”

Kuan elaborated on the complexities of the situation, drawing parallels with past instances of conflicts of interest in the financial sector. He emphasized the need for transparency and proper governance to maintain the integrity of the financial market in Singapore.