(Bloomberg) -- The Singapore government will block a proposed S$2.2 billion ($1.7 billion) deal by Allianz SE to buy a majority stake in a homegrown insurance firm, three months after the transaction sparked a public backlash.
The government decided it wouldn’t be “in the public interest” for the Income Insurance Ltd. deal to proceed in its current form, Minister of Culture, Community and Youth Edwin Tong told parliament on Monday. The city-state isn’t satisfied that Income can fulfill its social mission as a co-operative after the acquisition, he added.
The rare move by Singapore comes as new Prime Minister Lawrence Wong prepares for an election that must be held by November 2025. Wong said in a Facebook post the concerns are over the structure and terms of this deal, particularly in the context of assurances that Income had given to the government when it was corporatized in 2022.
“We are nonetheless open to any new arrangement which Income may wish to pursue, whether with Allianz or any other partners, so long as the concerns highlighted are fully addressed,” Tong said.
Law Amendment
The approval of any revised deal will lie with the country’s financial regulator, which will need to take the views of Tong’s ministry into consideration after the government amends a law to do so. The bill will be debated in parliament later this week.
Allianz said it’s convinced that a deal would “benefit Singapore’s customers and society.”
“We will now work closely with the relevant stakeholders to consider revisions to the proposed transaction structure,” the insurer said in an e-mailed statement.
In July, Allianz said it planned to buy at least 51% of Income from NTUC Enterprise Co-operative Ltd. which would elevate the German company to fourth spot among composite insurers in Asia, up from 9th. The deal ignited criticism after it was announced, with many in Singapore complaining how it could lead to higher insurance premiums and betrays Income’s roots to help middle to lower-income Singapore workers.
“Singapore’s life insurance market remains attractive,” said Bloomberg Intelligence analyst Steven Lam. “The question becomes will Allianz think of any alternative in Singapore or will it divert the firepower to other existing operations in Asia?”
Allianz Chief Executive Officer Oliver Baete is nearing the end of a three-year strategic plan that’s aiming for steady topline growth, better profitability and efficient capital management. He has largely refrained from larger acquisitions, paving the way for share buybacks and higher dividends. Baete is set to unveil new targets at a capital markets day which is scheduled for December.
Income was founded in 1970 as a co-operative to provide affordable insurance to workers and families, and designated as one of Singapore’s four systemically important insurers. It serves about 1.7 million customers in the country with life, health and general insurance, its website shows.
“This outcome underscores the importance of speaking up on matters of public interest,” said Tan Suee Chieh, the former CEO of both Income Insurance and NTUC Enterprise.
Income Insurance reported S$60.4 million in profit after tax for the 18 months to December 2023. Its capital buffers have come under pressure during past economic downturns, including the global financial crisis and the Covid-19 pandemic. Over the past decade, the insurer received several capital injections from its majority owner NTUC Enterprise, and also issued subordinated bonds to help bolster its capital position.
Foreign Investment
Income Insurance has a market share of less than 10% in both life and general insurance in Singapore, based on written premiums, and it doesn’t always offer the lowest prices, Monetary Authority of Singapore board member Chee Hong Tat told parliament in August.
Chee also said then that a key part of the regulator’s approach was to foster a competitive insurance market with financially strong insurers so that they operate sustainably and serve the public well.
Tong said on Monday it makes sense for Income to look to partner a strong party with a global presence and strong networks. The government’s move on blocking the current deal doesn’t mean Singapore is closing its doors on foreign investment, he said.
“Don’t read into this as suggesting that we’re not open to a foreign entity partnering with Income, or indeed, whether it’s Allianz, or indeed, any other entity,” he said.
--With assistance from Niluksi Koswanage, Chanyaporn Chanjaroen, Aradhana Aravindan, Serena Ng, Stephan Kahl, Christian Baumgaertel, Michael Sin and Natalie Choy.
(Updates with Allianz statement from sixth paragraph.)
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