Singapore Stalls Income Insurance-Allianz Deal

The proposed deal by German insurer Allianz SE to buy a majority stake in Singapore’s Income Insurance Ltd suffered a setback as the government decided on Monday to stall it in its current form.

Under the proposed transaction, which was announced on Jul 17, Allianz would have acquired a 51% stake in Income Centre at $40.58 per share for $1.64 billion and this triggered a public outcry, with people from all walks of life questioning the deal on the grounds whether Income Insurance would continue its social mission.

However, the government said that it was open to new arrangements if the concerns highlighted are fully addressed.

“The Government has assessed the proposed transaction and has decided that it would not be in the public interest for the transaction, in its current form, to proceed,” Minister of Culture, Community and Youth (MCCY) Edwin Tong Chun Fai informed Parliament in a statement on Monday.

Tong laid out the reasons why MCCY has chosen to reject the deal in its current form. In 2022, Income embarked on a corporatisation exercise, where it proposed to convert itself into a corporate entity with the members of the co-op receiving pari passu distribution in specie of shares in the new entity.

To do this, it sought exemption from Section 88 of the Co-operative Societies Act (CSA) as under the law, a co-op which is wound up will have to pay its members their original share capital plus any unpaid dividends up to a cap, after setting the costs of liquidation and the co-op’s liabilities.

Any surplus funds in the co-op beyond that would have to be transferred to the Co-operative Societies Liquidation Account to be applied for the benefit of the sector generally.

MCCY Not Confident

The MCCY is not confident that the proposed transaction would not affect Income, or the co-op movement as a whole to carry out its social mission, the statement said.

“We find it difficult to reconcile the proposed substantial capital reduction, soon after the transaction is completed, with Income Insurance’s representations to MCCY during the corporatisation exercise that it was aiming to build up capital resources and enhance its financial strength,” Tong said.

Income Insurance, a former co-op, was corporatised in 2022 and in doing so, it sought to be exempted from Section 88 of the CSA, which allowed it to carry over approximately S$2 billion in surplus to the new corporate entity, Tong said.

The proposed capital reduction in the Income-Allianz deal “runs counter” to the premise for why the exemption was given, he added.

The Minister further said that if not for the ministerial exemption in 2023, Income Insurance co-op’s accumulated surplus of some S$2 billion would have gone to the CSLA after being wound up, to benefit the co-op movement in Singapore as a whole.

“MCCY has not seen any arrangement within the present transaction to account for the estimated S$2 billion surplus that was carried over to the new corporate entity, due to the exemption,” he added.