Singapore government blocks Income-Allianz deal

The deal between German insurer Allianz and Income Insurance has been called off by the Singapore Government over concerns over the structure of the deal and also about the ability of Income Insurance to continue its mission, according to Edwin Tong, minister for culture, community and youth (MCCY) and second minister for law. He was speaking in Parliament o 14 October. 

Tong said the government assessed the transaction and decided that it would be in the "public interest" for the transaction to not proceed. 

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He added that The Insurance Act will be amended urgently to allow for the approval of the deal to be withheld. This will allow the Monetary Authority of Singapore (MAS) to consider the views of the MCCY in future applications related to insurers that are cooperatives or are linked to cooperatives.

Tong added that the concerns are not over Allianz's standing or suitability but rather in the terms and structure of the transaction especially with regards to Income’s corporatisation exercise.

He added that the government would be open to future proposals as long as its concerns were addressed. 

Income Insurance has since released a statement with regards to the government's decision. 

"Income Insurance notes and respects the government’s direction. Income Insurance appreciates the government’s understanding of the strategic purpose behind Income Insurance’s corporatisation exercise in 2022 and acknowledgement that the partnership with Allianz was to strengthen Income Insurance’s position for the long run," it said. 

Income added that it also notes the government’s concern about the terms and technical construct of the transaction and respects the need to amend the Insurance Act to provide a clear statutory basis for its review and approval involving such applications.

Given the latest developments, Income Insurance said that it will review and take into consideration the forthcoming amendments to the Insurance Act and work closely with relevant stakeholders to study and decide on the next course of action.

"Income Insurance has consistently acted in good faith to safeguard the best interests of its stakeholders, including policyholders and shareholders. It remains committed to empowering the financial well-being of Singaporeans," it said. 

This comes shortly after Income Insurance revealed that Allianz was in discussion with it on a transaction relating to the shares of Income Insurance on 14 June. 

"Income Insurance wishes to emphasise that there is no assurance that any transaction will materialise or that any definitive or binding agreement will be reached," it said at the time, adding that it will make further announcements if and when there are any material developments which warrant disclosure, in compliance with applicable laws and regulations.

On 14 July, Income Insurance released a new update saying that discussions were still ongoing and that there was still no assurance that any transaction will materialise or that any definitive or binding agreement will be reached.

"Shareholders are advised to exercise caution when dealing in the shares and to refrain from taking any action in respect of the shares which may be prejudicial to their interests," it added. 

On 17 July, Allianz said that had given a pre-conditional voluntary cash general offer to acquire at least 51% of the shares of Income Insurance, subject to regulatory approval. 

"Allianz intends to offer SG$40.58 per share for a total transaction value of approximately SG$2.2 billion for 51% of the shares in Income Insurance," it said at the time, adding that the proposed transaction marks a key milestone for Allianz in its strategic ambition to expand and strengthen its presence in Singapore - an important market for Allianz, given its status as the financial services hub of Southeast Asia.

Following the close of the offer, Allianz was meant to become the majority shareholder of Income Insurance while NTUC Enterprise would have continued to retain a substantial stake, said Income Insurance in response. 

Income Insurance also clarified at the time that Allianz intended for Income Insurance to continue to honour the terms of the existing policies underwritten by Income Insurance and ensure a seamless transition with no impact on policyholders.

It also intended for Income Insurance to continue participating in national insurance programmes, as well as to continue its social commitment and existing pledge of SG$100 million over 10 years from 2021 to promote social mobility among the low-income, support the well-being of seniors, and champion environmental causes, it said. 

In July, conversations online regarding German insurer Allianz’s ongoing discussions to potentially buy Income Insurance were 67.6% neutral, 3.8% positive and 28.6% negative, according to media intelligence firm CARMA.

The sentiments reflect that the news sparked some controversy on social media, with users expressing concerns about the impact on policyholders and the company's financial position, it said. 

On the other hand, some users expressed support for the deal in July, citing the strength of Allianz as a global leader in insurance and the potential benefits for Income Insurance's competitive position in Singapore, said CARMA. 

“Large corporations often find themselves under scrutiny on social media for how consumers perceive their actions. Having a good reputation is the key to reassuring that stakeholder interests will be safeguarded. This is especially important during significant movements like mergers or acquisitions,” said Divika Jethmal, head of marketing at CARMA at the time. 

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