Income-Allianz deal: NTUC Enterprise, Income rebut Tan Suee Chieh’s open letter, say ‘unfair’ aspersions cast

SINGAPORE: NTUC Enterprise and Income Insurance on Sunday night (Aug 4) rebutted an open letter by their former CEO Tan Suee Chieh, who raised objections to the Income-Allianz deal.
On Friday, Mr Tan posted on Facebook an open letter to the Monetary Authority of Singapore (MAS) chairman Gan Kim Yong asking government regulators to step in. He also criticised several aspects of the deal.
But in raising his objections, he has “cast aspersions on the stakeholders in relation to this proposed transaction”, said NTUC Enterprise and Income in a joint statement.
“These aspersions are not well-founded and, indeed, unfair. It is important that we set out the context and full facts accurately,” they added.
Germany’s Allianz announced on Jul 17 that it was planning to buy a majority stake in Income Insurance for about US$1.6 billion.
It said it would offer S$40.58 per share for a transaction value of S$2.2 billion (US$1.66 billion), for 51 per cent of the shares in Income Insurance.
NTUC Enterprise currently has a 72.8 per cent stake in Income. It will remain a substantial shareholder if the sale goes through.
In a Facebook post on Sunday, Minister for Culture, Community and Youth Edwin Tong noted that questions have surfaced recently about the corporatisation of Income in 2022.
This matter was raised previously to the Registry of Co-operative Societies (RCS) under the Ministry of Culture, Community and Youth (MCCY).
“The RCS had then advised all parties that this was a matter for NTUC Income and its members to collectively determine and resolve,” wrote Mr Tong.
“What was important was the need to be transparent about the arrangements and to allow Income’s members to decide whether or not to proceed with corporatisation.”
The ministry noted that NTUC Income had done so at that time, through consultation with its members at meetings. It provided the necessary disclosures to members and gave ample opportunities for them to seek clarification.
“Eventually, members voted overwhelmingly in favour of corporatisation,” said Mr Tong.
“From a regulatory perspective, therefore, RCS is satisfied that due process was followed in that corporatisation exercise.”
The minister said several parliamentary questions have been raised about the proposed deal and that they would be answered when parliament meets later this week.
Mr Tan was CEO of NTUC Income from 2007 to 2013, before he became Group CEO of NTUC Enterprise from 2013 to 2017.
In his open letter, Mr Tan raised an “important serious corporate governance issue which needs urgent attention”. 
He noted that NTUC Enterprise injected S$630 million from NTUC Income from 2015 to 2020 in return for shares at a par value of S$10 per share. It did not pay the true market or economic value of those shares, he added.
“The consequence of those capital injections was that NTUC minority shareholders at the time had their shares diluted,” said Mr Tan.
In their joint statement, NTUC Enterprise and Income said co-operative shares are purchased and redeemed at their par value and that they are not equity shares.
In the case of NTUC Income, all institutional and ordinary shareholders enter and exit the co-op at par, which was S$10 per share.
Co-op shares are not traded in the open market and do not hold a “market value”.
“The value of the co-operative shares of NTUC Income (was) valued at par (S$10 per share) when its ordinary members infused capital between 1995 and 2004 and also when NTUC Enterprise made its capital injections totalling S$630 million in NTUC Income between 2015 and 2020,” said the joint statement.
Prior to the period between 1995 to 2004, when ordinary members infused capital into NTUC Income, NTUC was the majority shareholder of NTUC Income.
“Thus, it is inaccurate for Mr Tan to claim, without proper context, that NTUC Enterprise had obtained shares that were worth more than their par value when it made its capital injections in NTUC Income,” they said.
In his open letter, Mr Tan also said that with NTUC Enterprise’s increased shareholding in NTUC Income, it would have “greater moral authority to prevent mission drift by the social enterprise”.
He also noted NTUC Enterprise’s commitment “not to redeem the shares in perpetuity” and that this assurance helped NTUC Enterprise increase its shareholding in NTUC Income to 70 per cent.
But in their joint statement, NTUC Enterprise and Income said this claim is “erroneous”.
“Against the backdrop of greater demand for capitalisation, NTUC Enterprise issued a letter of responsibility to the MAS in 2012 (at a time when Mr Tan was NTUC Income’s CEO), indicating that it would ensure that NTUC Income always maintained a sound liquidity and financial position by supporting the co-operative’s present and future obligations and liabilities, including any liquidity shortfall,” they said.
“NTUC Enterprise also offered not to redeem its shares via a letter of undertaking to the authorities to provide an expedient solution to have NTUC Enterprise’s capital contribution recognised as capital (instead of liability) that counted towards NTUC Income’s capital adequacy and solvency position.”
Based on the extract from the minutes of NTUC Income’s board meeting on Nov 21, 2014, at which Mr Tan was present, it stated that NTUC Enterprise is willing to “give an undertaking not to redeem the shares for at least 10 years”.
This makes it clear that NTUC Enterprise’s commitment was not for an indefinite period, said the joint statement.
NTUC Enterprise subsequently converted all its shares to permanent shares when the Co-operative Societies Act (CSA) introduced a new class of irredeemable shares in 2018 to support NTUC Income’s capital and solvency adequacy position.
Both parties said NTUC Enterprise’s capital injections of S$630 million were significant in shoring up NTUC Income’s financial resilience.
They added that minority shareholders have benefited from the conversion of their co-op shares to equity shares on a one-to-one basis.
There was also an increase in voting rights from 0.3 per cent to more than 26 per cent. 
Mr Tan raised questions about NTUC Income’s corporatisation exercise. When the co-op became a corporate entity in 2022, he was concerned that the laws governing corporations would not “necessarily bind NTUC Enterprise to hold its shares in NTUC Income permanently”.
He also said NTUC Enterprise and Income did not stay true to the commitments made to him during the corporation exercise.
In their joint statement on Sunday, NTUC Enterprise and Income said they engaged shareholders and policyholders then to clarify any questions prior to the Extraordinary General Meeting (EGM). 
The attendance at these sessions and the EGM was “comparable to the Annual General Meetings of many listed companies, if not higher”.
“Mr Tan neither attended the information sessions nor the EGM, which was held on Feb 18, 2022. The resolutions on the corporatisation exercise were passed with 99.99 per cent of shareholders voting in favour,” said the joint statement.
“Even if we were to exclude NTUC Enterprise’s votes, minority shareholders voted overwhelmingly in favour of the resolution.”
As part of the corporatisation, Income Insurance decided voluntarily – even though there is no mandate nor obligation to do so – to convert all shareholders’ cooperative shares to Income Insurance shares on a one-for-one basis.
As such, minority shareholders now hold equity shares that entitle them to the economic interest of Income Insurance.
“If minority shareholders choose to accept Allianz’s Offer of S$40.58 per share, if and when it is approved by the regulator, minority shareholders would be accorded priority to tender their shares ahead of NTUC Enterprise,” said the statement.
After the corporatisation in 2022, the majority independent steering committee of Income Insurance looked at three options – an outright sale, IPO or strategic partnership.
“The board was advised that an IPO would not be attractive, due to existing market conditions precedent at the time,” said the statement.
“In evaluating a strategic partnership, a key consideration was the alignment of interests and an agreement on the valuations.
“Discussions with several financial and non-financial institutions, both foreign and local were explored and Allianz’s credentials were the strongest and its interests were the most aligned.”
Mr Tan also asked how Allianz was going to “prioritise the social mission” of Income over profits.
NTUC Enterprise and Income said the German insurer is one of the world’s largest global financial services groups.
It has the “financial strength and global capabilities to create with NTUC Enterprise a highly competitive composite insurance powerhouse in Singapore”.
Allianz had also previously recognised the significance of NTUC Enterprise remaining a substantial shareholder, and that it intends for Income to continue to participate in national insurance programmes.
Read NTUC Enterprise and Income Insurance’s joint statement here, as well as Mr Tan’s open letter: