SINGAPORE: A capital reduction plan was “not a guaranteed outcome” of the now-aborted Income-Allianz deal as it required multiple approvals, which would have acted as safeguards to ensure that Income Insurance’s financial position would not be weakened, Income’s chairman Ronald Ong said on Tuesday (Jun 24).
Mr Ong, who was speaking at an annual general meeting held at The Star Theatre, also mentioned that the local insurer is keeping its options open and continues to explore different share liquidity options, which can include a share buyback programme.
The annual general meeting, which started at around 5.30pm, was not open to the media.
A few shareholders who were seen leaving the venue earlier told CNA that both Mr Ong and chief executive officer Andrew Yeo spent some time in their opening speeches addressing the scuppered deal, but they were hoping for more details on how they can exit their holdings in the unlisted Income Insurance.
Last July, German insurer Allianz made an offer of about S$2.2 billion (US$1.6 billion at the time) for a 51 per cent stake in Income Insurance.
NTUC Enterprise, which has a 72.8 per cent stake in the insurance company, said at the time that the proposed deal can strengthen the local insurer’s position in Singapore’s highly competitive market. It also said it would remain a “substantial” shareholder in Income Insurance if the sale went through.
The proposed deal triggered concerns, including public statements from several prominent figures, over whether Income would be able to continue its social mission.
The government stepped in to block the transaction in October and Allianz withdrew its offer in December.
A key concern was a planned capital reduction exercise in the proposed deal, which sought to decrease the capital held by Income and return S$1.85 billion to shareholders within three years after the deal is completed.
This ran counter to why Income was allowed to carry over some S$2 billion after it changed from a cooperative to a company in 2022, said then-Minister of Culture, Community and Youth Edwin Tong in parliament, as he explained why the government was stepping in.
NO COMMITMENT FOR CAPITAL OPTIMISATION
Based on a transcript uploaded on Income’s website, Mr Ong said it was “important to know that there was no commitment to conduct a capital optimisation”.
While Allianz had included the capital optimisation proposal in its preliminary business plan submitted to the Monetary Authority of Singapore (MAS), the plan was “not for approval” by the current board of Income Insurance or NTUC Enterprise at that point in time.
Only when the offer is formally launched would shareholders have been informed of the details, including the possibility of a proposed capital optimisation, said Mr Ong.
However, that did not materialise as the offer was withdrawn after the government raised its concerns about the deal.
Mr Ong added that Allianz’s proposed capital optimisation was “not a guaranteed outcome”, as it would be contingent on Income Insurance’s business performance, market conditions in subsequent years and the organisation’s solvency and capital requirements at the time.
It would also require approvals by the future board of directors at the time of the capital optimisation exercise, at least 75 per cent of shareholders at a special resolution, as well as the MAS and “possibly the High Court of Singapore”.
“These safeguards would have been in place to ensure that Income Insurance will always retain its financial strength, and that the capital and cash reserves it has following any capital optimisation, if it were to happen, will be sufficient to meet its business requirements and maintain policyholders’ interests,” he said.
He added that it is common for financially sound companies to optimise their capital structure or return surplus capital to shareholders.
“Being able to do so is a mark of financial strength as the company must have a strong capital base and buffer to implement a capital optimisation plan successfully,” he said.
