Ex-NTUC Income CEO Tan Suee Chieh lauds government’s move to block deal with Allianz

SINGAPORE: Former NTUC Income CEO Tan Suee Chieh on Monday (Oct 14) welcomed the government’s decision to intervene and stop a proposed deal between Income Insurance and German insurer Allianz. 
Mr Tan was one of the prominent voices who spoke out against the proposed deal, which was announced on Jul 17. In the past months, he had regularly made his views known on his social media pages such as Facebook and LinkedIn.
Mr Tan was CEO of NTUC Income from 2007 to 2013 before becoming Group CEO of NTUC Enterprise from 2013 to 2017. He had also led Prudential from 1994 to 1999.
Other figures against the deal included his predecessor Tan Kin Lian and Ambassador-at-Large Tommy Koh.
Under the proposed transaction, Allianz would have acquired a majority stake in Income.
Their concerns were mainly over how Allianz, a large multinational company, would not be fully aligned with the original mission of the Singapore entity, which is to serve the needs of low-income workers. 
“This outcome underscores the importance of speaking up on matters of public interest and ensuring that the values of trust, integrity, and governance remain at the forefront of our decision-making processes,” Mr Tan said on his social media pages.
“Throughout this journey, I have been driven by the belief that raising concerns and fostering open dialogue is essential for safeguarding the social mission of our institutions and protecting the well-being of Singaporeans.
“It is through such collective efforts that we ensure decisions serve the long-term interests of the public.”
In response to CNA’s queries, Mr Tan said that “on the specific grounds of public interest, I am in agreement with the government’s position” and that he agreed with the government’s assessment of the proposed deal.
Mr Tan said that there were “additional aspects that merit attention” that he would touch on in the future.
Culture, Community and Youth Minister Edwin Tong said in parliament on Monday that “it would not be in the public interest for the transaction, in its current form, to proceed”.
Mr Tong said in his ministerial statement that the Ministry of Culture, Community and Youth (MCCY) is not satisfied that Income will be able to continue fulfilling its social mission after the proposed transaction.
“There are no clear binding provisions or structural protections in the deal to ensure that Income’s social mission will be discharged.”
The government understands that the “strategic purpose” behind the deal was to make Income more financially sustainable in the longer term, Mr Tong stressed.
“Whilst we will not allow the proposed transaction to proceed, 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,” the minister added.
There will also be tweaks to the Insurance Act to provide “clear statutory basis” for MCCY’s views to be considered in applications related to insurers that are either a co-op or linked to a co-op.
While experts agree the deal could technically still proceed, they are not optimistic that it would.
Professor Lawrence Loh of the National University of Singapore’s Business School noted that the deal would need to be modified. “I’m not too optimistic that Allianz will revise the deal,” he said.
Associate Professor Shinichi Kamiya of Nanyang Technological University’s Insurance Risk and Finance Research Centre also said the deal could still go ahead “with a substantial revision … to get full support from the government and the public”.
However, the government’s move could lead to “suboptimal decisions” by Income and Allianz, creating potential incentive issues, he added.
Assistant Professor Goh Jing Rong of Singapore Management University’s School of Economics noted that there were plans to extract about S$1.85 billion in cash for shareholders within three years of the acquisition.
“This is a potential concern as this may limit Income’s position to issue more policies in the future, as insurers are required to hold sufficient capital against issued policies,” he added.
“Less available capital would naturally limit the number of policies Income could issue.”
He had previously told CNA that the deal should not proceed and he was pleased to see that the government has intervened.
Prof Loh said that two other scenarios could emerge: Income might revert to the status quo and continue operating under its existing arrangements, or a new entity could step in as a “white knight” to acquire Income.
“There are some strong players around, some of them are Singaporean (firms) that might be ready to consider Income Insurance,” he added.
Assoc Prof Kamiya believes that Income needs a strong partner to remain competitive in the market for future growth, adding that Allianz “appears (to be) a good one”.
“It will take years for the public to see whether this government intervention protected or damaged Income’s value,” he said.
Asst Prof Goh said there must be “strong contractual provisions” to safeguard Income’s commitment to fulfilling its social mission.
“These provisions should be explicit and enforceable,” he said.
When asked what the announcement meant for Income, given that it previously said it “cannot shoulder” growth in a competitive environment, Asst Prof Goh said Income should continue to “concentrate on its target demographic”, instead of focusing on competing with established market players.
“By staying true to its mission, Income can continue to perform well without needing to compete aggressively for mass-market share,” he added.
Prof Loh said the government’s decision to block the deal also sends a message to the industry that businesses must act responsibly.
“Public interest is … paramount,” he added.
In a commentary for CNA on Jul 27, Mr Tan wrote that selling 51 per cent of Income just two years after its corporatisation was an “unexpected shock” to those who value its social mission.
“Instead, the deal appears to be a mechanism for NTUC Enterprise and other shareholders to cash out with substantial gains,” Mr Tan noted.
He also pointed to the contrast in ethos and culture between Income and Allianz, highlighting Allianz CEO Oliver Baete in a Business Times interview on Jul 22, when he used terms focused on shareholder value, such as wanting to “build a resoundingly profitable business” and worrying about “things that look great from a volume perspective and not so great from a value perspective”.
Mr Tan also argued that socially motivated businesses do not necessarily have to “expand internationally, or in this case, be part of a multinational group”.
“Singapore has the talented people to run it as a social enterprise, especially if NTUC gives a clear context to maximise value for customers, as in decades past.”