SG justifies blocking $2b capital withdrawal in Income-Allianz deal

This proposed extraction does not align with the representations made to MCCY.

Singapore clarified the recent capital reduction and the role of Income Insurance's financial adviser in a proposed transaction with Allianz, saying that Income Insurance undertook a one-time capital reduction of approximately $31.8m (S$43m) in 2023.

This move was part of a transition following its corporatisation in 2022, during which NTUC Income Co-operative’s assets, liabilities, and retained earnings were transferred to the newly formed corporate entity, Income Insurance, explained Deputy Prime Minister and Minister for Trade and Industry Gan Kim Yong in a written parliamentary response to Leong Mun Wai, NCMP.

To ensure a shareholder payout for fiscal year 2022 (FY 2022), Income sought approval from the Monetary Authority of Singapore (MAS) to reduce its share capital, as all retained earnings had been converted to share capital.

Gan highlighted that the FY 2022 payout to shareholders was consistent with Income’s past dividend distributions and was lower than the average of $45.9m (S$62m) distributed annually by NTUC Income in the preceding five years.

However, he noted that the proposed plan to extract $1.37b (S$1.85b) over three years is substantially different in scale and nature from regular annual dividends.

This proposed extraction does not align with the representations made to the Ministry of Culture, Community and Youth (MCCY) when Income sought an exemption from the Co-operative Societies Act as part of its corporatisation.

Regarding the role of Income’s financial adviser, Morgan Stanley Asia (Singapore) was appointed by Income to provide financial advice and assist with structuring and negotiating the transaction with Allianz.

However, Gan pointed out that Morgan Stanley’s role is not equivalent to that of an independent financial adviser (IFA), who would typically evaluate the fairness and reasonableness of an offer in a voluntary general offer (VGO) scenario.

Currently, the Income-Allianz transaction remains in a pre-conditional VGO stage, meaning no formal VGO process, including IFA evaluation, has commenced.

The government has stated that the transaction, in its current form, will not proceed.

($1.00 = S$1.35)