Regulatory Assessment of Allianz Insurance's Planned Acquisition of Income Insurance

Mr Yip Hon Weng asked the Prime Minister and Minister for Finance (a) whether MAS is aware of the key considerations behind the planned acquisition of Income Insurance Ltd by Allianz Insurance; (b) if so, what are they; (c) what is MAS’ assessment of the impact of the acquisition on (i) the availability of existing and future insurance products that were designed for social good and (ii) the options available to Singaporean consumers and SMEs; and (d) whether MAS is aware if Income Insurance Ltd’s mission as a social enterprise will be preserved post-acquisition.

Ms He Ting Ru asked the Prime Minister and Minister for Finance (a) what is MAS’ assessment of the impact of the planned acquisition of Income Insurance Ltd by Allianz Insurance on the social mission of Income Insurance Ltd in providing affordable and well-structured insurance products for Singaporeans; and (b) what avenues and measures are available for Income Insurance Ltd policyholders to allay their concerns about the balance of interests shifting in favour of the new potential shareholder.

Mr Mark Lee asked the Prime Minister and Minister for Finance (a) whether the sale of a majority stake in Income Insurance Ltd to Allianz aligns with the Government’s strategy to build national champions that can compete globally; (b) if so, how; and (c) what measures will be implemented to ensure that Singapore (i) retains control over strategic national assets in the insurance sector (ii) safeguards the interests of local policyholders and stakeholders and (iii) balances the benefits of foreign investment with the need to develop and support homegrown companies.

Thank you, Madam. My reply will also cover Parliamentary Questions (PQs) on the same subject matter which several Members have filed for subsequent Sittings.

Madam, the Ministry of Culture, Community and Youth (MCCY) has just replied to the PQs pertaining to Income's social mission and NTUC Enterprise's reasons for entering into this proposed deal with Allianz. I will focus on the following areas from Monetary Authority of Singapore's (MAS') perspective as regulator of the insurance sector.

First, how would MAS assess the proposed deal for regulatory approval and did the deal involve any conflicts of interests? Second, would the proposed deal affect Singaporeans' access to affordable insurance products? Finally, what will be the impact on Income's existing policyholders and employees?

MAS' primary role as regulator is to promote a sound and progressive financial sector. For the insurance sector, we want insurers to manage their risks well so that policyholders are assured that their long-term policies are safe and will be adequately protected.

When MAS assesses the application for a change in substantial shareholder in an insurer, we will consider a range of criteria, in particular, the applicant's track record, financial soundness, reputation, as well as fitness and propriety. For example, we will assess if the proposed shareholder has the financial capacity to support the insurer when needed, coupled with the willingness and ability to ensure that the insurer's operations are well-run. The insurer must also have effective risk management systems and controls so that it can continue to meet its obligations to policyholders for the long term.

For the boards of major licensed insurers, including Income, MAS requires the majority of board members to comprise directors independent of the shareholders, management and business relations. Board appointments are also subject to MAS' approval. When assessing an application, MAS' considerations include the background, skillset and experience of the applicant.

With regard to Mr de Souza's question on the management of conflicts of interest, MAS had reviewed and was satisfied with the relevant processes Income's board had put in place to address conflicts of interest with respect to the appointment of its financial advisor on this proposed deal and the decision to enter into the deal with Allianz. In the appointment of the financial advisor for the deal, the Chairman of Income's board had recused himself. The decision to enter into the deal was made by the board, comprising a majority of independent directors.

Madam, fostering a competitive insurance market with financially strong insurers is a key part of MAS' approach to ensuring that insurers operate sustainably and serve the public well. We believe that a competitive market is the most effective way to meet the insurance needs of Singaporeans and facilitate access to affordable insurance options and good service over the longer term.

Allianz is one of the largest insurers globally, although it only has a small retail and small and medium-sized enterprise (SME) insurance presence in Singapore today. Allianz Insurance Singapore Pte Ltd is ranked 14th in general insurance with a market share of 2% based on written premiums. There is no significant overlap between Income and Allianz's overall insurance business in Singapore and hence, there is no concern about adverse impact of the proposed deal on competition in the sector.

The insurance market in Singapore is highly competitive. There are currently more than 50 direct insurers in Singapore offering a wide range of insurance products to meet the insurance needs of individuals and businesses. In both life and general insurance, Income has market shares of less than 10% based on written premiums. For many insurance products, Income does not always offer the lowest prices compared to other insurers.

Take life insurance as an example. A check on CompareFIRST, an online portal that allows consumers to compare life insurance products from various insurers, shows that the most competitive rates for Direct Purchase Insurance Term and Whole Life products, include a mix of local and foreign insurers.

With regard to Integrated Shield Plans (IPs), the Ministry of Health (MOH) helps to exercise regulatory oversight over the IP insurers and they have to seek approval from MOH for changing IP premiums or terms and conditions. MOH also publishes a comparison of indicative lifetime premiums and coverage across different IPs. There is strong competition in the IP market, with each insurer offering plans for different levels of coverage to the public and it is not dominated by any single insurer. Income's IPs are also not the cheapest in the market for most categories.

Finally, I would like to address the impact on Income’s existing policyholders and employees. Madam, we understand their concerns. Like many hon Members here in the House, I too have residents from Bishan-Toa Payoh who are existing policyholders and employees of Income.

Should the proposed deal be approved, there will be no change to the terms and conditions of existing insurance contracts. MAS expects Income to fulfil its obligations to all policyholders under the terms of its existing insurance contracts. I note that Allianz has also publicly stated its intent for Income to continue to honour the terms of the existing policies underwritten by Income and ensure a seamless transition with no impact to existing policyholders. MAS will hold Income and Allianz to account to these commitments.

In addition, MAS has regulatory requirements and guidance in place for insurers to maintain sufficient capital reserves, put in place robust governance and risk management frameworks, and also to treat their customers fairly.

For participating policies where policyholders share in the profits of the participating fund, MAS protects the interests of policyholders by restricting the ratio of profits allocated to shareholders and the type of expenses insurers may charge to the participating fund.

And with regard to employees, MAS does not regulate employment decisions of financial institutions (FIs). However, we expect all FIs, including Income, to treat their employees fairly and to fully comply with the Ministry of Manpower’s (MOM's) employment laws and guidelines.

To conclude, Mdm Deputy Speaker, MAS encourages all insurers, both local and foreign, to continually innovate, adopt best practices and ensure robust risk management. This will foster a competitive insurance market that offers choice, value and stability to protect the interests of policyholders.

Thank you, Mdm Deputy Speaker. I have two supplementary questions for the Minister. Given that the acquisition involves a very well-established social enterprise, what considerations did MAS take into consideration regarding the potential shift in corporate culture and mission alignment post-acquisition?

And secondly, looking ahead, how does MAS plan to monitor and evaluate the long-term outcomes of this acquisition in terms of social impact and financial inclusion?

Mdm Deputy Speaker, I believe I have addressed those points in my main reply, but let me just reiterate the key messages. So, first, as regulator, MAS will look at the interest of the policyholders. For the existing policyholders that have existing insurance contracts with Income, we will hold Income and Allianz to their commitments that they have both made to ensure that the terms and conditions of the existing insurance contracts will have no change. So, therefore, this is the way to protect our existing policyholders.

For the other commitments that NTUC, NTUC Enterprise as well as Allianz have made, I think my colleague, Minister of State Alvin Tan, shared some of these earlier in his reply, referring to the statements made by NTUC Enterprise and also by NTUC. I think these are the assurances given by the shareholders and also by NTUC, that its social mission will not change and that it will continue to look after the well-being, especially of the lower-income policyholders.

For MAS, our belief is that the best way to protect our policyholders, whether existing or future, is to have a competitive insurance industry. And insurers, which are well run, will then provide stability over the longer term and offer choice of options and offer competitive rates to policyholders. Then, from a policyholder's point of view, you can choose which insurance product best suits your needs, which insurance product would actually be most competitive for you.

So, choice and stability bring greater value to policyholders, and this is best done through a competitive insurance market.

Thank you, Deputy Speaker, and thank you to the Second Minister for Finance for the comprehensive reply. Can I ask supplementary questions to the Minister? What is the time frame for assessing and approving the deal proposed by Income and Allianz? And secondly, what is MAS' assessment of the current Income's financial viability and stability vis-a-vis the rest of the insurance companies in Singapore, particularly, the life insurance companies in Singapore? And, thirdly, can I just clarify again that when MAS evaluates whether to approve the deal, it is looking more at financial viability as well as protecting existing policyholders, rather than whether Income and Allianz will fulfil their commitment to provide affordable insurance to the policyholders?

Mdm Deputy Speaker, the proposed deal is subject to MAS' regulatory approval. So, MAS would have to go through the details, get the information and there is a due process for this. I would not be able to give the Member a specific timeline because I think what is important is that the process is done in a rigorous manner and in a comprehensive manner.

The second question that the Member asked, Mdm Deputy Speaker, is with regard to how we will assess, if I understood him correctly, the longer-term viability and the financial viability of Income. I think this has been explained by both NTUC Enterprise and also by NTUC that even though at the moment, Income is able to meet its commitments, insurance is a business that has a long tail. So, whether Income would, in the future, continue to be able to remain competitive, continue to be able to meet its obligations, I think, those are the questions that are also important. So, it is not just ensuring that Income is able to meet their obligations now. I think, collectively and not just MAS, all of us, we want Income to do well, so that they can do good. We want Income to be able to meet its obligations, not just now, but also into the future, so that is not only now that they are able to fulfil their social mission, but also in the future, they are also able to continue to fulfil their social mission.

So, that is what NTUC has said; they want to retain the social mission. They do not want that to change. But the best way to enable them to continue to fulfil their social mission and to fulfil their social mission more effectively is to have a strong Income. As NTUC has shared in their statement, with Allianz coming into this proposed deal, they would now have two strong supporters, two strong shareholders. Instead of only relying on NTUC Enterprise, they also could tap on the resources and the networks of Allianz.

MAS focuses on what is in the best interest of our policyholders because as regulator for the insurance sector, that is a key target group for us. Speaking not as Second Minister for Finance, but speaking as an MAS board member, that is how MAS will assess this from a regulatory approval point of view. And I have explained earlier in my response to Mr Yip why I believe that ensuring a stable insurance sector, a competitive and vibrant insurance sector, is the best way to benefit policyholders.

Thank you, Madam. I have three supplementary questions on this. The first would be in relation to governance and controls. First, I know that Allianz settled a criminal case in the United States (US) two years ago for around US$6 billion over allegations that it defrauded investors, and its US subsidiary pleaded guilty to criminal securities fraud and agreed to pay fines and make restitution to investors. Did MAS look into this and also is MAS then therefore satisfied that corporate governance and controls have been strengthened and that there are no residual concerns? Because after all Income serves 1.7 million Singaporeans with a significant market share in areas such as motor insurance, about 20%, in property and also health, roughly around 15% for each of those.

My second supplementary question relates to a point made in the Allianz announcement. In the announcement, it said, and I quote, "Allianz and the offeror intend to undertake a strategic and operational review of the company and its subsidiaries with a view to enhancing the value of existing businesses, operating the company in a more capital-efficient manner." And then, further on, it states, "Pending the outcome of such a review, Allianz may make changes to the operations and businesses of the company and its subsidiaries".

I note that there are approximately 1,900 employees of Income at the moment and, having worked on a number of acquisitions, I note the standard for discussions to be had between parties about streamlining operations, possible redundancies and sometimes certain undertakings are made about continued employment for a certain amount of time, particularly for key officers. However, it is natural that existing staff, especially those who are more junior, would be concerned and wonder whether and how they would be supported through this.

Given the above, is the Government or MAS aware of any discussions being made about possible job losses or will MAS consider if any guarantees should be made and sought from Allianz about existing employees, about their employment situation and would this form part of the MAS regulatory assessment and ultimately, decision whether or not to approve the transaction?

And finally, if I may, on the point about the financial sustainability of Income, I note a report that was published in December 2023 by Zero One Research, where it notes that the capital adequacy ratio of Income Insurance was roughly as 193% under the Risk-based Capital framework, called the RBC 2 framework, and this was based on reported data. This exceeds, by a wide margin, the minimum required level of 120% under Singapore's Insurance Act. [Please refer to "Personal Explanation", Official Report, 9 September 2024, Vol 95, Issue 140, Personal Explanation section.]

So, my question is, could I get some clarity about why are there concerns about Income's unsustainability as a business, given this healthy buffer?

Mdm Deputy Speaker, I thank Ms He Ting Ru for her three questions. Let me start off with the first one about the case against the Allianz Global Investors in the US.

Madam, the Allianz Global Investors is a US entity under the Allianz Group and this structure, this entity is not directly linked to the entity that will be entering into a deal, this proposed deal, with Income. The product that got into trouble with the US regulators, the Allianz entity that is in Singapore, they did not manage and they also did not offer similar funds, like this fund that got into trouble, which is called the Structured Alpha funds. The investigation by the US Department of Justice on Allianz Global in the US also did not reveal that any other entities within the Allianz Group, including the entity here in Singapore, were aware or had participated in the misconduct. So, I hope that addresses the question that Ms He raised.

Ms He's second question, with regard to the announcement by Allianz that they intend to do a review of their operations and see how they can deploy capital and also streamline their operations, I think that is to be expected, that every time you have a merger, you have a corporate restructuring, whether it involves another party or it is done internally, we are always looking for ways to work more productively and to become more efficient. Whether that then translates into what Ms He was concerned about, which is job losses, I think let us not jump too far ahead. They have not even entered into the proposed deal yet. It has not been approved yet. It is a bit too early, a bit too premature to start to talk about whether there will be job losses.

But as I mentioned earlier in my main reply, in response to a question that Ms Foo Mee Har raised, because I know Ms Foo is also very concerned about our workers and wanted to make sure that their interests will be protected, the MAS does not directly regulate employment practices of FIs. This is not just for Income, this is across all FIs. But we do expect our FIs to comply fully with the MOM employment laws and guidelines. If the workers are not treated fairly, that is where MOM and NTUC will be able to come in and help to speak up for our workers, just like what NTUC has done in previous cases. Where there are job losses and the workers were not fairly treated, NTUC will step forward and fight for our workers, so that we give our workers a fair deal.

As I qualified earlier, this is too early for us to talk about that. In Chinese, they say, "八字都还没一撇". You have not even completed the deal. Therefore, it is too early for us to start talking about some of these potential downstream issues.

The assurance I want to give to the Member and also to our workers is that we expect Income and Allianz, we expect the entity to treat its workers fairly and to comply fully with the MOM employment laws and guidelines.

To Ms He's last question, I would like to go back to what Minister of State Alvin Tan mentioned earlier in his reply, which is why NTUC Enterprise had to inject additional capital into Income. Maybe the healthy state of what Ms He has seen being reported, is the outcome of NTUC Enterprise injecting additional capital into Income.

As I also mentioned earlier in my response to Mr Ang, this does not mean that in the immediate moment, at the immediate point in time, Income is having a problem with its finances. That is not the case. But we know insurance is not a just here and now business, it is a long-term business with a long tail. How do you ensure that over the longer term, you are stronger and better able to meet your obligations and to protect the interests of your policyholders – both the existing policyholders and also new policyholders that you may take on later on. This is best done when you have a stronger insurer.

Thank you, Deputy Speaker. I thank the Minister for the many assurances of holding Income and Allianz accountable to their commitment for this deal. It is also comforting to hear NTUC also weighing in to give their commitment.

I think what is in many people's minds is that with a minority shareholding, what would be MAS' regulatory powers? In specific details, how are they going to exercise that to make sure that the interests of policyholders are safeguarded? The Minister did touch on the composition of the board of directors, but can the Minister elaborate further, including maybe on regulatory levers like approving pricing strategies and monitoring the product offerings so that the parties can honour Income's existing policies and ensure essential insurance products remain affordable and accessible under the new ownership structure, should it come through?

Mdm Deputy Speaker, I thank Ms Foo Mee Har for her questions. I know where Ms Foo is coming from because just as I mentioned earlier, she is very concerned about making sure that the workers are well looked after. She is also very concerned about making sure that the existing policyholders' interests are protected.

I appreciate where Ms Foo is coming from and I want to assure Ms Foo and Members of this House that indeed, MAS' focus is to make sure that the interests of policyholders are protected. I mentioned in my main reply earlier what are some of the ways in which we can do this and also what are some of the things that we can do to promote a competitive, vibrant and stable insurance market that would then give policyholders options and good choices.

I would like to reiterate this point in response to Ms Foo and then, add one important consideration to address the point that she mentioned. In order for us to promote a competitive and vibrant insurance sector, we need to make sure that our rules and regulations for the financial sector, for the insurance sector, are being implemented and that the regulator's decisions are being taken with transparency and also in accordance with what the law provides.

This is what we mean by rule of law – that it is not one set of treatment for one entity and another set of treatment for another entity. We have to have even-handedness and a level playing field across different entities within the market so that we are able to promote more competition in a more vibrant, in a more competitive market, which ultimately will serve the interests of our policyholders.

Thank you, Mdm Deputy Speaker. Just a few questions for the Minister. This pertains to the second thrust of his original reply, which was on the subject of Singaporeans' access to affordable insurance products. Both my questions pertain to what has happened over the last 24 hours.

The first pertains to the statement by the NTUC Secretary-General Ng Chee Meng. He stated that, "Today, Income offers two low-cost schemes for union members – NTUC Gift and LUV term life insurance. Income has assured NTUC that it will keep premiums affordable for policyholders, especially those in the lower-income segments."

Can I ask the Minister, with regard to MAS as regulator of insurance companies, has it queried NTUC on the basis of such a commitment that has been made in view of NTUC Enterprise's projected minority shareholding – if the deal goes through? Relatedly, can I enquire whether MAS is looking at the market to provide more low-cost options for Singaporeans, especially underserved communities who require insurance protection?

The second question pertains to NTUC's joint statement on 4 August and the response of the former Income CEO, Mr Tan, yesterday.

MAS, as regulator, would note that there is a point of difference between NTUC Enterprise's alleged representation that its undertaking to hold on to the relevant shares was "not for an indefinite period". Mr Tan, on the other hand, represents that this is not true and he invites MAS to ask both NTUC Enterprise and NTUC Income to produce all the material board minutes on the undertaking given by NTUC Enterprise. What is MAS' position on this matter?

Mdm Deputy Speaker, I thank the Leader of the Opposition for his two questions.

The first question on the insurance products that Income will continue to provide and also what the NTUC Secretary-General said in terms of those two specific low-cost products targeted at, especially, the lower-income workers, we are glad that NTUC has stepped forward to provide this assurance to look after the lower-wage workers. From a regulatory point of view, we do not go into the level of details in which the Secretary-General of NTUC has provided because he has gone beyond what is the regulatory requirement for him to give this assurance. He did it because he understands the concerns and he wants to give the assurance to the lower-wage workers that NTUC will continue to stand by them.

For MAS, my reply earlier to Ms Foo, to Mr Ang and others, and also in my main reply, that is what MAS will focus on. We will make sure that the terms and conditions of the existing policies will not change after the proposed deal has gone through. That is something that we will hold Income and Allianz to. That is something that will be part of our regulatory approval.

To Mr Singh's second question, we have noted the two letters from Mr Tan Suee Chieh. We will do some further work to establish what the facts are before we assess what our position is and our next steps. I want to assure Mr Singh and the House that MAS takes a serious view of protecting the interests of our policyholders and other stakeholders. We will establish the facts and we will assess what our next steps should be.

— co-ops and social enterprises cannot remain forever just because they are there or they started at a certain time. Social enterprises are difficult to run because they have to meet both financial and social bottom lines. It is even costlier to keep them around just for sentimental reasons.

Will the Minister of State or the Minister, through this episode, review and provide better guidelines to educate co-ops, social enterprises, even Singaporeans at large, on the best practices on when these entities like social enterprises or co-ops should enter a market, when they should exit, especially when the landscape has changed? And also, if it is truly an essential sector, how would the Government then come in to support like in the case of preschools and so forth with anchor operator schemes? I just want to know what we learned from this episode.

Mdm Deputy Speaker, with your permission, I may exceed the time a little bit. I just want to apologise because I forgot to answer part of Mr Singh's question earlier. Mr Singh asked about the options and products for lower-income Singaporeans and underserved segments. Income, through the assurance given by NTUC and NTUC Enterprise, has said that they will want to continue to ensure that they provide affordable products for lower-wage segments. The provision of these different insurance products that cater to different segments of the society, including the vulnerable segments that Mr Singh mentioned, today, it is not just the purview of Income. The other insurers are also doing it.

So, we believe that a competitive market with sufficient competition and sufficient numbers of insurers, a stable, vibrant, competitive market, will allow us to be able to have more insurers step forward to provide products that may serve the needs of different segments in society, including the lower-wage segments and the vulnerable segments.

If I may now turn to Ms Denise Phua's question, Ms Phua's starting point is a correct one, and that is also the view of NTUC and NTUC Enterprise. I believe my colleague, Minister of State Alvin Tan, had also reiterated that this is also the Government's belief that in order for an entity to do good, it must first be able to do well, so that it can sustain doing good. If you are unable to do well, you cannot continue to do good. So, that philosophy, as Dr Goh Keng Swee articulated, still remains very true today.

For this particular proposed deal, one of the key objectives that NTUC and NTUC Enterprise want to achieve is exactly that. They are not moving away from their social mission. They continue to want to fulfil their social mission. But this is a better way of fulfilling that social mission and this is a more effective way for them to do good if they are able to have a strong Income.