SINGAPORE: Allianz’s plans to buy a majority stake in Income Insurance have sparked concerns among some Singaporeans over their health insurance plans tied to Income, despite the German insurer’s assurances that there will be no change to national insurance programmes.

They also fear that Income’s original social values and mission to provide coverage for lower-income groups will no longer apply once Germany-listed Allianz takes a controlling stake, spelling an end to affordable insurance coverage.

“As a listed entity, Allianz is answerable to its shareholders who have elected the board of directors. How will it manage Income’s social mission in Singapore and its business goal of profit maximisation?” asked one The Straits Times reader, a Singaporean who is also an Income policyholder.Lester Lee, 62, is among those worried.

The Singaporean and his family have relied on the Integrated Shield Plans (IPs) offered by Income to complement the basic healthcare provided by the MediShield Life health insurance plan.

“The foreign company can say anything now to secure the deal, but once it has a controlling stake, it can do whatever it wants to maximise profits. It’s scary because I rely on Income Insurance,” the retiree said.

This is even as Allianz has given assurances that it intends for Income to continue participating in national insurance programmes, including the IP plans.

The chief executive of insurance advisory Havend, Eddy Cheong, noted that Income has been known to introduce products that might not be profitable but which would achieve a certain social outcome.

“With the recent corporatisation and the impending deal, this may become less of a possibility in the long run,” he said.

Income was corporatised in 2022 and is now a public non-listed company limited by shares.

Lee is among the Singaporeans seeking greater clarity.

“As a Singaporean, I am totally at a loss as to why we would divest a successful and important part of our social enterprise network. Does this represent a major shift in the role of Income? Will NTUC FairPrice be next on the sell list?” he asked.

FairPrice is the largest supermarket chain in Singapore, and a cooperative of the National Trades Union Congress (NTUC). On July 17, Allianz announced plans to buy a stake of at least 51% in Income at S$40.58 a share in a S$2.2bil cash deal.

The offer is conditional on Allianz getting at least 51% of Income.

It is expected to close in the fourth quarter of 2024 or in the first quarter of 2025, subject to regulatory approvals.

Income said its directors will appoint an independent financial adviser (IFA) to advise them on the offer, and the views of the IFA and the directors will be set out in a document that will be dispatched to shareholders if a formal offer is made.

Boutique investment firm KT Capital Group’s analyst Alec Tseung was surprised by the offer to buy a majority stake, given that expectations had been for a strategic partnership or a minority stake.

Income was set up in November 1970, the first cooperative society to be established by NTUC, and it identifies closely with the values, mission and goals of the labour union.

It was able to distribute special bonuses to policyholders, which observers said was possible as the insurer did not have to maximise profits for shareholders.

Before 1970, only 3% of Singapore’s population was insured.

Today, Income serves about 1.7 million customers in Singapore. It rose to become one of the key players in the life and general insurance businesses in Singapore, leveraging the union network.

For the 18 months ended Dec 31, 2023, Income’s gross premiums stood at S$4.9bil, with life and health insurance generating 87% of the total portfolio. Total assets stood at S$43bil and net profit was S$60.4mil.

Industry observers said the potential deal makes business sense, and could help Income become a bigger player in the region, where Allianz is already active in 15 markets from Sri Lanka, China and Indonesia to Malaysia, the Philippines and Thailand.

Kanishka de Silva, senior director of insurance at Fitch Ratings, said Income would benefit from Allianz’s global expertise and the potential synergies, and the deal would solidify Income’s No. 1 position in the fragmented non-life insurance space here.

 - ANN