Income Insurance for its part, says, “material information relating to the Offer would have been disclosed publicly if the Offer was formally launched. Allianz’s submission of its preliminary business plan to the Monetary Authority of Singapore (containing information relating to the proposed capital reduction) was part of the required process for Allianz to obtain regulatory approvals, which was the pre-condition of the Offer.”
Preliminary business plan not subject to board approval
"The preliminary business plan was not subject to approval from the current Board of Income Insurance,” the Income Insurance statement reads.
If the Offer was formally launched, based on the process stipulated under the Singapore Code on Takeovers and Mergers, all shareholders would have been informed about the details of the Offer, including the possibility of a proposed capital reduction, via the composite document. The composite document would have been made public on Income Insurance’s website, Income says in its statement.
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On Dec 5, following a report that Amundi was in talks to acquire Allianz Global Investors (which has since been put on hold), The Edge Singapore reported that the capital reduction of $1.85 billion that was disclosed by the Ministry of Culture Community and Youth (MCCY) minister Edwin Tong on Oct 14 would have caused Income’s shareholders funds to fall by two-thirds.
The Edge Singapore had reported that as of end-Dec 2023, Income Insurance’s shareholders' funds stood at $3.17 billion, and its tier-1 capital was at $2.7 billion based on data available. Income Insurance’s participating (par) funds stood at $10.4 billion. Hence, total capital worked out as $14.09 billion, compared to a total risk requirement of $7.08 billion giving a capital adequacy ratio of 199%. (Income’s capital adequacy ratio is the ratio between total capital divided by total risk requirement.)
As part of the Income acquisition, Allianz planned to “extract $1.85 billion” from Income Insurance via a capital reduction exercise in a “planned capital optimisation”.
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On the capital front, based on the RBC ratio, an extraction of $1.85 billion would have reduced Income Insurance’s CAR to 173%, leaving the ratio well above the MAS’s minimum required for domestic systemically important insurers (D-SII). Based on Allianz's Financial and Solvency Report 2023, its Solvency II ratio is 229%. There would not have been an issue for the transaction from a risk-based capital point of view.
However, the planned capital reduction would have depleted Income Insurance’s shareholders’ funds of $3.17 billion significantly, and its tier-1 capital would have fallen to below $1 billion.
Minister Tong said: “We find it difficult to reconcile the proposed substantial capital reduction, soon after the transaction is completed, with Income’s representations to MCCY during the corporatisation exercise that it was aiming to build up capital resources and enhance its financial strength. As part of that exercise, Income had sought and obtained an exemption to allow it to carry over a surplus of $2 billion to the new corporate entity. The proposed capital reduction runs counter to the premise on which the exemption was given. If not for the Ministerial exemption in 2023, Income Co-op’s accumulated surplus of some $2 billion would have gone to the Cooperative Societies Liquidation Account (CSLA) after being wound up, to benefit the Co-op movement in Singapore as a whole”
Liquidity option for shareholders
"There has been a growing demand for a share liquidity option from minority shareholders, which has intensified since Income Insurance’s corporatisation in 2022. The proposed transaction with Allianz would have provided shareholders with the opportunity to fully realise their investment in their shares. Understandably, minority shareholders may be disappointed that the Offer has been withdrawn. Income Insurance will consider exploring other liquidity options for shareholders to unlock the value of their shares. Shareholders can continue to buy and sell their shares on a willing-buyer and willing-seller basis," the Income Insurance statement says.
Income Insurance has consistently acted in good faith to safeguard the interests of its stakeholders, including policyholders and shareholders. Income Insurance remains steadfastly committed to its purpose. Income Insurance has always been committed to offering inclusive and affordable products to support the more vulnerable segments of society, the statement adds
