Allianz seeks 51% Income Insurance stake in 1.5 billion-euro deal

GERMAN financial services giant Allianz plans to acquire 51 per cent of Singapore-based insurer Income Insurance at S$40.58 per share. The deal amounts to some 1.5 billion euros (S$2.2 billion), Allianz announced on Wednesday (Jul 17).

NTUC Enterprise Co-operative Limited currently owns around 72.8 per cent of the insurer, represented by about 78 million shares out of the total 107.2 million shares as at Dec 31, 2023, based on Income’s annual report. The balance is held mainly by retail investors.

Allianz requires about 54.7 million shares of Income to reach the 51 per cent stake. The offer price represents a 37.3 per cent premium over the net asset value of the shares as at Dec 31, 2023.

If offer acceptances from Income’s minority shareholders are less than this amount, NTUC Enterprise has taken an irrevocable undertaking to duly accept the offer, up to the number of shares that would result in Allianz acquiring a 51 per cent stake.

At the close of the offer, the remaining 49 per cent of shares will be held by both NTUC Enterprise and minority shareholders, with the cooperative still retaining a “substantial stake” in Income post-deal.

The offer is subject to the approval of Income’s shareholders, for the amendments to the constitution and the proposed name change of Income.

The deal comes as Allianz seeks to expand and strengthen its presence in Singapore. Through its partnership with NTUC Enterprise, it aims to focus on life and health, and property and casualty insurance in the Republic.

Anusha Thavarajah, regional chief executive for Allianz Asia Pacific, said: “Asia holds great strategic importance for Allianz, and we are committed to investing in Singapore by partnering with a well-respected local institution.”

She added: “By integrating Income’s capabilities in distribution, partnerships, products, people and Allianz’s global and regional resources and expertise, we look forward to taking the insurance landscape of Singapore and South-east Asia to the next level.”

Adeline Sum, chief executive of NTUC Enterprise, said: “Allianz’s expertise as a global leader in insurance can strengthen Income’s competitive position in Singapore and enable Income to access its regional scale and networks.”

In an interview with The Business Times, Allianz global chief executive Oliver Baete said the partnership had been “in the works for a while”.

“(Income) has been a foundation of providing support to the working class people in Singapore, and Allianz has a very similar history in Germany,” he said.

Baete expects the acquisition of Income will take the German insurer to the top rank in property and casualty insurance in Singapore.

This plays into the insurer’s ambitions to be a market leader in the countries it operates in. Baete expects companies to have a significant size – especially in smaller markets – to be successful.

“In a highly competitive market, it is even more important to have a leading share,” he said.

Allianz is one of the world’s largest global financial services groups, and it achieved an operating profit of 14.7 billion euros in 2023. It has a presence in Asia across nine markets and serves nine million customers through a network of 80,000 distributors and 35 distribution partners.

The insurer said it intends for Income to continue participating in national insurance programmes. It will also ensure a “seamless transition” for policyholders of Income Insurance, and honour the existing policies underwritten by Income Insurance.

Income and retail shareholders

Income is the corporatised entity that was formerly the insurance cooperative NTUC Income. The corporatisation exercise, announced in January 2022, was completed in September 2022, when the insurance business under NTUC Income Insurance Co-operative was transferred to Income Insurance.

At the time of the corporatisation, Income said that the exercise was done to “achieve operational flexibility and gain access to strategic growth options to compete on an equal footing with other insurers locally and regionally”.

It is now a public non-listed company limited by shares. It has been deemed “systemically important” by the Monetary Authority of Singapore, alongside AIA Singapore, Prudential Assurance and Great Eastern Life Assurance.

Income’s shares were in the spotlight recently when The Straits Times reported on the complexity faced by retail shareholders in trading the public non-listed company’s shares.

Based on Income’s latest annual report, 15,835 individual shareholders held 28.1 million Income shares as at Dec 31, 2023. Institutional shareholders held 79 million shares.

Under Income’s previous cooperative structure, shareholders could redeem their shares at par value of S$10 each. After the corporatisation exercise, co-op shareholders received an equivalent number of Income shares on a one-for-one basis, but there was no more option to redeem them.

Earlier this year, shareholders were given the option to sell shares through the Income Insurance Share Liquidity Programme, a partnership between PhillipCapital and digital securities exchange Alta.

Shares for sale were held in custody by PhillipCapital’s brokerage arm Phillip Securities. These shares are then listed on Alta Exchange, which serves global institutional and accredited investors.

However, the drawback is that only accredited investors are allowed to trade on the Alta Exchange.

To qualify, an individual must meet any of the following requirements – have a minimum income of S$300,000 in the last 12 months; have net personal assets exceeding S$2 million, of which the net value of his or her main place of residence can contribute up to only S$1 million; or have net financial assets exceeding S$1 million.

ST reported that the potential bids received on Alta ranged from S$15 to S$25 a share, with the shares having traded at S$19.

Insurance industry consolidation

If the Allianz deal – which requires regulatory approval – does go through, it will be the latest in a recent round of mergers and acquisitions activity.

In March, Singapore Life Holdings (Singlife) became a fully owned subsidiary of Japanese insurer Sumitomo Life, in a deal valuing Singlife at S$4.6 billion.

British insurer Aviva also said it had completed the sale of its 25.9 per cent stake in Singlife and two debt instruments to Sumitomo Life for £937 million (S$1.6 billion).

In May, OCBC made a voluntary unconditional general offer of S$1.4 billion for the remaining 11.56 per cent stake it did not own in its insurance subsidiary Great Eastern, with an aim to delist the insurer.

At the offer’s close on Jul 12, the bank had garnered 93.52 per cent of all Great Eastern shares, falling short of the threshold of being able to compulsorily acquire the remaining shares that it does not already own.