IN A BID to beef up its competitiveness, NTUC Income announced a plan to corporatise its legal form, which would help pave the way for fresh injection of capital from institutions.

Corporatisation will entail the transfer of Income's existing insurance business and assets to a new company (NewCo), Income Insurance Ltd, and thereafter the co-op will be liquidated. The exercise is expected to be completed in the second half of the year, subject to regulatory approvals and customary closing conditions.

In a briefing, Income executives said corporatisation would sharpen Income's competitive edge in a mature domestic market dominated by multinational brands. In the the life insurance market, its share is 8 per cent based on weighted annual premium, and it is the 5th largest.

Income said it remains committed to its social mission and pledges S$100 million over 10 years for sustainability causes, including environmental and social causes such as education for youths and children in need.

In a statement, Income said it is looking to the corporatisation exercise to achieve "operational flexibility'' and gain access to strategic growth options "to compete on an equal footing with other insurers locally and regionally''. Last year, Income tied up with partners in Malaysia, Indonesia and Vietnam to launch insurance-as-a-service products.

Corporatisation will open up avenues to raise capital for growth initiatives. Currently as a cooperative, Income is subject to certain restrictions. For instance, the cooperative's share price is capped at par value of S$10 per share. Dividends are also capped at 10 per cent of share capital. The NewCo's shares will not be capped at par value; there will be no statutory cap on dividends. Currently as a co-op governed by the Co-operative Societies Act, institutional members must be co-ops and trade unions.

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Post corporatisation, existing institutional and ordinary members of Income who hold co-op shares will receive an equivalent number of shares in the NewCo on a one-for-one basis, and their co-op shares will be cancelled.

Shareholders of the NewCo will have one vote per share. There are currently close to 16,000 institutional and ordinary members who hold co-op shares.

Income will organise an extraordinary general meeting to seek members' approval for the proposed transfer of the insurance business to the NewCo and the liquidation of the co-op. It will also hold sessions for members to provide more information and help them make informed decisions before the EGM.

Income chairman Ronald Ong said in a statement: "We see corporatisation as a strategic and essential pivot for Income to scale its business quicker locally and regionally, invest in growth channels and markets, as well as digital capabilities to effectively compete more equitably with other insurers. More significantly we will be even more responsive to changing customer needs via insurance solutions that speak to today's digital-first lifestyles and customers.''

"Since inception, Income has consistently shown agility to adapt and stay relevant amidst evolving customer needs and market changes over the years. By embarking on the corporatisation exercise, Income is demonstrating foresight to be future-ready and sustainable in an increasingly dynamic and complex insurance landscape.''

Andrew Yeo, Income chief executive, said in the briefing that there is a greater need for capital. "In order to fuel our growth plans, we do foresee that there will be greater need for capitalisation. In the existing structure, only institutional members' capital is considered Tier 1 capital... Corporatisation is definitely a necessary step for us to open ourselves up or gain access to more strategic growth options in order to grow and future-proof Income.''

The NTUC Income Insurance Cooperative was set up in 1970, to provide essential insurance to underserved workers. Today its offerings include a Silver suite of products to enhance seniors' access to insurance; as well as SpecialCare products for children and youths with special needs. There is also Prolonged Medical Leave, which is health insurance for self-employed persons, and Care4MigrantWorkers to cover migrant workers for death, total and permanent disability and critical illness.

Mr Yeo said corporatisation will not change Income's social mission; nor will it affect policyholders, distribution channels and business partners. "Income's purpose to improve Singaporeans' financial well-being will remain a beacon for our way of business. Thus shifting from a cooperative to a corporate entity will have no bearing on our commitment to deliver positive customer impact through our products, services and people.

"Income remains committed to driving financial inclusion via more comprehensive and accessible insurance innovations, as well as initiatives that build social inclusion.''

There will be no change to Income's organisational structure or business operation. For current policyholders there is also no change to their existing policy coverage, benefits and terms. Distribution channels and business partners are expected to continue on the same contractual terms following corporatisation.

For employees there will be no changes to existing employment contracts, benefits and roles. Employees may look forward to more career growth opportunities as the proposed corporatisation may open up diverse strategic growth paths, including acceleration of its regional expansion. Mr Yeo said: "As Income embarks on an ambitious growth trajectory, retaining and nurturing employees will hold even more importance. The future is exciting with Income and we are looking forward to embark on this journey with all employees.''

Providend chief Christopher Tan says Income has through the years sought to refresh its image to appeal to younter clients and gain competitiveness. "I think this is more a strategic move that Income is taking to make themselves more attractive as a financial institution. Now that they are no longer a social enterprise, they can focus on maximising profits.''

He observes that the local market has been consolidating, citing the merger of Singlife with Aviva and the acquisition of AXA Singapore by HSBC Holdings. "With corporatisation, Income may also be preparing itself for a sale. They will not be so attractive if they are just a social enterprise with only a local presence and only attracting the older generation. They need to grow their portfolio beyond the Singapore shores and become more tech-enabled. If that is their objective, then they have done well so far and are moving in the right direction.''