Former NTUC Income CEO, Mr Tan Suee Chieh, has issued a further open letter to the Monetary Authority of Singapore (MAS) urging a thorough examination of the proposed sale of a majority stake in Income Insurance to German insurer Allianz Europe BV.

This follows a joint statement from NTUC Enterprise (NE) and Income Insurance addressing his previous criticisms and concerns.

While the statement explained the par value redemption of shares, it did not directly address the significant dilution of minority shareholders’ stakes due to capital injections at par value. The focus on regulatory compliance and capital resilience overshadowed the economic impact on minority shareholders.

In his letter dated 5 August 2024, Mr Tan reiterates his call for comprehensive scrutiny of the sale, arguing that NE acquired shares at a steep discount, thereby diluting the stakes of minority shareholders. He contends that NE’s capital injections between 2015 and 2020 were made at par value ($10 per share) rather than at the true economic value, leading to significant “paper profits” for NE.

NE’s Share Acquisition and Dilution of Minority Shareholders

Mr Tan’s letter outlines several key points to emphasize his concerns. He points out that NE increased its shareholding in NTUC Income from 30% to 70% by obtaining 63 million shares at par value, significantly below their actual worth. This acquisition, according to Mr Tan, allowed NE to enjoy substantial “paper profits” without sharing any windfall with the minority shareholders, whose stakes were diluted from 70% to 30%.

He highlights that while NTUC Income operated as a cooperative, shares were redeemable at par value, ensuring all members, including NE, could only exit at that value, regardless of the true market value. However, the corporatisation of NTUC Income in 2022 changed this dynamic, allowing NE to potentially profit from its holdings.

Allianz announced on 17 July that it planned to buy a majority stake in Income Insurance for about US$1.6 billion. Allianz offered S$40.58 per share, valuing the transaction at S$2.2 billion (US$1.66 billion) for a 51% stake in Income Insurance. NTUC Enterprise currently holds a 72.8% stake in Income.

Critique of the NTUC Joint Statement

Mr Tan criticizes the NTUC Joint Statement for failing to address the core issue of how NE’s share acquisition diluted the holdings of ordinary members.

He asserts that the statement glosses over the fact that NE’s capital injections at par value led to a significant dilution of minority shareholders’ stakes.

According to Mr Tan, the joint statement’s emphasis on the minority shareholders’ overwhelming vote for corporatisation ignores the reality that NE, as the majority shareholder, controlled the outcome of the vote.

He argues that the minority shareholders were not given a genuine choice in the matter, as NE’s control meant the vote for corporatisation was inevitable.

Additionally, Mr Tan points out that no vote was ever put to the minority shareholders regarding whether NE should compensate them for the dilution of their stakes. He believes that if such a vote had been held, the minority would have likely demanded compensation for their reduced shareholding.

Undertakings and Commitments

Mr Tan also challenges the NTUC Joint Statement’s assertion that NE’s commitment not to redeem its shares was not for an indefinite period. He recalls multiple meetings and discussions from November 2014 to March 2015, where NE undertook not to redeem additional shares issued at par value until the relevant legislation was passed, converting them into irredeemable shares.

He invites MAS to review board meeting minutes and papers from this period to verify his claims. Mr Tan argues that NE’s commitment not to redeem shares in perpetuity was a critical assurance that enabled NE to increase its shareholding at par value. He contends that this commitment should be honored and that any deviation from it undermines the integrity of the assurances given to NTUC Income.

Concerns About Allianz’s Commitment to Social Mission

In his letter, Mr Tan also expresses skepticism about Allianz’s ability to uphold NTUC Income’s social mission. He questions how a profit-driven commercial entity like Allianz will prioritize the cooperative’s founding principles and social commitments over its profit motives. He warns that if NTUC’s social mission is eroded, future commentators might view the current assurances as empty promises.

Mr Tan’s letter brings to light several critical concerns about the proposed sale of Income to Allianz.

His arguments focus on the significant dilution of minority shareholders’ stakes, the true economic value of shares acquired by NE, and the long-term safeguarding of Income’s social mission.

Mr Tan concludes his letter by urging the MAS to scrutinise the proposed sale in the interests of Singaporeans, calling for transparency and adherence to previous commitments. As the debate continues, the MAS’s decision will be pivotal in addressing the concerns of both former and current stakeholders of NTUC Income.