The recently blocked acquisition of a majority stake in Income Insurance by German-insurer Allianz has drawn sharp criticism from retired Singaporean banker Chris Kuan, who has been dissecting the deal’s structure and financial implications since its announcement.

Kuan, who initially supported the acquisition from a value perspective, now questions the proposed capital reduction and NTUC Enterprise’s motivations, which he refers to as NTUC in his posts.

The deal, announced in July 2024, would have seen German insurer Allianz acquire a 51% stake in Income.

However, on 14 October 2024, the Singapore government intervened, citing concerns over Income’s ability to maintain its social mission and the significant capital extraction proposed in the deal.

In a series of detailed Facebook posts, Kuan criticised the undisclosed S$2 billion capital reduction, which would have allowed shareholders, primarily NE, to extract funds from Income soon after the transaction. Contrary to popular belief, Kuan argued that Allianz, despite reducing its acquisition cost, was not the real winner in this arrangement.

“There are many comments out there saying Allianz is getting back a heck of a lot of money from the capital reduction and therefore it is the bigger winner,” Kuan wrote. “This is completely wrong.”

Kuan explained that under the deal’s structure, Allianz was set to pay S$2.2 billion for a 51% stake in Income, whose total equity stood at S$3.2 billion as of its last financial statement.

After the acquisition, the $2 billion capital reduction would kick in, with Allianz receiving about $1 billion, which would reduce its total outlay to S$1.2 billion. However, Kuan highlighted the downside: Allianz would end up owning 51% of a significantly smaller entity, with Income’s capital base dropping from S$3.2 billion to just S$1.2 billion.

“In effect, Allianz’s total outlay is S$1.2 billion for a company whose total capital is now just S$1.2 billion, after having S$2 billion extracted from its capital base,” Kuan pointed out. He argued that this left Allianz paying a substantial premium for what would be a much smaller insurer post-acquisition. This revelation flipped the narrative, showing that Allianz was not benefiting as much as it might seem from the capital reduction.

Kuan contrasted Allianz’s position with that of NTUC, which stood to gain significantly from the deal. “NTUC gets S$2.2 billion from Allianz and another S$1 billion from the capital reduction—altogether S$3.2 billion,” he noted.

Kuan underscored that NTUC was the real beneficiary of the deal, extracting value not just from the sale but from the capital extraction as well. He further suggested that this might explain why no other insurers submitted competing bids, with NTUC’s asking price seen as too high by others in the industry.

“This is why IPO [initial public offering] is not an option,” Kuan added. “The German solution is much better for NTUC. With the disclosure of the S$2 billion capital reduction, it now appears the Germans were paying an even bigger premium.”

Kuan criticised NTUC’s eagerness to push the deal through and alluded to potential conflicts of interest, particularly with senior executives possibly having roles in both NTUC and Income.

“You can fully understand why NTUC die die wanna do this deal… the price NTUC is getting is too high,” Kuan commented. He also questioned the appropriateness of such a significant capital reduction in an era of higher capital adequacy requirements for banks and insurers.

Despite Allianz reducing its outlay through the capital extraction, Kuan argued that this didn’t make the German company the ultimate winner. Allianz would be left with a majority stake in a much-reduced Income, whose future capital base would be slashed.

Kuan speculated that NTUC might have been trying to “extract as much as it can possibly get away with” through the capital reduction, leaving Allianz with a diminished company.

As Kuan delved deeper into the financials, he pointed out that the deal contradicted former NTUC Income CEO Tan Suee Chieh’s earlier advice.

Tan had previously suggested that Income should exit capital-heavy insurance products, like annuities and savings products, to avoid the need to raise additional capital.

Kuan highlighted the irony that this strategy was now being implemented as part of the Income-Allianz deal.

“The irony is that Allianz’s business plan goes along the lines of what Tan had suggested Income to do… exiting capital-heavy product lines,” Kuan said.

In his Wednesday (16 Oct) post, Kuan elaborated further on the mechanics of the proposed capital reduction. He explained that for Income to execute the S$1.85 billion reduction within the next three years, the insurer would likely have to exit its capital-intensive product lines such as annuities and savings products.

By doing so, Income’s risk exposure would shrink, allowing it to reduce the amount of capital needed and freeing up funds to be returned to shareholders. However, this would also mean that Income would become a much smaller insurer after the deal.

Kuan highlighted that while NTUC and Allianz would benefit from this reduction, the latter would be left owning a majority stake in a significantly downsized company.

“Allianz is left owning 51% of a company whose capital base is reduced by more than half,” Kuan remarked. He emphasised that this deal structure was more advantageous for NTUC, allowing them to extract both the acquisition proceeds and capital reduction gains, while Allianz was stuck with a smaller and less capitalised company.

Addressing public misconceptions, Kuan cautioned against interpreting the government’s ruling as a win for those who had opposed the deal on ideological grounds.

Many of the arguments about Income’s social mission, he stated, were not the basis for the government’s decision.

“The plebs… are cheering the deal getting blocked by the government by reading the headlines only or reading only what they want to read,” Kuan wrote.

“None of those favoured arguments formed the basis of the government’s objection, which is based almost entirely on the previously non-disclosed capital reduction.”

In the end, Kuan suggested that the deal could return in a revised form. He speculated that Allianz and NTUC might re-negotiate the terms, potentially removing the capital reduction or redirecting the extracted funds to the Co-operative Societies Law Association (CSLA).

“I can see a revised deal in which S$2 billion is extracted before the sale to Allianz, and paid to the CSLA,” Kuan wrote.

This scenario, however, would require NTUC to accept that it could no longer benefit from the capital extraction.

Kuan’s in-depth analysis of the deal highlights his shift from initial support to strong criticism, particularly over NTUC’s disproportionate gains and the questionable capital reduction.

While the government’s intervention has blocked the deal for now, Kuan believes this may not be the final chapter, with Allianz likely to return with a revised proposal.

On Thursday evening (10 October), Singapore’s mainstream media, stationed outside Singapore Casket where Dr Lee Wei Ling’s wake was held, reported the arrival of Senior Minister Lee Hsien Loong and his wife, Ho Ching, to attend his sister’s funeral.

Dr Lee, the daughter of Singapore’s founding Prime Minister, Lee Kuan Yew, passed away on 9 October at the age of 69, at her family home at 38 Oxley Road.

Her wake is being held at Singapore Casket from 10 October to 12 October.

According to Lianhe Zaobao, SM Lee and Mdm Ho arrived outside Singapore Casket at around 8.30 pm.

They reportedly stayed at the wake for about 10 minutes and did not provide any comments to the media.

In contrast, the South China Morning Post reported that SM Lee and Mdm Ho stayed for approximately 15 minutes before leaving.

A member of the public who paid respects to Dr Lee shared with TOC that SM Lee had written a simple “RIP” in the condolences book.

Mr Li Yipeng, the eldest son of Senior Minister Lee Hsien Loong, also attended Dr Lee’s wake earlier.

Observing comments on social media, some users questioned the brevity of SM Lee’s visit to his sister’s wake.

One user remarked that even attending a friend’s funeral typically lasts at least 30 minutes, asking, “Where can you find a brother who attends his sister’s funeral for just 15 minutes?”

Others pointed out that it is customary for family members to stay the entire day at a funeral, particularly the eldest brother, who usually greets visitors and offers hospitality, such as refreshments.

“That’s what family members do,” one user noted.

A netizen lamented that instead of receiving guests at his sister’s wake, LHL appeared as a VIP guest accompanied by bodyguards.

Another user expressed sadness over the situation, noting that the eldest brother was attending the wake like any other outsider.

The comment highlighted that Lee Hsien Yang, the younger brother, was organizing the funeral remotely and could not return.

This led to a broader question among netizens: Would LHL attend his own brother’s funeral if he were to pass first?

Some netizens disagreed with the criticism of LHL’s attendance at his sister’s wake, arguing that, regardless of public sentiment towards the government, this is a personal matter.

One comment emphasised the need for objectivity, stating that people cannot judge LHL solely based on appearances or media reports.

He questioned what LHL might have done for his sister behind the scenes and pointed out that even if he had stayed longer, some would still find fault with his actions.

A comment on Reddit expressed that while LHL doesn’t necessarily need to be invited, his absence from receiving mourners as the eldest family member suggests he was not asked or instructed to participate in the funeral proceedings at all.

A netizen lamented that family disputes deeply affect one’s soul, particularly when reconciliation with a sibling is impossible, even in death.

The Reddit comment emphasised the emotional pain that arises from being reminded of happy childhood moments during such difficult times.