The move is expected to help Income stay relevant and continue fulfilling its social mission.
Income Insurance Andrew Yeo, NTUC Enterprise chairman Lim Boon Heng and Income board’s lead independent director Joy Tan speaking to ST on July 29.
NTUC Enterprise now holds close to 78 million Income shares, representing a 72.8 per cent stake, while some 16,000 minority shareholders hold the remaining 27.2 per cent, which includes institutional investors. We are faced with mostly foreign insurers that come with much stronger, bigger balance sheets. There’s no special privilege, no subsidy, no quarters accorded to Income. Be it from the regulatory perspective or the financial perspective, we compete on an equal footing.
When we did the repricing pre and post-corporatisation, there was no change in our methodology. The cost of insurance is the same for us. They think that they can contribute their expertise as a group operator and grow the business together with their regional operations. Should NTUC Enterprise devote all its financial resources to help build up Income, it would not be a very prudent policy. NTUC Enterprise must therefore look at the balance of interest in different investments, so there is a balanced offering.As responsible stewards, we’ve always got to look at future-proofing the organisation and be prepared for rainy days.
This is an opportunity for minority shareholders, two-thirds of whom are seniors who have invested in Income for a long time. It is also a good opportunity for them to monetise their investments, which is something that they’ve always been asking for. ST: Income’s original objectives were set up 50 years ago. Are they still relevant, or are they less relevant now?I would say that the fundamental objectives of providing for the financial well-being of the people and their families, particularly the lower-income, are important.
If the business does not earn its cost of capital, eventually you’ll find that it’s unable to continue and be able to serve people. But as I said earlier, in order to serve people you must do well and the emphasis on that particular part of the interview might have created an impression that it’s out for profit maximisation.
ST: This brings us to the question of lower and lower-middle-income groups and the growing sandwich class in Singapore. With this deal, there is a concern of how Income is going to fulfil its social obligations and its aspiration to take care of these groups.My opinion is that with a stronger insurance company through this partnership, the ability to offer customers of whichever segment the most competitive prices would be better than if you were just Income alone.
ST: The key worry that people have here is health insurance, particularly for those who have already bought policies, because it’s a problem for people who are older and they typically have pre-existing ailments, so it’s very hard to switch. What guarantee is there that Allianz will not push up premiums?Like I said, the industry is very competitive. Ultimately, any price increase will have to clear the regulators, so there’s a gate there.
When you are a price taker, as Andrew said, there are things beyond Income’s control or ability to change. ST: For financial advisers, what’s the basis for giving this to Morgan Stanley, knowing that Ronald Ong is chairman of both Income and Morgan Stanley’s South-east Asia business?The independent directors of Income consider all the interests of Income, and with a particular concern regarding the minorities. As to whether we approached other financial advisers, we can confirm that we did engage in a considered selection process by involving other candidates apart from Morgan Stanley.
Hence, people will watch what this partnership does, and only will be assured if they see the partnership doing the right thing.
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