When it was founded in 1970 as NTUC Income Insurance Co-operative Limited, Income was a co-operative.
When a co-op is liquidated, members of it are entitled to receive their cash and dividends up to a cap under Area 88 of the Co-operative Societies Act.
Any surplus funds will be transferred to the Cooperative Societies Liquidation Account ( CSLA ), which would benefit the co-op sector in this country, after reaching this cap.
Instead of joining the CSLA, Income sought and received an provision from the Act that allowed it to take over about S$ 2 billion in surplus to the new business entity in 2022.
But, the proposed Income-Allianz offer sought to minimize the money held by Income, returning some S$ 1.85 billion to owners within three years.
According to Mr. Tong, this proposed money reduction so soon after the transaction “runs store” to the idea for the exemption being granted.
” It is also not clear what Revenue might do after the money recovery, for example, to change or reduce its healthcare profile, and what impact this could have on policy holders”, he said.
Why lower capital?
When corporatising in 2022, Income argued that it , was  , subject to similar regulatory requirements, market competition and issues like other commercial carriers, despite being able to touch only on investment from its members.
Corporatization may give it access to additional funding to expand its business, including introducing new electronic products and expanding beyond Singapore.
Removal of investment does not automatically make the company weaker, Associate Professor Koh SzeKee, chairman of the company, contact and style cluster in Singapore Institute of Technology, told CNA.
” On the contrary, it does improve it by ensuring money is more quickly deployed, thus enhancing earnings to shareholders”, he said.
For example, if a business has built up extra cash resources, but it is not invested due to a lack of immediate prospects, holding the amounts could lead to a lower return on equity and discontent among shareholders, he explained.
” Returning this extra cash to shareholders allows them to put their money where they can, in order to earn higher returns,” said Assoc Prof Koh.
What differences exist between social and prudential considerations?
If the deal had been approved, Mr. Tong had also noted that” there are no clear binding provisions or structural protections in the deal to ensure that Income’s social mission will be discharged.”
While prudential considerations emphasize financial health, risk management, and operational sustainability, social missions examine specific social, environmental, or ethical goals and effects, with less emphasis on profit maximization or financial returns, according to Assoc Prof. Koh.
Although there may be tensions, he said,” the relationships between prudential considerations and social mission can be complementary.”
Being financially stable over the long term, such as being able to attract funding or use resources wisely, is equally important for socially engaged organizations.
Assoc Prof Koh said that “potential tensions arise when certain financial goals or risk management strategies could lead to decisions that reduce or undermine the social impact of a mission, such as raising prices or cutting costs to improve financial sustainability and making essential services less accessible.
What will now befalling Income and its policyholders?
Existing Income policyholders should not be worried, according to Mr. Chee, because MAS will continue to regulate the insurer as a licensee.
According to him,” Income has sufficient resources to meet the required capital adequacy ratio, which means it has sufficient capital to meet its liabilities and pay out to policyholders.”
Following Mr Tong’s announcement, Income said it respects the government’s decision and appreciates its understanding of both the purpose of its 2022 corporatisation exercise and its plans to partner with Allianz.
The voluntary cash general offer from Allianz is pre-conditional and subject to regulatory approval, according to Income Insurance.
In light of the most recent developments, Income Insurance will examine and consider the upcoming Insurance Act amendments and work closely with relevant stakeholders to study and decide the next course of action.
Mr. Tong had stated that the government would be willing to make new arrangements if the issues raised were fully addressed.