SINGAPORE: American company Fitch Ratings, one of the “Big Three” credit rating agencies, has forecast that German conglomerate Allianz’s plan of taking the majority stake in Singapore’s Income Insurance will most likely not have significance in Singapore’s insurance market.
The acquisition consolidates market positions rather than disrupting them, the company indicated, as it emphasized that while this acquisition will strengthen Income Insurance’s leading role in the non-life insurance sector, the life insurance market will continue to be dominated by the top five insurers, such as Great Eastern Life Assurance Company Limited and subsidiaries of global insurance groups.
Earlier this month, Allianz disclosed plans to acquire a 51% stake in Income Insurance for approximately $1.6 billion. This acquisition could result in a rebranding for the Singapore insurer. Pending regulatory approval, NTUC Enterprise Co-operative Ltd will retain between 21.8% and 49% of shares, contingent on other shareholders’ decisions.
Income Insurance, a top composite insurer in Singapore with a rich history spanning over five decades, is poised to benefit from Allianz’s global expertise and potential synergies. The deal is expected to make Income Insurance the largest property and casualty insurer and the fifth-largest life insurer in Singapore.
Noting the strategic importance of this acquisition for Allianz’s growth in Asia, Fitch Ratings said: “We expect the proposed acquisition will also strengthen Allianz’s presence in Asia, a region identified as strategically important for the group’s growth, and to elevate it from the ninth- to the fourth-largest composite insurer by insurance revenue in Asia, according to Allianz.
“The proposed acquisition aligns with Allianz’s strategic objective to grow inorganically in the non-life sector rather than the life insurance segment and to become a leader in its markets,”
Despite the optimistic forecast from Fitch Ratings, the acquisition has sparked considerable debate among prominent Singaporeans. Concerns have been raised about the impact of foreign ownership on Income Insurance’s foundational values, which have historically focused on serving the working population with affordable insurance solutions.
Veteran diplomat Tommy Koh did not mince words, as he asserted on social media that selling Income is not a good idea, and the social purpose it was aimed at is still valid today. He wrote:
“INCOME started life as a cooperative of NTUC like Fairprice. The idea was to offer insurance to the people at affordable rates. A few years ago it was made into a company and ceased to be a cooperative. Now we are told that it may be sold to a German insurance company.
“I don’t think it’s a good idea to sell INCOME. It was founded to serve a social purpose and a social need. They remain valid today. I wish to argue that INCOME and Fairprice should never be sold.”
Former mainstream media editor PN Balji commented, “I am against selling Income. Will we dare sell SIA?”
Ex-NTUC Income chief Tan Kin Lian criticised the takeover bid, as well. Responding to a question about whether the company’s “noble socialist philosophy has lost its roots,” the two-time former presidential candidate, who led NTUC Income for 30 years, said last week:
“This is sad. But it reflects what has been happening in Singapore for the past three decades. We are following the bad practices of America. America is now in decay. Singapore may follow.”
TISG/