WHY THE GOVERNMENT BLOCKED THE DEAL
Culture, Community and Youth Minister Edwin Tong told parliament in a ministerial statement on Monday that the government had “assessed the proposed transaction and has decided that it would not be in the public interest for the transaction, in its current form, to proceed”.
He said the Ministry of Culture, Community and Youth (MCCY) is not confident that the proposed deal would not affect Income, or the co-op movement as a whole to carry out its social mission.
“We find it difficult to reconcile the proposed substantial capital reduction, soon after the transaction is completed, with Income’s representations to MCCY during the corporatisation exercise that it was aiming to build up capital resources and enhance its financial strength,” said Mr Tong.
Income, a former co-op, was corporatised in 2022. In doing so, it sought to be exempted from Section 88 of the Co-operative Societies Act, and thus was allowed it to carry over approximately S$2 billion in surplus to the new corporate entity, said the minister.
The proposed capital reduction in the Income-Allianz deal “runs counter” to the premise for why the exemption was given, he added.
“If not for the ministerial exemption in 2023, Income co-op’s accumulated surplus of some S$2 billion would have gone to the CSLA after being wound up, to benefit the co-op movement in Singapore as a whole.”
“MCCY has not seen any arrangement within the present transaction to account for the estimated S$2 billion surplus that was carried over to the new corporate entity, due to the exemption,” he added.
“There is no clarity on how this sum will be directed towards advancing Income’s social mission.”
Hence, the ministry is not satisfied that Income will be able to continue fulfilling its social mission after the proposed transaction, said Mr Tong.
“There are no clear binding provisions or structural protections in the deal to ensure that Income’s social mission will be discharged.”
However, Mr Tong added that the government is open to new arrangements, whether with Allianz or any other partners, as long as the concerns highlighted are fully addressed.
The government understands and accepts that the strategic purpose behind Income’s corporatisation exercise and potential partnership with Allianz was to strengthen it and make it more financially sustainable in the longer term, stressed the minister.
In its statement on Monday, Income Insurance said it appreciates the government’s understanding of the “strategic purpose” behind its corporatisation exercise in 2022 and acknowledgement that its proposed partnership with Allianz was to strengthen its position “for the long run”.
