SINGAPORE: German insurer Allianz is unlikely to revise a proposed deal to acquire a majority stake in Income Insurance, after the transaction was blocked by the Singapore government earlier in October, according to some experts.
What’s next, then, if Income still needs a partner in the long run?
A local firm like DBS or Temasek could acquire or invest in what a Nominated Member of Parliament described as a “national treasure”, said Professor Lawrence Loh of the National University of Singapore’s business school.
He said Singapore’s largest bank would be a “natural candidate” having emerged from recent “challenges” of recurring service disruptions, leading to non-essential activities being paused for six months.
Prof Loh pointed out that DBS had a strong insurance business in the past, but sold it off to United Kingdom insurer CGNU, which later rebranded to Aviva before merging with Singlife – which in turn became a fully owned subsidiary of Sumitomo Life Insurance Company in 2024.
Elsewhere, rivals like OCBC increased its stake in insurer Great Eastern to 93 per cent in July, while UOB is parent to the United Overseas Insurance firm.
“For DBS, I think they might consider completing their portfolio. Insurance is, going forward, competitive but lucrative,” said Prof Loh, who is also director of the centre for governance and sustainability at NUS.
Another possibility would be getting an investment from Temasek, he added, noting that the firm also has a social mission to fulfil.
But he acknowledged that the optics might not be good with a state investor entering the insurance industry and competing in the commercial space.
Associate Professor Shinichi Kamiya of Nanyang Technological University (NTU) said DBS and Temasek could be potential buyers, but questioned if they would see “significant value” in Income.
“Moreover, these entities may not serve as long-term strategic partners due to a lack of insurance expertise that Income may require,” said the academic, who’s from NTU’s insurance risk and finance research centre.
He pointed instead to international insurers who might want to expand their footprint in Singapore.
“Major players like Ping An and Zurich might view this as an opportunity to grow their presence in the region,” Assoc Prof Kamiya added.
In response to queries on its next steps should the Allianz deal fall through, Income directed CNA to its Oct 14 statement, where it said it would review and take amendments to the Insurance Act into consideration while deciding the next course of action.
PARTNERSHIP NECESSARY?
The Income-Allianz deal was blocked because of a planned capital extraction where S$1.85 billion (US$1.4 billion) would be returned to shareholders within three years.
This figure is close to the amount Income was allowed to keep when it went from being a co-operative to a corporate entity in 2022. The money would otherwise have to be returned to the Cooperative Societies Liquidation Account.
While Income remains a healthy and profitable insurer, its long-term sustainability and growth could be at risk without a strong partner, experts said.
“Income may need to wait until the Singapore public recognises the necessity of a strategic partnership,” said Assoc Prof Kamiya. “It’s likely that this realisation will take time to fully surface.”
Prof Loh also said Income might not be able to fly solo without a stronger player supporting its business.
