Mr Speaker, in light of the emerging information on the Allianz-Income deal, the Workers’ Party believes that it is a sound decision to withhold approval, in its current form. If the deal is bad for Singapore, it should be blocked.
That said, I will make two key arguments. I will begin by documenting a troubling sequence of events in the runup to the public announcement on the Allianz-Income deal and its aftermath, involving what appears to be multiple sources of information failures within government, and between the government and the public. Next, I will offer some thoughts on guiding principles for how we may wish to approach a revised deal.
Puzzling and troubling series of informational failures
Let me begin by sketching out what appears to be a puzzling set of events that has been presented as an “information gap” between MAS and MCCY. However, I will explain why this is not merely a mild oversight in information exchange, but a communication breakdown that may reveal some troubling pathologies with how this government conveys information within itself, and with the public.
First, it would be useful to understand how much MAS knew about Allianz’s capital extraction plan.[1] Minister Tong explained on Monday that MAS had evaluated the offer on prudential grounds, consistent with its regulatory mandate, and on that basis, it saw no reason for concern.[2]
But MAS’s oversight functions extend beyond prudential regulation. Its mandate includes supervision of Domestic Systematically Important Insurers (D-SIIs), of which Income Insurance is one.[3] Besides capital requirements—which is of course central to macroprudential supervision—a holistic risk assessment would also entail the evaluation of, and I quote from the MAS’ own published framework on risk assessments, qualitative criteria such as “brand value” and “strategic importance”.[4] Did MAS not believe that a capital extraction plan, contrary to Income’s historical mission, would not potentially contribute to elevated post-acquisition risk? After all, if there were to be a sudden exit of Income policyholders resulting from the deal, surely this would give rise to undesirable financial instability. Could such a holistic assessment be completed in the brief period between mid-July and the time of the public announcement?
Second, on Monday Minister Chee Hong Tat had also indicated that MAS was, “not aware of MCCY’s considerations when MCCY issued the section 88 exemption and hence… did not link the proposal from Allianz with the exemption that MCCY had provided earlier.” But this begs the question of why this link was not made, given how the exemption is in the public records, and surely a $2 billion surplus would be material to the sort of prudential considerations that MAS concerns itself with in its supervision?
Third, it was revealed on Monday that MAS had belatedly shared information with MCCY only in early August, after many MPs had raised many questions related to the proposed transaction during the August 6 sitting. Apparently, it was then that MAS recognized that there could be larger considerations beyond just prudential ones, and hence only then did the agencies begin “working together… in a whole-of-Government manner.”
I wonder if it is only me that finds it troubling that there was no coordinated discussion between the two major relevant regulators, MAS and MCCY, in advance of the proposed deal. Has our civil service become so siloed in their treatment of what falls under which agency or ministry’s purview that, even for transactions of such prominence, no joint working group was convened to ensure sufficient information exchange? Can we be assured that this is a one-off occurrence, or is this a canary in the coal mine that is telling us that we need to look more carefully at how well our government departments exchange data and information?
Fourth, in September I had filed a parliamentary question, asking if MAS had required a commitment from Allianz to provide a capital adequacy injection to grow Income Insurance Ltd across its business lines, beyond the $2.2 billion that Allianz would pay. At the time, I—like many others—were unaware of the capital extraction plan. Presumably, however, the government was, but in the terse response received from DPM Gan Kim Yong, it was only suggested that MAS would “assess Income Insurance’s business strategy and capital management plan after Allianz submits its application to obtain effective control and be a substantial shareholder of Income.” No reference was made to the capital extraction plan, yet as shared by the Ministers on Monday, these concerns were already conveyed to MCCY by then. So why wasn’t the same information shared as a response to my PQ? Perhaps more important, why was so much of the debate in this House two months ago—and the constant refrain by NTUC Enterprise itself[5]—so fixated on capital injections, when in reality, Income was much more likely to be facing capital extraction?
I am left to conclude that, if the government was not willfully withholding information from one governmental agency to another, or to a direct question posed by a Member of Parliament, then, at the least, there appears to have been multiple breakdowns of communication between different governmental entities in the communication of pertinent information over the transaction.
What should we expect now?
Given the objection to the original deal, it is natural for us to ask what’s next. I do not propose to be speculative, given how we do not even have the contours of a potential revised deal. But given how NTUC Enterprise and Income Insurance have publicly stated that they will work closely with relevant stakeholders to decide on next steps—and how the market motivations that led to the original deal remain—it would not be a stretch to imagine that there will be a revised effort to raise capital for Income. What have we learned from public feedback over this episode?
For starters, it is clear that there is a strong public sentiment that values the historical social objectives of Income Insurance. Notwithstanding how Income is already a corporate entity—ultimately answerable to its shareholders—the Boards of Income Insurance as well as NTUC Enterprise do need to be more sensitive to how their stewardship should reflect the concerns of stakeholders as well, and render appropriate consideration to its social mission.
The need to be cognizant of social objectives notwithstanding, the minority shareholders of Income—many of whom are aged and have sought liquidity for years—should be allowed to exit with a fair value for their holdings. If Allianz’s capital injection cannot be obtained with an assurance that it will not excessively dilute Income’s brand equity, perhaps we can look to home-grown sources, such as a syndicate of institutional investors, or even an SWFs such as Temasek, as alternative sources of patient capital.
Furthermore, future transactions of such strategic importance should, right at the outset, involve the establishment of a multi-ministry taskforce with representatives from all relevant bodies, to ensure that the sorts of communication breakdowns that occurred this round do not occur again. It is not difficult to see how, depending on the sector, not only MAS and MCCY but also MOM, MDDI, and MTI may be involved. Traditionally, such whole-of-government efforts would be coordinated via the PMO. This may well be called for here.
To this end, one is left to wonder why the Significant Investments Review Act (SIRA) was not triggered for this case, given Income’s status as a D-SII. The simplistic answer, of course, is simply that Income does not fall within the existing gazetted list of designated entities under SIRA.[6] Indeed, what does appear on the list all seem to be related, in some form or fashion, with security and the military-industrial complex. But given how we have six pillars for total defense in Singapore—including economic, social, and digital—it seems wholly inconsistent with our own characterization of defense that systemically important financial institutions, such as DBS, or digital assets, such as Singtel, could be sold without similar protections.
Doing so may open the door to determining whether SIRA-style restrictions or other measures are necessary for future transactions of this nature, thereby ensuring that future transactions are evaluated not just commercially, but also for their alignment with Singapore's broader interests. This will lend further credence to the transparency and predictability of our regulatory approach, which will go some way toward rehabilitating our nation’s reputation as a reliable institutional partner. In the long run, this will benefit both local and foreign stakeholders in our financial sector.
Conclusion
Sir, the Bill is a good-faith effort at redressing some of the problematic issues arising from the first pass of the Allianz-Income deal. If this were the reason alone, the Workers’ Party will have no objection to the Bill, beyond clarifications over the points I have raised. That said, the manner by which the Bill is being funneled—last minute and amidst a live transaction—does raise other flags, as my Sengkang colleague He Ting Ru will point out. I will allow her to elaborate further on our Party’s ultimate position.
[1] The plan involves the return of $1.85 billion in cash to Income shareholders within the first three years after the completion of the deal, which would have been realized from post-acquisition efficiencies. The plan was shared with MAS in mid-July.
[2] Hansard (2024) 95(142): Oct 14.
[3] MAS (2023), “MAS Publishes Inaugural List of Domestic Systemically Important Insurers in Singapore,” Press Release, Sep 21, Singapore: Monetary Authority of Singapore.
[4] MAS (2015), MAS’ Framework for Impact and Risk Assessment of Financial Institutions, Singapore: Monetary Authority of Singapore.
[5] NE & Income (2024), Joint Statement from NTUC Enterprise and Income Insurance, Aug 4, Singapore: NTUC Enterprise and Income Insurance.
