Income says chairman recused himself from decision to appoint Morgan Stanley in Allianz deal

SINGAPORE: Mr Ronald Ong, chairman of Income Insurance, has recused himself from the board’s decision to appoint Morgan Stanley as financial adviser in its deal with Allianz, Income Insurance said.

The Singaporean insurer issued a statement in the early hours of Saturday (July 27), as questions arose the day before about a potential conflict of interest due to Mr Ong’s positions at both Income and Morgan Stanley.

Mr Ong, in addition to being Chairman of Income, is also President and CEO of Morgan Stanley’s Southeast Asia division. He has worked for Morgan Stanley for over 20 years.

“Morgan Stanley has been appointed as financial advisor to Income Insurance following a considered selection process,” Income said on Saturday in response to CNA’s queries.

“They were appointed based on their prior credentials in insurance transactions, the experience of their negotiation team and their deep knowledge of income insurance.”

Income added that an audit committee had reviewed Morgan Stanley’s appointment before the board gave approval.

The insurer also said that none of its directors are linked to Allianz and that, therefore, all are “considered independent for the purposes of making a recommendation on the offer.”

“Notwithstanding the foregoing, and in line with good corporate governance, the board of directors will establish an independent committee chaired by the lead independent director and composed entirely of independent directors, to select and appoint an independent financial advisor,” Income Insurance said.

“The advice of the board’s independent financial adviser on whether to recommend to shareholders that they accept or reject the offer (when made) will be set out in the integrated document.”

CONTROVERSY OVER THE AGREEMENT

The deal, which will make Allianz the largest shareholder in Income Insurance, has already faced backlash as the public feared it would compromise Income’s stated commitment to Singapore’s workers.

Allianz announced on July 17 that it intended to buy 51 percent of Income Insurance’s shares, bidding for S$40.58 (US$30.20) per share for a transaction value of S$2.2 billion.

NTUC Enterprise currently holds a 72.8 per cent stake in Income Insurance and will remain a significant shareholder if the sale goes through.

Following the announcement, observers including Mr Tan Suee Chieh, former chief executive of NTUC Income Co-operative, expressed concern about how this could compromise the company’s original mission.

The company was founded in 1970 with the goal of providing essential and affordable insurance to disadvantaged workers.

Mr Tan called the deal a “breach of good faith” as NTUC Enterprise’s assurance to remain a majority shareholder was used to ease concerns about its corporatisation in 2022.

NTUC Enterprise chairman Lim Boon Heng said on Thursday that the cooperative will continue to provide affordable insurance for low-income customers after the deal with Allianz.

Analysts told CNA that some of the fears surrounding the deal are justified, as Allianz’s goals may not be fully aligned with Income Insurance’s original mission.

However, they also said the deal makes sense from a business perspective, as a larger scale of operations could result in benefits such as lower costs.