Income-Allianz saga: What’s next if German insurer decides not to pursue a revised deal?

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.
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.
Assistant professor of economics Goh Jing Rong of the Singapore Management University said whether Income can move forward alone ultimately depends on its goal. 
If aiming for high growth, another buyer would be needed to provide capital injections to fuel that growth.
If aiming to continue providing affordable policies to lower-income customers, then it should make use of past experience, he said.
“Instead of focusing on competing with established market players for mass-market share, Income can concentrate on its target demographic,” he said.
The Singapore government has said it supports Income having a strong partner to strengthen its market position. 
For its part, Allianz said last week it would consider revisions to the proposed transaction structure and would assess the situation together with Income and its current majority shareholder, NTUC Enterprise. 
Asst Prof Goh said those interested in expanding their market share in Income’s target demographic of lower-income households might find a deal appealing.
But a potential buyer – whether Allianz, a local firm or an international insurer – would have to prioritise returning S$2 billion to Singapore’s cooperative movement before they can extract capital, he said.
And that lowers the likelihood of another buyer stepping into the picture.
“If Allianz does re-propose a deal, the bid amount will likely be lower,” said the assistant professor.
“I will not entirely rule out that possibility, although I think the likelihood of it happening is not high.”
Prof Loh of NUS described the S$2 billion sum as a “pot of gold”. Without that money being accessible to a buyer, Income is less attractive, he said.
He does not expect Allianz to pursue an altered deal.
“I think very, very likely – once bitten, twice shy,” he said. “It may be hard to craft up something attractive for them.”
Assoc Prof Kamiya was more optimistic. He said Income remains an attractive option for Allianz to strengthen its presence in Singapore.
“The government’s decision may not be a dealbreaker, and Allianz could still see the value in pursuing the deal with necessary adjustments,” he said.
Other buyers may also be interested depending on how the terms of the deal are revised, he added.
“If the cash flow is fairly evaluated, it remains feasible for a new agreement to be reached despite the cash distribution concerns.”