SINGAPORE: Mr Ronald Ong, the chairman of Income Insurance, had recused himself from the board’s decision to appoint Morgan Stanley as the financial adviser in its deal with Allianz, said Income Insurance.
The Singapore insurer issued a statement in the early hours of Saturday (Jul 27), as questions emerged the day before on a potential conflict of interest due to Mr Ong’s positions in both Income and Morgan Stanley.
Mr Ong, in addition to being chairman of Income, is also the chairman and CEO of Morgan Stanley’s Southeast Asia business. He has worked for Morgan Stanley for over 20 years.
“Morgan Stanley was appointed as Income Insurance’s financial advisor after a considered selection process,” said Income on Saturday, in response to CNA’s queries.
“They were appointed based on their prior insurance transaction credentials, the experience of their deal team and their deep understanding of Income Insurance.”
Income added that an audit committee had reviewed the appointment of Morgan Stanley, before approval was given by the board.
The insurer also said that none of its directors are connected to Allianz and all are therefore “considered independent for purposes of making a recommendation on the offer”.
“Notwithstanding this, and in line with good corporate governance, the board will establish an independent board committee chaired by the lead independent director and wholly comprising independent directors, to select and appoint an independent financial adviser,” said Income Insurance.
“The advice of the independent financial adviser to the board on whether to recommend shareholders to accept or reject the offer (when made) will be set out in the composite document.”
CONTROVERSY OVER DEAL
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 Jul 17 that it had intended to purchase 51 per cent of Income Insurance’s shares, stating an offer of S$40.58 (US$30.20) per share for a transaction value of S$2.2 billion.
NTUC Enterprise currently has a 72.8 per cent stake in Income Insurance. It will remain a substantial shareholder if the sale goes through.
After the announcement, observers – including Mr Tan Suee Chieh, former CEO of NTUC Income Co-operative – voiced concerns about how this might compromise the original mission of the company.
The company was founded in 1970 with the aim of providing essential, affordable insurance to underserved workers.
Mr Tan called the deal a “breach of good faith” given that the assurance from NTUC Enterprise to remain as majority shareholder was used to alleviate concerns about its corporatisation in 2022.
NTUC Enterprise chairman Lim Boon Heng said on Thursday the co-operative will continue to provide affordable insurance for lower-income customers after the deal with Allianz.
Analysts told CNA that some of the fears surrounding the deal are warranted as Allianz’s goals may not fully align with Income Insurance’s original mission.
However, they also said the deal makes sense from a business perspective as a bigger scale of operations could result in benefits such as lower costs.