Source of article: THE STRAITS TIMES

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Claire Huang of the Singapore Straits Times wrote a detailed analysis on the possible ways to enable NTUC Income to maintain its social mission whilst remaining financially viable.

Shareholders of Income who were expecting to cash out at a premium when it was first announced that Allianz offered to acquire Income are understandably disappointed when the deal was aborted.

What’s next for Income? How will Income continue to maintain its social mission to provide affordable insurance to Singaporeans, whilst staying competitive and financially healthy? It would be difficult for its parent entity, NTUC Enterprise, to continue funding and underwriting its operations for the long term. The limited sources of revenue for NTUC Enterprise would obviously be a constraint to its means to continue financing Income’s business operations and social mission.

Income could consider issuing a new series of convertible bonds that are listed on the Singapore bourse to public investors. Consistent with Income’s social mission, the government may wish to allow Singaporeans to use their CPF monies to buy the convertible bonds. This will allow Income to tap on a significant source of funds from the CPF monies of Singaporeans.

The bonds should pay a higher interest rate vis-a-vis the current interest rate for the ordinary accounts of Singaporeans’ CPF monies. This is to incentivise Singaporeans to invest in the convertible bonds. Investors who hold a longer term view of Income’s prospects will have the option to covert their bonds to equity.

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