Allianz bid for Income Insurance fuels concerns over Fullerton

A public row over Allianz’s agreement to take control of Singapore’s Income Insurance has been grabbing headlines recently, but may be overshadowing other important implications of the prospective deal. 

A major question is how the German insurer's planned acquisition of a 51% stake – unveiled on July 17 – would affect Income’s strategic partnership with Fullerton Fund Management and Income's own investment team.

Singapore-based Fullerton runs a sizeable chunk of Income’s S$43 billion ($33 billion) investment portfolio.

It took on around two-thirds of the insurer's assets under a tie-up in 2017 (first reported by AsianInvestor), thereby more than doubling Fullerton’s assets under management (AUM).

Income declined to provide the current proportion, saying only that Fullerton manages a "substantial part" of its total AUM.

Income also owns 49% of FFMC Holdings, the holding company of Fullerton, which is also part of Seviora, an asset manager owned by Singapore sovereign wealth fund Temasek.

Criticism of the proposed deal has centred around worries that a foreign majority-owner might not be as aligned with the interests of Singaporeans as NTUC Enterprise, a local holding company that owns 72.8% of Income Insurance. 

NERVOUSNESS AT FULLERTON

The July 17 acquisition agreement has, however, stirred up nervousness at Fullerton on top of existing uncertainty over how successful the tie-up with Income has been, sources told AsianInvestor. 

Moreover, Fullerton’s head of Asia equities, Choo Jee Meng, is understood to be leaving – though it’s unclear whether his departure is directly linked to the recent developments. 

The acquisition’s potential impact on Income’s investment set-up would surely have been raised in discussions ahead of the deal announcement, said a senior Singapore-based asset management executive.

And it could have a major impact on Income’s investment performance – and therefore profitability – and on the life and savings products the insurer could or would offer.  

Fullerton declined to comment for this article. Both Allianz and Income Insurance said they could not comment on any implications of what is a live deal.

ALLIANZ'S APPROACH

If the acquisition were to complete, the logical expectation is that Allianz Global Investors and PIMCO – the German group’s asset management businesses – would take on some of Income’s portfolio. 

That is the case for Allianz’s proprietary insurance assets elsewhere, which fall under Allianz Investment Management. And it would have been one incentive for seeking control of Income, said a senior Hong Kong-based asset management executive. 

Between them, AllianzGI and PIMCO manage around €511 billion ($567 billion) of Allianz's total proprietary insurance AUM of €740 billion (excluding unit-linked business), according to publicly available information.

The two fund managers have capabilities across the full range of alternative and traditional investments.

As at the end of 2023, Allianz Investment Management in Asia – for which Singapore is the hub – has some €45 billion in insurance AUM (including unit-linked business), spread across 21 operating entities in 12 countries in the region.

In a joint statement on 4 August, NTUC Enterprise and Income Insurance said the proposed transaction would “enable Income Insurance to leverage” Allianz’s asset management capabilities – along with its global insurance franchise, technology and product development, distribution and reinsurance expertise.   

IMPLICATIONS FOR INCOME'S TEAM

While the proposed deal poses questions over the future of the Income-Fullerton partnership, it also raises the issue of how the Allianz Singapore and Income Insurance investment teams and strategies would combine. 

Income has a far larger business and operations in the Lion City, with around 2,000 staff.

It was the fourth largest insurer in the city-state by assets as of December 2023, according to the Singapore Business Review’s Insurance Rankings.  

Allianz had 129 full-time employees in Singapore as of December 31, 2023, according to General Insurance Association of Singapore industry data. 

An Income spokesperson declined to comment on the size of its in-house investment team, but said it was responsible for strategic asset allocation, asset-liability management including hedge overlays, and external manager selection across public and private markets.

That may mean there would be little potential duplication of expertise between the two, suggested the Hong Kong-based asset management executive.

“That might mean there is less overlap, because I don’t think anyone at Allianz Insurance in Asia is covering the same functions. So maybe that would make [the acquisition] smoother.”

That said, there are expectations that there would likely be some staff attrition over time, as is the case with most business acquisitions.