Singapore — Income Insurance’s future capitalisation remains uncertain as the company navigates upcoming accounting changes, business expansion, and the potential acquisition by Allianz SE, according to a recent report from S&P Global Ratings.
S&P’s revised criteria for evaluating insurers’ risk-based capital did not directly impact Income Insurance’s rating. However, the global ratings agency highlighted the increasing capital requirements due to higher confidence levels under the new framework. Improved risk diversification has mitigated some of the additional capital burden, but concerns remain regarding the company’s exposure to market volatility.
Income Insurance maintains a significant allocation to high-risk assets, including equities and investment properties. These investments expose the firm to market fluctuations, potentially affecting its capital adequacy in the future.
A notable development is the potential acquisition by Allianz SE, which has prompted S&P to place Income Insurance on CreditWatch. The agency expressed concerns that a successful acquisition could reduce the level of extraordinary support Income Insurance currently receives from the Singapore government through NTUC Enterprise, its majority shareholder. Should government backing decline, this could lead to a downgrade of Income Insurance’s rating by one notch, S&P warned.
S&P expects to resolve the CreditWatch status within 90 days as it awaits greater clarity on the intentions of Income Insurance’s major shareholders and the potential impact of the acquisition on government support. While a downgrade is possible, S&P could also reaffirm the insurer’s rating if strong government support persists despite NTUC Enterprise’s potentially reduced shareholding.
Despite these uncertainties, S&P projected that on a stand-alone basis, Income Insurance will likely maintain a strong business presence in Singapore over the next two years, supported by satisfactory capitalisation. However, the looming acquisition by Allianz SE may pose short-term distractions for management, potentially impacting the company’s growth strategy in the near term.
As the situation unfolds, Income Insurance’s ability to navigate these challenges while sustaining its market position will be closely monitored by industry stakeholders.
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