Address by Mr Ng Kee Choe
Chairman of the Board of Directors of NTUC Income
38th Annual General Meeting held at 6.00pm on 30 May 2008
At the NTUC Auditorium, One Marina Boulevard
Fellow Directors
Members of the Society
Ladies and Gentlemen
Good evening. Thank you for taking the time to be with us this evening to
participate in the 38th Annual General Meeting of NTUC Income.
Traditionally, at this point the Chairman would present the performance and
results for the previous year; after which he would put the motion to the meeting.
As the performance and results are well set out in the Annual Report, I would
like to share with you instead the key initiatives launched during the past year
to make your Cooperative a stronger organization all round.
The operating environment has changed and continues to evolve. The
marketplace is more competitive. Competition has intensified not only for
the share of the consumer’s financial wallet but also for talent. The
demographics in Singapore have changed – we have a growing silver-haired
population; we have growing affluence; we have more new citizens and we also
have more guest workers. Income has to respond to the new operating environment.
Indeed Income has responded. Key initiatives were launched in order
for your Cooperative to:
Compete more effectively in the marketplace;
Meet the insurance needs of the changing population, and
Ensure NTUC Income’s well-being and progress going forward are secured
even as we change.
Let me share with you some of the initiatives.
First, we expanded and deepened our bench strength. To compete well
we must have the right mix of talent. We believe we have made significant
progress here.
Second, we made greater investment in our multi-channel sales and distribution
whilst reducing channel conflict. This has gained traction. Our market
share for life insurance new business increased from 10.2% to 13.3% last year,
and we arrested the decline in our motor insurance business.
Third, we focused on our core competencies, that is on the insurance business,
doing what we know best. We divested our non-core businesses such as Snow
City and fitness centres.
Fourth, we strengthened ourselves internally. New systems, software
and processes were put in place to ensure that our financial, actuarial, risk
management and investment activities meet high standards of corporate governance
and best professional practices.
This is a journey – there’s still much work-in-progress.
Amidst the changes, we ensured that NTUC Income continues to be soundly
and prudently managed. As a financial institution, it behoves us to safeguard
and protect the interest of all stakeholders, in particular those who have put
their trust in us by investing in our products and services. Your directors
are keenly aware of their fiduciary duty – to ensure that Income is financially
strong and sound; that it is managed prudently; that it fully complies with all
regulations, and to ensure that the interest of all policyholders are well looked
after.
Against this background, I would now like to talk about the bonus restructuring
of participating life policies.
The old bonus structure served our customers well in the past. However, it
is not good for the future. The financial scenario has changed. Let me categorically
state upfront that we did NOT cut bonuses. We paid annual bonuses and special
bonuses. We continue to do that. What we did was to increase the
special bonuses payout whilst reducing the annual bonus. With this restructuring,
we aim to improve the total amount of bonus payout – special and
annual.
Suffice to say, extensive research and study was done to review our actuarial
practices and arising therefrom, the Board, after long and intensive deliberations,
accepted management’s recommendation to restructure the bonus. So
it was a carefully considered decision.
The bonus restructuring is in the best interest of policyholders. The
Appointed Actuary has concluded that under the old bonus structure, we would
be less likely to meet policyholders’ expected payout when they make a
claim, surrender their policy or when the policy matures. With the restructuring,
the prospects of delivering returns as illustrated are enhanced. In other
words, the likelihood of meeting, or even exceeding, illustrated bonus payouts
are better.
Additionally, I would like to inform you the bonus restructuring will strengthen
the Life Fund. We have to ensure that the Life Fund remains adequately
solvent so that it can withstand the volatility of the equity and capital markets
and that there are more than adequate financial resources to meet policy obligations
as and when they occur.
In short, the bonus restructuring is done in the best interest of policyholders;
it financially strengthens NTUC Income as well. It is therefore prudent. I
might add that it is in line with best management and professional practices,
in Singapore and globally as well.
You may know that we engaged Mr Nick Dumbreck from the global financial management
firm Watson Wyatt for a professional and independent opinion, a second opinion
if you will. Mr Dumbreck is also President of the Institute of Actuaries. He
has strong credentials. He has opined that the bonus restructure was sound
and the right thing for NTUC Income to do. He also stated that going forward,
the old annual bonus would be too high given the bond returns available in our
market now and in the foreseeable future.
As I have mentioned earlier, your Directors have to exercise duty of care
in discharging its duties. It has to ensure that the interest of policyholders,
first and foremost, are protected whilst ensuring that your Co-operative is soundly
managed and financially strong. The bonus restructuring meet both these
tests.
I would like to add that your Directors will be vigilant and will, to their
best of ability, take early action to ensure that the well-being and interest
of policyholders, shareholders and Income as an organization are not threatened
in any way. The decision to do the bonus restructuring was taken also with
this objective in mind.
Some policyholders have raised specific concerns on the special bonus in
blogs. Allow me to address them.
While special bonuses are not guaranteed, they are designed to ensure that
the reduction in annual bonus is compensated. As I have indicated earlier,
the new bonus structure is aimed at improving, the total payout to policyholders.
Should the special bonus in future reduce due to adverse financial conditions,
we are committed to restoring it when conditions improve.
I have stated that this Board will look after the policyholders’ interests.
Towards this end, the Board will ensure that the bonus allocated to policyholders
result in payouts is fair and consistent with the experience of the Life Fund.
I hope I have managed to give you a better understanding and appreciation
of the position regarding the bonus restructuring. We will not hurt policyholders
and shareholders. And we shall also not allow NTUC Income to be hurt.
Thank you very much for the opportunity to address you.
