The deal faced backlash from Singaporeans who thought it betrayed Income's social mission.

The failed merger between Singapore's Income Insurance and Allianz showed that companies should not solely base their financial decisions on the bottom line; public sentiment is just as important.

"I think players will need to be quite mindful," Lawrence Loh, a professor at the Department of Strategy and Policy of NUS Business School, told Singapore Business Review. "They have to fundamentally cater to the interest of all stakeholders, beyond just shareholders, and [beyond] the financial value viewpoint."

The Singapore government in October rejected a bid by German insurer Allianz to buy a majority stake in Income Insurance, but said it remained open to a new deal if its concerns could be addressed.

Along with the rejection, Singapore's Parliament passed a bill to amend the Insurance Act, paving the way for the Monetary Authority of Singapore (MAS) to consider the views of the Ministry of Culture, Community and Youth when an application for regulatory approval involves an insurer that is either a cooperative or linked to one.

The deal faced backlash in the city-state as Singaporeans worried that the acquisition would detract from Income's social mission to provide affordable insurance to low-income workers.

Allianz did not immediately reply to an email seeking comment, whilst Income declined to comment.

"The financial imperative is, of course, primary," Loh said in a video interview. "But with this episode now, it is quite clear that we have to go beyond finance, that the context of the situation is very important, particularly in certain markets like Singapore where sometimes, we deal with the public sentiment very heavily."

A company seeking to acquire a cooperative-linked insurer in Singapore "will need to keep its purpose in mind," said Eugene Tan, an associate professor of law at Singapore Management University.

"It will have to propose an acquisition proposal that recognises such an insurer, even after the acquisition, cannot be expected to be a full-fledged for-profit entity," he said in an emailed reply to questions.

The company seeking to acquire a cooperative-linked insurer might have to settle for a minority stake or commit that the cooperative-linked insurer's social mission remains iron-clad, Tan said.

Whether the acquisition target is a cooperative-linked insurer or not, Loh said foreign companies should be "sensitive to the requirements" of the market they wish to enter.

Exception to the rule

Tan said the failed acquisition showed it is important to understand the local dynamics when structuring a deal.

Loh said the parties had failed to communicate how the new entity planned to fulfil its social purpose and how they would handle a $2b surplus that was to remain with Income Insurance instead of being returned to the cooperative sector.

There was also a proposal to return $1.85 billion to shareholders over three years to reduce the company's capital holdings. "In other words, this is like a value capture from something that is public money to [private] shareholders," he said.

Tan cited a "failure to sufficiently appreciate the niche that Income occupied in the cooperative and insurance landscapes in Singapore."

The failed deal is an exception to the growing number of mergers and acquisitions in the insurance sector, aside from the fact that Income, Singapore's lone cooperative-linked insurer, is one of its kind, he said.

"If there is any ripple effect, it is the fundamental importance of fully appreciating the lay of the land in structuring the deal. The importance of local knowledge is also equally vital," he added.