Entrepreneurial journey of Wayne Aldridge CA(SA) – Aussie’s top thoroughbred insurer

Chartered accountant Wayne Aldridge left South Africa in 1999 to make a new life in Australia. After a fascinating entrepreneurial journey, the company he now runs dominates its field, insuring more than 10 000 Australian racehorses. HQ Insurance, a replica of the market leader Aldridge helped build in SA, was created through the merger of the company he started and two others. Biznews.com’s Alec Hogg caught up with Aldridge in London where he took time out from an annual pilgrimage to Royal Ascot to share his views on why South African immigrants often outperform in foreign climes. The wide ranging conversation runs from Aldridge’s own entrepreneurial journey to the emotional winning comeback by SA’s one-time Champion Jockey Jeff Lloyd after suffering a stroke, through to reasons why Australia’s racing industry is booming and the growing involvement there of South African entrepreneur Markus Jooste.

In London you bump into interesting people. Here’s former Durban boy Wayne Aldridge, out from Australia. When did you actually leave the southern part of Africa for the sunny Australia?

Alec, my wife and I and our two daughters left in 1999. At that stage, our daughters were six and eight. We took the decision then that as responsible parents, we just needed to provide them with some sort of certainty in their future. We identified a number of countries that we’d like to relocate to and we eventually settled on Australia. It’s been quite a while.

We know each other from the thoroughbred industry where they say you find princes and knaves. I know you aren’t one of the knaves. Did you have much success in the July Handicap, for example? 

Yes. Look, it’s still an aspiration to win it. There’s no doubt but I’ve never been successful. I think I’ve had 10 or 12 runners in the race over probably eight years. Sometimes I’ve had multiple runners in the race and they’ve always paid prize money – 1st to 10th. I hate to say it, but I’ve never earned any prize money so the horses always ran 11th to last. Having said that, I did find that those runs in the July were good prep ones for the Gold Cup and I’ve managed to win that with shares in horses I’ve had an interest in, with Icona and Milveroff and I’ve also managed to run 2nd, 3rd, and 4th so it’s not all doom and gloom with the July. It’s had some positive effects in the other big race a month later.

What is it about Australia that appeals to South Africans, particularly in the thoroughbred industry? I think about top trainer David Payne…. a few jockeys have been very successful there, too.

David’s been very successful, had multiple Group One winners. You’ve got Jeff Lloyd there, riding at the moment as well as Robbie Fradd and of course, Glyn Schofield. I think it’s the way of life. There’s a similarity with South Africa. Whether its sporting nations or business, they seem to have the same sort of ethic and that’s the attraction. It’s very similar to South Africa in many respects. It’s a country of opportunity so if you’re prepared to work (put your shoulder to the wheel), you get some really positive benefits from it.

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What have you been doing in the last 16 years?

Obviously, I left South Africa having run the Delta Bloodstock and Insurance Brokers. I set up an insurance brokerage business in Sydney from scratch. I formed a company there, getting all the licensing sorted out. I then worked for William Inglis & Son in the insurance division, for six years and then decided to branch out on my own and set up a traditional brokerage. Most of the insurance brokers in bloodstock there was tied to one insurer. I had this concept of setting up a conventional brokerage where I didn’t have any ties to any one insurer and I could place my business at the one that offered the best deal at the time. Then I set up what was called Equine Insurance Services and built that up. It grew to be the 3rd biggest in the space of about three years. Bear in mind that at that stage, I had the contacts and it was just a case of continuing to service those clients.

That’s still extraordinary growth in three years…

Look, it was a similar trend to when Robin Bruss and I started Delta. Within three years, it became the leading bloodstock insurance brokerage in South Africa. The same sort of pattern evolved when I was in Australia. I managed to get some big stud clients with multimillion Dollar stallions and so I was lucky. Whatever I’ve done… a large component is luck. Then we three parties got together (including Howard Global, which was a London broker but with a retail office in Australia). The three of us got into talks and decided to merge our three businesses. In doing that – with me as the managing director and also a substantial shareholder – we built this business up into the leading bloodstock brokerage business in Australia today and probably in the southern hemisphere. I was a consultant managing millions of insurance brokers, which was part of the Magic Million sales group.

It presented a conflict of interests with me being a consultant as well as being the managing director and shareholder of another (opposition) group so we decided to bring them into the fold. It was just an exchange of shares. There was no cash. We just valued the two businesses. Now we have a 4th company in the group with two licenses so I oversee all of that.

What made the success possible – your immigrant mentality?

I think the education and the experience I had in South Africa, which holds true for all South Africans in that era…it was incredible. I look back and I see some of the hardest working people I’ve ever met in my life. It was also a grounding place for entrepreneurs and what I’ve (hopefully) always done is apply an entrepreneurial mind-set because once you apply a bureaucratic mind-set, which you get with a lot of employees who don’t have a stake in the business, you find you get boiled down in a managerial role and you really need to be a leader. I try to be a leader and get my staff to follow me. What’s so important in this industry is that when horses are your passion… My hobby of horses became my business. When your passion is your career, it is a wonderful feeling to get up in the morning knowing that you’re going to do what you love.

I cannot think of anything worse than getting up in the morning and saying, “Oh, I’ve got to go and do a job that’s just a job.” I love doing what I do. I always have and I think that drives you. That motivates you and if you can engender others who work with you who have that same sort of passion; and you build up a team of that and give them some sort of flexibility and let them make decisions – all the while just overseeing everything – then I think that is the secret to success. I stayed in America in 1984 at Cornell University. I learned about the expression ‘stick to the knitting’. The Americans say, “Stick to the knitting.” I’ve always decided to focus on the core business. My speciality is bloodstock insurance and while it sounds fairly easy and mundane, it’s actually very specialised. Some of the policy wording (even today) is flawed and you’ve got to try and plug those, and use that speciality and that knowledge in providing a better service.

Through all of that, service-orientation, being innovative, trying to amend/vary these products, find a niche market (something that’s in demand and isn’t there), and trying to find an underwriter to structure it just gives you the impetus and the momentum.

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The racing industry is a closed family – it must have been hard to break into. What did you do to build those relationships?

When you look back, it’s difficult to pinpoint. Australians are very parochial so they’re inclined to stick to their own. When we moved over… Despite the best planning in the world, when you emigrate you can never do enough planning. It just doesn’t happen. Two important decisions in my life: when I joined Robin and started Delta Bloodstock, I followed my heart and not my head. My heart said, “Wayne, go and do what you want to do – your passion for horses in a business” and I went. My head said, “Stay where you are. You’ve got a great future in the Spar Group – WG Brown Investments”, but I followed my heart. When we emigrated, I followed my head. My head said, “Look to the future. You’ve got the kids.” My heart said, “I love South Africa. I can make a contribution here. Hopefully, things will get better.” Mandela was out and we were all very optimistic but my head said, “Wayne, long-term: I think you need to… You can see this currency continue depreciating – 2:1 Aussie Dollars.” Now, it’s 11 or something.

What did you get your money out at?

It varied. I would think at about R2.80/R2.90 at that stage, in 1999.

It’s over R10 now…..

It’s R11 to the Aussie Dollar now. When you get there, you realise the things we take for granted in South Africa. The networks you develop when you’re at school, in the army, business, university, or horseracing. When you get to Australia, your network becomes the Yellow Pages. In South Africa, if I needed a cardiologist, I’d make one phone call. I knew someone. I knew the top guy. In Australia, you didn’t have that. We went in there and I’ve been lucky. I’ve been dealing with buying horses in Australia and New Zealand. I used to the New Zealand bloodstock representative in South Africa for many years prior to that so I had experience with sales. I had met people but even so, you need the lucky breaks. There’s no doubt that you need the lucky breaks. Thank goodness, I managed to get them and I’ve met some clients who’ve become very good friends – Australians. There are a lot of horses. I can’t pinpoint it but the ball bounced kindly for me.

How big is the business today?

We would probably insure close to 10,000 horses in Australia. It’s incredible because the population in Australia is half of South Africa but yet, their involvement in horseracing is phenomenal. Everybody wants to own a horse.

The industry’s still booming in Australia….

It’s an unbelievable industry. We just had the Magic Million sales at the Gold Coast last week – seven days of sales was something like $105m. China’s driving it. You’ve got a number of syndicates coming in from China. They’re driving the market and the momentum for horses is just… The desire to own horses is quite incredible. The other thing, which is very significant is unlike South Africa, the prize money or the stake money as we call it there… The maiden plate would have the lowest tier and then maybe you’d have a maiden juvenile the next tier up and then a few thousand more into a novice and a graduation into the handicaps. In Australia, on a Saturday in the city, every race (barring stakes races) has the same level of prize money. You could have a novice, a maiden, handicap, top division, or whatever you want to call it all running for $85,000.00. It’s equivalent to R1m on every race on the card.

The stakes race is obviously higher. You can be running your first race ever and if you win, you’re getting 42,000 net and that will pay for your training fees for a year. In addition, they have various breeders’ bonuses. We had a filly who managed to run the Golden Slipper. When she won her second start, she won about $68,000.00 with the bonuses. She cost $20,000.00 so you’re well in front and that’s the attraction and also, the publicity. The amount of coverage – television, radio, and newspapers – is unprecedented. I’ve never seen anything like it.

So you moved from an industry that’s declining into one that’s thriving, more by luck than good judgment…..

Racing in South Africa was under pressure because whenever I went overseas to buy a horse (and we bought good horses such as Icona and those sorts of horses overseas), you were always taking the Pound or the Dollar and multiplying. A $10 000 purchase was R50 000 in those days. I’ve only ever been to one sale in my whole live where I divided to get the Rand figure. I went in 98 or something to Zimbabwe and we bought three horses there. I took the Zimbabwe Dollar price and I divided. It’s the only time in my life I’ve ever divided to get to a lesser figure. Every year, buying horses…you’re just paying a bit more and I realised that eventually, unless the stakes continued and race prize money continued at the same level as probably the inflation rate plus the devaluation of the Rand, you’re always going to go backwards.

How good are South African horses, relative to Australian horses? 

Top horses in South Africa can hold their own anywhere in the world. There’s no doubt. The difference in Australia is that they’re probably racing 10 times as many horses. They’re breeding 10 or 15 times as many horses so if you get in the top one percent of champions, they’ve got 10 or 15 times more chance of getting it. The top horses: David Payne had Hoeberg there. She was Group One placed. She’s probably gone off the boil at the end of her career but the South African top horses – no problem. Anywhere in the world, they’d hold their own.

What’s happening with the African Horse Sickness story, the fact that South Africa’s not been able to export any racehorses?

I think it’s a political game. If you restrict South Africa to racing in South Africa, you’re eliminating another competitor that could encroach on your market when you’re in export. Bear in mind that New Zealand (principally) is a big exporter of horses as are the Australians. When I was on Nat Fed, it was a problem then, 20 years ago. It doesn’t look like it’s any closer to being resolved. I know Mick Goss was fairly vocal about it a couple of months ago (or earlier this year) at one of the conferences and with justification. It just seems crazy that we’re excluded, particularly in this day and age when you’ve got so much advances in veterinary science. It is a problem. If it were overcome, you would have a case of horses flying directly from South Africa straight to Australia. At the moment, it’s one-way traffic. It’s Australia to South Africa.

With the other way, you could have the top horses there going to compete. Even over the Carnival – the Melbourne Cup time or Easter time – but at the moment, it’s an issue and I don’t think it’s a satisfactory outcome because South Africa deserves a better hearing. It’s all very well listening to them but people need to then take action and I know that guys like Mick and others in South Africa have done their level best. I think even Roy Gottschalk was involved at one stage, when I was over there but it’s like hitting your head on a brick wall.

It’s all about politics?

I would think so, yes. There can’t be any other reason.

Why is racing thriving in Australia?

I think everyone wants to own a horse. They promote syndicates. There are probably 15 to 20 syndicators and they would syndicate (between them) maybe 10 to 25 horses per year. They mark them up obviously, because that’s their profit margin. It’s just so well promoted and of course, the prize money is very good. It can be life-changing. If you get a good horse that wins a Golden Slipper and wins a Group One race, it’s life-changing. You can have a 10 percent share of the horse and suddenly, your 10 percent share becomes worth $1m or $1.5m. The promotion is exceptionally good.

Wayne, you’re in London – what are you doing here?

I just come over once a year to touch base with my partner broker here. This is their wholesale office. The retail office has been merged with us and also, it’s an opportunity to meet all the underwriters. Now, the underwriting market is how Global have an exclusivity with Swiss Re. They managed to get them into horse insurance so we have the exclusivity with Swiss Re, Australia, and New Zealand. The traditional market has been the Lloyds market, which is made up of a number of bloodstock syndicates. Each of them has a lead underwriter. You need the support of everyone if you’re insuring a stallion for $15m, for example. There’s no one insurer that will take all that on his own so you need to get others to participate. You might need seven or eight of them to spread the risk. I come over and I meet them. I’ve done it every year (even the years at Delta) for probably the last 25/30 years.

I come over here and meet them, catch up with acquaintances and of course, importantly as well, I come here for Royal Ascot. I think it’s the greatest racing festival in the world. The quality of the horses, the organisation, the pomp and ceremony, and the Queen is just a magical spectacle.

Any Australian horses that you insure running?

No. I think one’s coming over – Holler – for Godolphin who self-insure. I’m not sure how well he’ll do. He’s probably not quite the quality of horses that have come over before. He’s certainly not a Black Caviar or a Takeover Target, but if you’ve got a ticket you’ve got a chance.

Black Caviar is a horse that most people around the world will remember. Did you have any insurance relationship there?

No, we didn’t, unfortunately.

What would the mare have been worth?

You could easily justify an insurance value of between $5m and $10m. Had she been a colt instead of a filly, you would probably have been looking at $30m to $40m. You’ve got Frankel, the most valuable horse in the world. He would be higher than that. He’s probably be $50m plus, I would think. Black Caviar: people are inclined to value the fillies as the colts. Bear in mind that a filly can only produce one per year. A stallion can produce 120 so the value is effectively in the semen, and so colts would be more valuable. I’ve had the great opportunity of seeing her but she wasn’t insured by us.

Earlier this year, Warren Buffett sold out of a couple of his stakes in reinsurance. Are you finding the tough conditions in that sector are lapping over to the bloodstock insurance market?

Bloodstock market is defying the trend., We all need an increase in rates. There’s no doubt about that but the world’s awash with all this money that seems to be printed out and is just churning out. On the insurance side… Bloodstock: I would think the cycle is probably at the bottom and from here on, the rates can only go up. I know that in Australia (and even when I was in South Africa) the trend is that in August, September, and October you’ll get – on average – about 40 percent of your number of losses in the year. You’d think that arithmetically, it should be 25, but it happens to be 40 and that’s the breeding season so mares are being transported to stallions. Mares are having difficult foaling etcetera and we had that same sort of trend this year. Forty percent of three months but unfortunately, it went on October, November, and December. It wasn’t limited to us.

It was also the other brokers and underwriters who sustained a huge number of losses. That should have triggered an increase in rates but it hasn’t yet. There was sort of a two-month period when claims and losses stabilised and the last two months again, we’ve seen a surge. The inclination would be to expect an increase in rates but of course, if someone has been paying low rates and hasn’t had a loss or a significant loss, it’s very hard for you to say them, “Well, hold on. You’ve had a clean record but because other people are weighing in and having the claims that are pushing the rates up, you now have to go along with them and get a rate increase as well.” Cost of reinsurance is probably the lowest it’s been for many, many years. A lot of insurers don’t even reinsure anymore. They just say, “We’ll carry it ourselves” although they’ll limit themselves to what they can afford to lose.

On a more personal basis, last week I met with Markus Jooste here in London. He’s been South Africa’s racehorse-owning champion for at least the last five years and he has been buying in Australia. Does he make much of a noise there? Is he one of the bigger buyers?

Anywhere in the world, he’s a dominant owner. I actually represent him in Australia. I do a lot of his tax work, accounting work for his company there, as well as Klawervlei. He has a Klawervlei setup in Australia as well and I do all of that. I’m lucky to do that so I’ve got a good relationship with them all. Markus has a stallion there – Delago Deluxe (you’ll know him from South Africa). He’s done pretty well. His first progeny were sold this year as yearlings. They fetched some decent prices. Markus is racing a few and with Delago Deluxe there he’ll build up and no doubt, if he gets returns, increase the string.

He’s a lucky guy, Markus Jooste, isn’t he?

Yeah, but he deserves to be lucky. He’s worked hard for it and his heart’s in the right place as well. I understand he’s helped a lot of people out. Paul Lafferty related a story to me, which was very touching.

What was that story?

When Paul, a SA racehorse trainer, had cancer and he had to go for chemotherapy, they had a fundraising event but people rallied around to donate and Paul actually said to me, “Markus was incredibly generous”. There were just about tears in Paul’s eyes when he related the story to me, but that’s Markus. My experience is that you only hear good things about him because he’s a good man. He deserves every success that comes to him.

Markus Jooste’s racing investments in Australia have been quite well-publicised. Are there any other South African owners involved at that level?

Not to the extent that Markus has. Markus has been a good supporter of David Payne. He’s bought him a horse every year. His best horse was the first one – a filly called Hurry Choice. While she was here, she won two Group races. They’ve got her at stud now. Outside of that, I think Bernard Kantor and Larry Nestadt have had small interests for many years and they prefer racing. Certainly, Bernard does in the northern hemisphere but their names feature from time to time in horses. Outside of that, in the early days… When Mrs Oppenheimer was alive, she tried to help David Payne. A lot of South Africans came and helped him, and bought him horses in the first year but there aren’t too many. I think probably from a cost factor, you don’t want to be paying in Rands and a weak currency and then having to ship it from a weak currency. You’d be paying R50,000. per month in training fees. You could get a fair number of horses trained for that in South Africa.

The big injection into the Australian thoroughbred industry has been from the Chinese?

Southeast Asia, particularly, have come in. A lot of the northern hemisphere owners are buying as well but I think they’ve taken the view that they’d rather take a horse from the northern hemisphere and target the Melbourne Cup that’s like a $3m race. The Chinese certainly, Southeast Asia, and Hong Kong is a huge hunting ground for Australian horses. They come over from Singapore and buy yearlings there so the export market is good. It’s really good.

Other South Africans are doing well in Asia like trainers David Ferraris and Tony Millard in Hong Kong….

Absolutely. They come over. Hong Kong’s Champion Dougie Whyte occasionally comes over and rides. We’ve had jockeys. We’ve had Glyn Schofield who’s done very well. Jeff Lloyd made a comeback they’ve been the most incredible days of my life. I’ve had three Group One’s winners in South Africa but the most emotional for me, was when Jeff came back and he won. You know he had a stroke. He was in intensive care and they said he would never ride again. It was touch and go. He was not at all well. Anyway, he pulled through it, thank goodness, but he still had this passion to ride. The doctors said, “You can’t ride anymore” and Jeff said, “I’ve got to try.” He went to David Payne. He was living up in Queensland in the Gold Coast. He went to Dave and he said, “David, I’m going to make a comeback” and David said, “Jeff, you’re crazy. You’re mad. Another fall and you’re gone.” He said, “No, I want to try again.”

What he said was, “David, I want to come and work for you and I want you to assess me. You tell me whether I’ve got it or not. If you say, after a month, ‘Jeff, you’ve lost it’, I’ll turn it up. I’ll take your word.” Jeff did remarkably well and I had share in the horse that he won with when he had his first comeback ride. I think it was the very first ride he had. David put him on this and he won at Canterbury. It was just quite emotional. Here was a guy who had no chance of coming back, riding. It was better than the days when he used to win on Wolf Power. Even now, I get Goosebumps just thinking of it. It was so emotional. Here was Jeff at the age of nearly 50, coming back from being on the carpet – down and out – coming back and winning.

Is he still riding?

Yes, he’s still riding very well. He rides up in Queensland. He’s riding very well.

Well, it’s an emotional sport. It’s an emotional decision that you made. If you were talking to people in South Africa who were considering following your route to Australia, how can they best prepare?

I think it was a lot easier when I did it in 1999. The currency was more in play. Today, at 11 to the Aussie Dollar or 25 to the Pound, you really have to have the wherewithal to move and I’m not sure that it’s that easy to move those amounts of money because I think you’ve still got foreign exchange controls there. I don’t quite know how you do it but the thing is to research it (no doubt) and it can be daunting. I’ve heard of a number of people that have been there and haven’t made it, and gone back. There’s no doubt that the first two years… Whoever you are, the first two years is typically the so-called stress periods, the periods where you have your doubts. Look, I was lucky. I just managed to get through it. Maybe I was in the right frame of mind. I had this mind-set that it was going to work. I had the courage of my convictions. I don’t know. You need to research it as far as possible.

I think if anyone’s going there to a job (if you have employment), I think you need to tee that up. I think it’s very difficult to go straight and I don’t think I could have done as well as I have if I’d just gone straight in and set up my own business. Even though I had contacts, by having worked at Inglis for five or six years, I got to know everybody. It wasn’t designed like that because I set up my own brokerage business and it’s just how everything fell into my lap. It’s not an easy decision and you can wake up at night sometimes with cold sweats but at the end of the day, it’s a mind-set. You make up your mind that it’s going to work and if you’re positive, you’ll overcome it.

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