In this fascinating interview with one of SA’s great entrepreneurs, Discovery founder and CEO Adrian Gore kept stressing the need to keep humble, stay focused and have his team’s collective feet firmly on the ground. That’s a reflection of the excitement being generated at the Sandton-headquartered group. Gore will be kicking in more than R350m of his own money into the R5bn rights issue announced today. And with the now wholly owned UK business gathering momentum and the Chinese joint venture with Ping An starting to rip, why wouldn’t he? – AH
Last time we were here Adrian, you said you could see round about 20 percent headline earnings growth as being sustainable. You delivered on that front. Today though, is another announcement – a much bigger announcement – the R5bn rights issue.
I think the growth has been strong. We’ve really opened up a number of very powerful growth opportunities. The rights issue itself is around two distinct categories – the U.K. that we’ve acquired. We about the Prudential out of there at 25 percent, so now you have a standalone Discovery business in the U.K. It has fantastic potential. The main issue is the life insurance – we’ve called it Vitality Life, in the U.K. It’s growing at a rapid rate.
Is it completely renamed now?
It’s renamed and in fact, we’ve chosen the Vitality name, just to reflect the nature of the product, etcetera. The research showed that it had tremendous cut-through and receptivity. It’s a Discovery company, but called Vitality Life Health and the Vitality Life itself has had a tremendous evolution in the U.K. The issue though, is going forward. Funding the acquisition of life insurance requires capital. There are different ways to do it. The approach we’ve taken is that part of it will be equity capital from us. Part will be financial reinsurance. Part of it will be debt structures that match the cash flows. We’ve developed a structure that I think is relatively capital-light against the scale of that business. We think it generates a return of 25 to 30 percent in Pounds, if we get it right. To my mind, it’s certainly worth pushing ahead and trying to grow the business as quickly as we can.
You could have funded with Rands, which is not that easy, though. How much of the funding has to come from here? How much is self-generated?
This is a substantial business. If you look at the acquisition cost funding, we anticipate about £800m over time. What we’re looking at now is probably about 150-million from us, in equity capital. The idea is to raise it and it goes across there, so we’re not going to carry any kind of mismatching risk or anything like that. The capital will be in that entity – capitalised – and letting it grow.
The £150m that you’re putting in as equity is part of the rights issue that you announced today.
It’s the lion’s share of it. There’s another opportunity in South Africa. As our markets evolve, we are looking at finalising the detail and that’s why we’ve been given a range of four – to five-billion. We’ll see how that plays out, but the lion’s share of it is for the U.K. for Vitality Life.
How big is Vitality Life now? Looking back at the acquisition of the final 25 percent; that was £1.5bn branding.
It was a R2.7bn deal. The business is getting considerable scale – a business, which will be close to R1bn in profit for the year. It’s actually growing very quickly.
It’s making money.
Life and Health made 430-million for the six months so for the year; we should be like 850 to 900-million. It’s a big business. It’s substantial. Vitality Life itself is the third biggest right of new business in the U.K. It’s been tremendously successful and we’re focusing hard on the quality as well. The opportunity that beachhead provides us (not just in the life insurance space) to go into other businesses as we’ve done here: in the context of the Prudential, we were tied into a specific scope of business, which was Life and Health. Now, having our own business there; licensed property/property capitalised is very big opportunity for us.
How are you changing the business now that it’s a wholly owned subsidiary?
Nothing has changed in the day-to-day running and the positioning. The value set and the purpose – everything is Discovery-based. The changes are about brand. The funding, the licensing and regulation are the kinds of structures, which require changing. The branding is a big issue. Losing the Prudential brand was one of the big consideration but in fact, we’ve had a very good rebranding process. We were initially concerned that we’d see a drop-off in business. Would we see a lapse? We haven’t see it at all – quite the opposite. The business has accelerate. I wouldn’t say that we can claim success of the transition, but I think it’s gone better than we expected.
You bump into the Vitality brand in most parts of London, and I’m sure, other parts of England as well. Very smart advertising on the Underground, for instance – those football sponsorships you’ve done do get into people’s consciousness very quickly. How big is the offshore/U.K. operation, relative to South Africa? How big do you think it’s going to be in about five years’ time?
The U.K. is about 25 percent of the size of South Africa, so it’s growing very quickly. On one hand that’s true and on the other hand, South Africa is growing quickly. If Discovery Insure turns (and it’s turning now) and starts to grow quickly, and if China really starts to pick up, I’m not sure how it will grow. We have really good growth potential throughout, but the U.K. has grown disproportionately over the last number of years. The last three or four years have been very good for the U.K. I think we did the hard yards in a difficult economy. I remain that it’s in difficult times that you build so hopefully now, we’re in a very good position to capitalise.
You mentioned China.  Is that growing at a similar rate?
With China, we own 25 percent of health. It’s taken us some time to get traction. The last two quarters (six months of our financial year) have been absolutely, tremendous. The new business group grew by 200 percent. The real issue has been ‘can we get Pingan’s life distribution channel over about 500,000 Asians, to sell individual health insurance’. It’s never been done. The reality is that it’s taken us 18 months to get this right. Now, we’re seeing about 800 to 1000 cases per day being sold. That’s huge.
How does it compare with South Africa?
It’s probably as big as any of our businesses is. It’s probably R4m/day of new business and it’s still embryonic. The growth has really, been good. We need to focus on quality and moderating so there’s no hubris. I’m not suggesting that it will, but the growth has been staggering and unlike with the other businesses. We’re scratching the surface with regard to the scale of the middle class and the amount of out-of-pocket health expenditure. Pingan Health looks as if it could really grow.
Adrian, I know you talk to many people. Have you spoken to Koos Bekker? If you’re only scratching the surface, Pingan could potentially be like Tencent in the Naspers context.
Yes.
Does it have that potential?
I think that health insurance in China has massive potential. Pingan itself is not only investing in health insurance. Pingan Health will the health insurance repository of healthcare, clinics, an online portal etcetera. I think you know that Pingan is one of the biggest and best insurers in China. It has that potential. We are embryonic. We’re just starting to get the traction. It’s interesting, though. Once you gain traction, you see how quickly this thing grows. I actually, don’t think the growth will be a problem. I think need to ensure that the loss ratios and claims levels are right, and that the persistency is right. We’re doing a lot of work on that quality. I think the team has done very well so it looks incredibly positive but we have to wait and see how it plays out.
How many of your team are in there?
We’ve had a small core team in there and we’ve had quite a team here, backing it up. Over time, we now have a new (Chinese) CEO there. He was originally the CTO of Alibaba so he’s built a very strong Chinese team. To an extent, over time I think we will retract from the frontline. All the systems are there and the team is moving, but it’s not an insignificant business.
He moved from Jack Ma’s business, which is all the rage in the United States, to your business in China. It must have taken some doing or some kind of growth potential.
Peter Ma, who’s actually the Chairman and Founder of Pingan, has very big aspirations. Our leadership there didn’t have the kind of scale. Peter’s view was to bring the kind of CEO in that would get it to scale. I think he’s doing a phenomenal job. We’ll see.
Another Ma: are these guys all related? You have Tony Ma at Tencent.
I don’t think they’re related.
Maybe it’s a very popular name, like Smith. Adrian, coming back to the U.K. (and that’s a much more hands-on operation obviously, because it’s a wholly owned subsidiary), are you now finding that you’re starting to move staff between South Africa and England?
Yes and no. I think the English business is quite well established now, so it has a fantastic management team. We sent Neville Cooper there, who’s the CEO of the health business. Herschel Meyer does life here and there and there’s been a very good crossover, but the team is very well established. Much of the back office functionality for the life business is here. There’s a very good team. In the U.K., we probably have 1000 people. It’s a big business. We’re getting a lot of crossover all over the place. Our partner markets have people floating all around.
Let’s talk about those partner markets. It is something to new, to most people watching Discovery. You’ve also mentioned that you have a relationship with Generali, a huge Italian insurance company, to get into Europe itself. By doing in an entirely new name/operation, what exactly is your involvement there? How is it all going to work?
If you look at South Africa and the U.K., we’re an insurer. It’s a primary market. That’s our business. I think the Discovery model is so applicable with this kind of dynamic underwriting. We’ve been trying to work [inaudible 10:13] markets. We’ll never be in a substantial market; we don’t think that given our scale, we can do that for decades and decades. How do we actually, get exposure? The idea came up through the link with AIA in Asia. AIA are taking (almost) a Discovery model in a franchise way and using it in their markets. On the approaches of many companies, we took a view. Let’s form a partner market (business, in effect) and work with some of the best companies in different markets where we don’t think we would be present. Effectively, what it does is we inject the Discovery Life model into their business. We help run it in a way, with them, and we share the economic value-add that’s created. For us, these are very big, complicated initiatives. They’re capital-light. It’s mainly the capital of the partner, be it AIA or Generali. As an insurer in the U.S. – one of the big ones that we’re working with – where, if we get scale, there’d usually be an upside for us. We don’t yet know how it will play out.  Its novel, ambitious, and well though through, but I think we need to see how it plays out.
Why would they deal with you in this way? Surely, they just come and study your business, maybe hire a few of the people who worked for you, and get the secrets that way.
There’s more to it than that. The ability to take the systems into another market (if you think about the many layers of Vitality), the ability to work out how to structure partner deals, the data around how these mortality curves are codified, product design and elements, how you build it into term assurance or a universal life product, are things that we pioneered. My sense is that with each one of them, you might figure out the ability to do the whole package is difficult. In truth, I actually think they have a very good deal. I really believe that. If we can be transformative, as we’ve been with Discovery Life or the U.K. where the products have really done well, for them it’s a no-brainer.
Where do you get the people from, to make sure these things happen? With all these expansion projects, you must be hiring like Topsy.
The problem is that you need really good people for this – experienced people. We’ve rolled out across Singapore, Australia, and soon, in Hong Kong. AIA, Exentia, and us, are working across Asia. I’m guessing that collectively, we have probably 600 people across Asia, working on this stuff. It’s a substantial initiative.
Another substantial initiative is your new Head Office, just around the road here in Sandton. That opens in 2018.
It opens in 2017.
How many people will you have there?
Probably around seven or eight thousand.
Are many of the international operations being run from here?
We like people together who strongly believe in a certain value set or culture of how we operate. To an extent, they’re here anyway. They’ve simply been in a few different buildings. We’ve had the difficulty of accommodating them as we grow. It turned out to be more efficient to move from to one big building. In truth, it’s more efficient. It’s a similar cost. It’s smartly done. There’s no arrogance in this process. I need to tell you that. I’m always scared of these buildings. It has to be done carefully. For our people, they’ve done a brilliant job. I feel a sense of great togetherness. I think the culture, which we built very carefully, will perpetuate.
Adrian, yesterday we spoke to the Chairman of Wilson Bayly. He’s been running the place for decades. They’ve cut their dividends for the first time – ever – and yet, Discovery just seems to roll on and become stronger and stronger. What is it about the business you’ve built, which is now nearly a R70bn business, that you seem to be able to succeed when many other parts of the economy are struggling?
I think we’re industries that are very fundamental to people – healthcare, for example. In that respect, if you’re really good in that industry you can be sustainable and you can perpetuate the growth. In addition, the Discovery model (the idea of engaging people) is embryonic. We’re learning more about it. The success of that model has let us continue to grow into adjacent industries. Discovery Ensure is now growing. It’s actually the same DNA. It’s one of the lessons we’ve learned and there’s a lot of academic work around its repeatability. You can only grow if you have a repeatable model. Again, there’s no arrogance here. You have to keep pushing incredibly hard. I don’t assume anything is preconceived. You have to keep getting better.
So you always started with that idea, that it was scalable. When did you click to the reality?
The lessons we’ve learned from success and failure have been around focusing on the repeatable part and I think South African companies aren’t that good at repeating and scaling. I think Americans are good at that kind of thing. We’re not and we’ve tried our best to learn how you can repeat and scale a model. Framing of it has helped us. We came to Discover Ensure. What parts of Vitality can we use in the same way as well as the same incentives? We’ve learned over time. In this last year, a lot of work has been done on defining repeatability, and how you do it. The partner markets are exactly that – defining the economic model, how it will work, and what the functions are. We developed playbooks around every part of the chain of ‘how can we repeat it’, so a lot of work has been done in that regard. There’s a lot to learn but I think that intellectually, we understand what has to be done.
It hasn’t been a smooth ride. You’ve mentioned America and you had a bloody nose in America a few years ago. Is this part of the learning, from that?
There’s no doubt. On the entire journey, you pick up a lot of learning. Interestingly, I believe that you learn more from success than you do from failure. I know that sounds counterintuitive. If you can learn from what works and perpetuate that, then I think that’s very powerful. We have a very smart team and I think the approach we take to governing the team – of keeping people together – has helped us perpetuate in an additive way. It’s an ongoing process. We’re halfway through the marathon here.
Another success has been your relationship with the Founders of FirstRand. I see you’ve gone to them to underwrite your rights issue.
Through FirstRand, when we unbundled half of RMI became our biggest shareholder. They’re a 25 percent shareholder and a fantastic partner throughout.  Generally, it’s always been a good partnership and to an extent, I think that when you make expansions like this, having your shareholders onside right at the decision-making, is critical. We have listeners as well, listening as well. The feedback that comes back through the process helps us align our thinking as well, so frankly, it’s been a wonderful partnership and friendship.
So the R5bn is guaranteed because they’ve underwritten the issue.  You, personally, are a big shareholder. Are you going to follow your rights?
Definitely. We’ve actually had irrevocables from close to 40 percent of the base and the balance is underwritten, so I think it’s been done very simply. The pricing is straightforward. We have enough complexity in the actual building of the business. I’m a great believe that the accounts and the raising of capital is clear, transparent, and simple.
In addition, when you have a 40 percent improvement in your share price over the past year, it isn’t too difficult to come in at maybe, a slight discount to the current market price, which you’ve done with your rights issue.
Absolutely. I think the advice was 20 percent off the current price. It’s probably a good deal (I hope, or shareholders), but I think it’s the right kind of pricing. We leave that to our advisors to give us the best advice.
Adrian Gore is the co-Founder and Chief Executive of Discovery.
dio. Last time we were here Adrian, you said you could see round about 20 percent headline earnings growth as being sustainable. You delivered on that front. Today though, is another announcement – a much bigger announcement – the R5bn rights issue.
I think the growth has been strong. We’ve really opened up a number of very powerful growth opportunities. The rights issue itself is around two distinct categories – the U.K. that we’ve acquired. We about the Prudential out of there at 25 percent, so now you have a standalone Discovery business in the U.K. It has fantastic potential. The main issue is the life insurance – we’ve called it Vitality Life, in the U.K. It’s growing at a rapid rate.
Is it completely renamed now?
It’s renamed and in fact, we’ve chosen the Vitality name, just to reflect the nature of the product, etcetera. The research showed that it had tremendous cut-through and receptivity. It’s a Discovery company, but called Vitality Life Health and the Vitality Life itself has had a tremendous evolution in the U.K. The issue though, is going forward. Funding the acquisition of life insurance requires capital. There are different ways to do it. The approach we’ve taken is that part of it will be equity capital from us. Part will be financial reinsurance. Part of it will be debt structures that match the cash flows. We’ve developed a structure that I think is relatively capital-light against the scale of that business. We think it generates a return of 25 to 30 percent in Pounds, if we get it right. To my mind, it’s certainly worth pushing ahead and trying to grow the business as quickly as we can.
You could have funded with Rands, which is not that easy, though. How much of the funding has to come from here? How much is self-generated?
This is a substantial business. If you look at the acquisition cost funding, we anticipate about £800m over time. What we’re looking at now is probably about 150-million from us, in equity capital. The idea is to raise it and it goes across there, so we’re not going to carry any kind of mismatching risk or anything like that. The capital will be in that entity – capitalised – and letting it grow.
The £150m that you’re putting in as equity is part of the rights issue that you announced today.
It’s the lion’s share of it. There’s another opportunity in South Africa. As our markets evolve, we are looking at finalising the detail and that’s why we’ve been given a range of four – to five-billion. We’ll see how that plays out, but the lion’s share of it is for the U.K. for Vitality Life.
How big is Vitality Life now? Looking back at the acquisition of the final 25 percent, that was £1.5bn branding.
It was a R2.7bn deal. The business is getting considerable scale – a business, which will be close to R1bn in profit for the year. It’s actually growing very quickly.
It’s making money.
Life and Health made 430-million for the six months so for the year; we should be like 850 to 900-million. It’s a big business. It’s substantial. Vitality Life itself is the third biggest right of new business in the U.K. It’s been tremendously successful and we’re focusing hard on the quality as well. The opportunity that beachhead provides us (not just in the life insurance space) to go into other businesses as we’ve done here: in the context of the Prudential, we were tied into a specific scope of business, which was Life and Health. Now, having our own business there; licensed property/property capitalised is very big opportunity for us.
How are you changing the business now that it’s a wholly owned subsidiary?
Nothing has changed in the day-to-day running and the positioning. The value set and the purpose – everything is Discovery-based. The changes are about brand. The funding, the licensing and regulation are the kinds of structures, which require changing. The branding is a big issue. Losing the Prudential brand was one of the big consideration but in fact, we’ve had a very good rebranding process. We were initially concerned that we’d see a drop-off in business. Would we see a lapse? We haven’t see it at all – quite the opposite. The business has accelerate. I wouldn’t say that we can claim success of the transition, but I think it’s gone better than we expected.
You bump into the Vitality brand in most parts of London and I’m sure, other parts of England as well. Very smart advertising on the Underground, for instance – those football sponsorships you’ve done do get into people’s consciousness very quickly. How big is the offshore/U.K. operation, relative to South Africa? How big do you think it’s going to be in about five years’ time?
The U.K. is about 25 percent of the size of South Africa, so it’s growing very quickly. On one hand that’s true and on the other hand, South Africa is growing quickly. If Discovery Insure turns (and it’s turning now) and starts to grow quickly, and if China really starts to pick up, I’m not sure how it will grow. We have really good growth potential throughout, but the U.K. has grown disproportionately over the last number of years. The last three or four years have been very good for the U.K. I think we did the hard yards in a difficult economy. I remain that it’s in difficult times that you build so hopefully now, we’re in a very good position to capitalise.
You mentioned China.  Is that growing at a similar rate?
With China, we own 25 percent of health. It’s taken us some time to get traction. The last two quarters (six months of our financial year) have been absolutely, tremendous. The new business group grew by 200 percent. The real issue has been ‘can we get Pingan’s life distribution channel over about 500,000 Asians, to sell individual health insurance’. It’s never been done. The reality is that it’s taken us 18 months to get this right. Now, we’re seeing about 800 to 1000 cases per day being sold. That’s huge.
How does it compare with South Africa?
It’s probably as big as any of our businesses is. It’s probably R4m/day of new business and it’s still embryonic. The growth has really, been good. We need to focus on quality and moderating so there’s no hubris. I’m not suggesting that it will, but the growth has been staggering and unlike with the other businesses. We’re scratching the surface with regard to the scale of the middle class and the amount of out-of-pocket health expenditure. Pingan Health looks as if it could really grow.
Adrian, I know you talk to many people. Have you spoken to Koos Bekker? If you’re only scratching the surface, Pingan could potentially be like Tencent in the Naspers context.
Yes.
Does it have that potential?
I think that health insurance in China has massive potential. Pingan itself is not only investing in health insurance. Pingan Health will the health insurance repository of healthcare, clinics, an online portal etcetera. I think you know that Pingan is one of the biggest and best insurers in China. It has that potential. We are embryonic. We’re just starting to get the traction. It’s interesting, though. Once you gain traction, you see how quickly this thing grows. I actually, don’t think the growth will be a problem. I think need to ensure that the loss ratios and claims levels are right, and that the persistency is right. We’re doing a lot of work on that quality. I think the team has done very well so it looks incredibly positive but we have to wait and see how it plays out.
How many of your team are in there?
We’ve had a small core team in there and we’ve had quite a team here, backing it up. Over time, we now have a new (Chinese) CEO there. He was originally the CTO of Alibaba so he’s built a very strong Chinese team. To an extent, over time I think we will retract from the frontline. All the systems are there and the team is moving, but it’s not an insignificant business.
He moved from Jack Ma’s business, which is all the rage in the United States, to your business in China. It must have taken some doing or some kind of growth potential.
Peter Ma, who’s actually the Chairman and Founder of Pingan, has very big aspirations. Our leadership there didn’t have the kind of scale. Peter’s view was to bring the kind of CEO in that would get it to scale. I think he’s doing a phenomenal job. We’ll see.
Another Ma: are these guys all related? You have Tony Ma at Tencent.
I don’t think they’re related.
Maybe it’s a very popular name, like Smith. Adrian, coming back to the U.K. (and that’s a much more hands-on operation obviously, because it’s a wholly owned subsidiary), are you now finding that you’re starting to move staff between South Africa and England?
Yes and no. I think the English business is quite well established now, so it has a fantastic management team. We sent Neville Cooper there, who’s the CEO of the health business. Herschel Meyer does life here and there and there’s been a very good crossover, but the team is very well established. Much of the back office functionality for the life business is here. There’s a very good team. In the U.K., we probably have 1000 people. It’s a big business. We’re getting a lot of crossover all over the place. Our partner markets have people floating all around.
Let’s talk about those partner markets. It is something to new, to most people watching Discovery. You’ve also mentioned that you have a relationship with Generali, a huge Italian insurance company, to get into Europe itself. By doing in an entirely new name/operation, what exactly is your involvement there? How is it all going to work?
If you look at South Africa and the U.K., we’re an insurer. It’s a primary market. That’s our business. I think the Discovery model is so applicable with this kind of dynamic underwriting. We’ve been trying to work [inaudible 10:13] markets. We’ll never be in a substantial market; we don’t think that given our scale, we can do that for decades and decades. How do we actually, get exposure? The idea came up through the link with AIA in Asia. AIA are taking (almost) a Discovery model in a franchise way and using it in their markets. On the approaches of many companies, we took a view. Let’s form a partner market (business, in effect) and work with some of the best companies in different markets where we don’t think we would be present. Effectively, what it does is we inject the Discovery Life model into their business. We help run it in a way, with them, and we share the economic value-add that’s created. For us, these are very big, complicated initiatives. They’re capital-light. It’s mainly the capital of the partner, be it AIA or Generali. As an insurer in the U.S. – one of the big ones that we’re working with – where, if we get scale, there’d usually be an upside for us. We don’t yet know how it will play out.  Its novel, ambitious, and well though through, but I think we need to see how it plays out.
Why would they deal with you in this way? Surely, they just come and study your business, maybe hire a few of the people who worked for you, and get the secrets that way.
There’s more to it than that. The ability to take the systems into another market (if you think about the many layers of Vitality), the ability to work out how to structure partner deals, the data around how these mortality curves are codified, product design and elements, how you build it into term assurance or a universal life product, are things that we pioneered. My sense is that with each one of them, you might figure out the ability to do the whole package is difficult. In truth, I actually think they have a very good deal. I really believe that. If we can be transformative, as we’ve been with Discovery Life or the U.K. where the products have really done well, for them it’s a no-brainer.
Where do you get the people from, to make sure these things happen? With all these expansion projects, you must be hiring like Topsy.
The problem is that you need really good people for this – experienced people. We’ve rolled out across Singapore, Australia, and soon, in Hong Kong. AIA, Exentia, and us, are working across Asia. I’m guessing that collectively, we have probably 600 people across Asia, working on this stuff. It’s a substantial initiative.
Another substantial initiative is your new Head Office, just around the road here in Sandton. That opens in 2018.
It opens in 2017.
How many people will you have there?
Probably around seven or eight thousand.
Are many of the international operations being run from here?
We like people together who strongly believe in a certain value set or culture of how we operate. To an extent, they’re here anyway. They’ve simply been in a few different buildings. We’ve had the difficulty of accommodating them as we grow. It turned out to be more efficient to move from to one big building. In truth, it’s more efficient. It’s a similar cost. It’s smartly done. There’s no arrogance in this process. I need to tell you that. I’m always scared of these buildings. It has to be done carefully. For our people, they’ve done a brilliant job. I feel a sense of great togetherness. I think the culture, which we built very carefully, will perpetuate.
Adrian, yesterday we spoke to the Chairman of Wilson Bayly. He’s been running the place for decades. They’ve cut their dividends for the first time – ever – and yet, Discovery just seems to roll on and become stronger and stronger. What is it about the business you’ve built, which is now nearly a R70bn business, that you seem to be able to succeed when many other parts of the economy are struggling?
I think we’re industries that are very fundamental to people – healthcare, for example. In that respect, if you’re really good in that industry you can be sustainable and you can perpetuate the growth. In addition, the Discovery model (the idea of engaging people) is embryonic. We’re learning more about it. The success of that model has let us continue to grow into adjacent industries. Discovery Ensure is now growing. It’s actually the same DNA. It’s one of the lessons we’ve learned and there’s a lot of academic work around its repeatability. You can only grow if you have a repeatable model. Again, there’s no arrogance here. You have to keep pushing incredibly hard. I don’t assume anything is preconceived. You have to keep getting better.
So you always started with that idea, that it was scalable. When did you click to the reality?
The lessons we’ve learned from success and failure have been around focusing on the repeatable part and I think South African companies aren’t that good at repeating and scaling. I think Americans are good at that kind of thing. We’re not and we’ve tried our best to learn how you can repeat and scale a model. Framing of it has helped us. We came to Discover Ensure. What parts of Vitality can we use in the same way as well as the same incentives? We’ve learned over time. In this last year, a lot of work has been done on defining repeatability, and how you do it. The partner markets are exactly that – defining the economic model, how it will work, and what the functions are. We developed playbooks around every part of the chain of ‘how can we repeat it’, so a lot of work has been done in that regard. There’s a lot to learn but I think that intellectually, we understand what has to be done.
It hasn’t been a smooth ride. You’ve mentioned America and you had a bloody nose in America a few years ago. Is this part of the learning, from that?
There’s no doubt. On the entire journey, you pick up a lot of learning. Interestingly, I believe that you learn more from success than you do from failure. I know that sounds counterintuitive. If you can learn from what works and perpetuate that, then I think that’s very powerful. We have a very smart team and I think the approach we take to governing the team – of keeping people together – has helped us perpetuate in an additive way. It’s an ongoing process. We’re halfway through the marathon here.
Another success has been your relationship with the Founders of FirstRand. I see you’ve gone to them to underwrite your rights issue.
Through FirstRand, when we unbundled half of RMI became our biggest shareholder. They’re a 25 percent shareholder and a fantastic partner throughout.  Generally, it’s always been a good partnership and to an extent, I think that when you make expansions like this, having your shareholders onside right at the decision-making, is critical. We have listeners as well, listening as well. The feedback that comes back through the process helps us align our thinking as well, so frankly, it’s been a wonderful partnership and friendship.
So the R5bn is guaranteed because they’ve underwritten the issue.  You, personally, are a big shareholder. Are you going to follow your rights?
Definitely. We’ve actually had irrevocables from close to 40 percent of the base and the balance is underwritten, so I think it’s been done very simply. The pricing is straightforward. We have enough complexity in the actual building of the business. I’m a great believe that the accounts and the raising of capital is clear, transparent, and simple.
In addition, when you have a 40 percent improvement in your share price over the past year, it isn’t too difficult to come in at maybe, a slight discount to the current market price, which you’ve done with your rights issue.
Absolutely. I think the advice was 20 percent off the current price. It’s probably a good deal (I hope, or shareholders), but I think it’s the right kind of pricing. We leave that to our advisors to give us the best advice.
Adrian Gore is the co-Founder and Chief Executive of Discovery.
