Watch out world says CEO Schalk Malan after Brightrock’s founders sell 100% to Sanlam
Just shy of 13 years ago, Schalk Malan, Suzanne Stevens, and Sean Hanlon gave up executive jobs at Discovery Holdings to launch an insurance startup. This week their business, now SA's preferred life insurance company for independent financial advisors, became a wholly owned subsidiary of Bellville-based giant Sanlam. Alec Hogg of BizNews asked CEO Schalk Malan the obvious – and not such apparent questions. For his part, Malan reckons access to Sanlam's large capital base will accelerate Brightrock's impressive growth trajectory. This suggests that competitors, like the Brightrock trio's former employer Discovery, best pay attention.
Find timestamps of the interview below:
- Schalk Malan on selling Brightrock to Sanlam – 00:45
- On how the decision was arrived at and the conclusion finalised 02:20
- On the comparison to other entrepreneurs in the financial services industry 06:50
- On what Sanlam is doing that is different to other corporates – 09:55
- On how often he speaks to Paul Hanratty and other executives at Sanlam – 12:10
- On their incentives being aligned with Sanlam for the foreseeable future – 14:20
- On being an incumbent that is impacting the market – 16:55
Some extracts from the interview:
Schalk Malan on selling Brightrock to Sanlam
We are more than excited. We are thrilled with the announcement and the transaction. It's definitely not the end of the dream. It is just the inflection point in the Brightrock journey. We believe this will put Brightdrop on the road to further and higher heights than ever before, with Sanlam now as the 100% shareholder, enabling the business to really achieve its objectives. So we are very excited with the announcement and with this transaction.
On how the decision was arrived at and the conclusion finalised
I think a lot of entrepreneurs go through those debates. If you look at Brightrock's journey, Sanlam has been a majority shareholder for more than five years, first and foremost. And in the last five years, the business has flourished. We've gone from strength to strength. We've built the brand, the distribution, supporting capabilities and really have become comfortable with the support that Sanlam has given at various levels of the organisation. I think coming to this decision wasn't a difficult decision in the sense that – what's the right thing for the business going forward and really putting it on this amazing growth trajectory that we are looking forward to. Knowing that we have a partner in play that's been with us for the greater part of five or six years, through very difficult periods, through COVID. And that supported us.
The question whether 100% shareholding was the right number. There are various reasons for that in setting up the transaction, but really driving home the fact that with Brightrock now being 100% owned by Sanlam, the largest financial services company in Africa, we've got access to arguably the largest balance sheet in our industry to really achieve what we set out to do. That for us is very exciting. Maybe to reinforce a couple of things on that and to enable that is the executive team, the management team, the founders that you referred to earlier are very much in play. They will continue to build the business. In fact, we are very excited for the interesting things that lie ahead. For example, we're looking to expand and, as we said we're busy expanding and growing our distribution footprint in the intermediated space. I'm looking forward to growing our funeral business and then part of it is also looking to focus on what we are really good at and where we've really made massive inroads in the market. And those are in our intermediated individual life product as well as our funeral business. I think the conclusion of it is it's the right thing for Brightrock at this stage of its journey and it will put it in a position to to really capitalize on the impact that we've had in the market to continue the growth that we've seen.
On the comparison to other entrepreneurs in the financial services industry
Life insurance is very capital intensive and if you're on a very steep growth trajectory like we've been on and plan to be on, it is capital hungry. It's not just talking about the infrastructure, your ICT technology developments. It also very much refers to putting new business on the books and the cost of acquisition. So that is true. The story of Brightrock is a story that's going to persist. And it's one of those, I think, very unique and special entrepreneurial stories in the Southern African financial services industry. I've used the word before in our discussions – Brightrock entered a very concretised market 11 years ago. It made a huge impact in the time that we've been in the market, seen the results, seen the impact in the market, new business positions and seeing our competitors changing their products. So all of those things mean that we've been a success story and continue to be such.
So I don't see the fact that Sanlam owns 100% of the business taking away from that entrepreneurial journey. In fact, it will enable it and in some cases, it shows that acting in the best interests of the business must always be paramount in the back of the entrepreneur's mind. What is the best for the business to allow that growth for its people, for its clients and you come to that conclusion that this was the right decision and it was. I'm very proud of that. Do we compare ourselves against other entrepreneurs in financial services industries, the names that you've mentioned? You take learnings from that, but our journey is our journey. It's not modelled nor mimicked on anybody else. Maybe the last point on that is if you talk to other similar entities in the Sanlam stable, like MiWay. Rene Otto built up MiWay and that was a 100% owned business from day one. He would say he is one of South Africa's leading pioneers and entrepreneurs in the short term space. That for me also is on the flip side of the coin – I don't think the two are mutually exclusive. Our entrepreneurial journey has been incredible and it will continue as we stay a part of and build out the business on a structure that we believe is most effective and most efficient for the business going forward.
On what Sanlam is doing that is different to other corporates
That's a great question, Alec, and we've often debated it. Obviously coming up to this decision and transaction, we will continue to debate that. And as I said earlier, Sanlam's been the majority shareholder for more than five or six years and we continued on our innovation trajectory. They didn't stifle that at all. It's really seeded very deep in the Sanlam culture. I think they recognise what they're very good at and they recognise what they need to be better in certain markets. If you look at models, financial services in particular, it shows that those models do work. It is recognising that having two horses in a race does give you access to a broader client market. It gives you access to areas where you might not get with your own product set. And I think those lessons and understanding is what Sanlam has deployed. And it comes with a level of humbleness and understanding your own strengths and weaknesses and harnessing that. One's got to complement the strategy. It's worked very well, as you said, and they've done it very effectively. They typically, when they invest, try to keep the management team as is, the brand and the distribution model and look at ways on how to empower that and enhance that. But they are very much arm's length and soft touch with the business – and we've seen that. To summarise: it's very much that understanding where you are strong and what you need to further enhance your offering and capability.
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