Bank On This Man

Where would we be without globalization? What if media was restricted to reporting within its own national boundaries? What if we all lived in isolation? It’s a scary picture and one where humanity would have not progressed as broadly as it has.
To fellow African entrepreneurs, I want to say one thing: the more you are exposed to, the bigger you can dream.
Industrialization progressed by further developing what had been done before. Only after working with renowned inventor Thomas Edison, could Nikola Tesla go on to create his own inventions.
Andrew Carnegie worked under the leading businessman, Thomas A. Scott. This mentorship allowed Carnegie to define an era by starting a generation of industrialists, pioneering the philanthropic movement, and becoming an epitome of self-development.
The key word here is exposure.
There are countless occasions where entrepreneurs only discovered their flair by observing other entrepreneurs or studying companies that transformed industries. Some even became competitors of their former employers.
Adrian Gore, the Founder of Discovery Holdings, was exposed to the dealings of the insurance sector early in his career. He worked for Liberty Life but resigned to build his own insurance company. Today, Discovery is the leading medical insurance company in South Africa.
Isn’t it surprising that many companies were started by entrepreneurs who thought they could do it better? Deciding to improve something can shape your destiny. Decisions like these act as the force that pushes us on in our lives.
Look at the former employees of PayPal – today known as the PayPal Mafia. After leaving the famous tech company, these individuals went on to found and fund other mammoth companies like LinkedIn, YouTube, Facebook, Tesla, SpaceX and they are not finished. At the moment, they are investing in Artificial Intelligence.
These gentlemen were exposed to a revolutionary business and they now all share a drive to change the world as we know it to a better world, one that they see in their minds.
Exposure can give you something other than experience, it can also get you through certain doors that were previously shut. Let’s look at two entrepreneurs; both are looking to seal separate deals. Entrepreneur X closes a $1.8 billion deal, while entrepreneur Y gets a $274,000 deal.
Both worked tirelessly to get these deals but the rewards are not the same. It is likely that entrepreneur X has been exposed to certain levels, while entrepreneur Y was operating independently. They might have both known about the $1.8 billion deal, but knowing about it does not mean you have access to it. You need to run in certain circles to get exposed to deals that involve other entrepreneurs in those circles.
What led Aliko Dangote to manufacturing? While trading commodities, he took note of the huge market in Nigeria and decided it was better to manufacture what he was importing.
Before founding Apple, a 12-year-old Steve Jobs landed a summer job at HP and the rest is history. It is this type of exposure that allows entrepreneurs to gravitate towards their destinies.
If you look at the rain, you will never plant. Get out there; attend conferences, travel to various countries, network with successful business leaders and read as much as you can. Whatever you are exposed to can only broaden your current view on the world around you.
By exposing yourself, you also expose your company to other markets and greater opportunities.
You can’t afford to stand idly by and wait for everything to fall in place. Business, and life, is a fight for territory – the moment you stop fighting for what you want, is the moment you will have lost.

Nothing was Achieved  by Being Idle

Widely regarded as one of the best business leaders to have emerged from Africa over the past 20 years, there is not the slightest embarrassment on the face of this self-taught entrepreneur as he admits to having no investments—none whatsoever—other than the shares he has in Discovery Holdings, the company he formed over 21 years ago and built into a global diversified financial services group with an annual income of more than $4 billion (R40 billion).
With glee, he says he doesn’t subscribe to the conventional investment caveat of not putting your eggs in one basket. So, he is invested to the hilt in Discovery, now the largest health insurer in South Africa, of which he owns about 9%, part of a personal fortune of close to $300 million (R3 billion).
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Welcome to the world of, the sometimes maverick, Adrian Gore.
It is a day after Gore released more than respectable annual results for the year that ended on June 30. The results showed that the group had achieved a 20% increase in normalized headline earnings, to almost $281 million (R2,8 billion), while cash generated from operations was up by 45% to over $201 million (R2 billion). All this with a 15% rise in new business to $1 billion (R10 billion), mainly in Britain, China and the United States.
An ebullient Gore intimates that taking on the rest of the African continent could be in the offing in another three to five years.
“You don’t have to be first. I see a massive opportunity. Health insurance requires private health systems not yet present in Africa.”
Not that he hadn’t tried before; the company had to reassess its strategy following a couple of dud acquisitions.
“Ours is about building a product—not buy a business and bring costs down to make a profit. We create value for customers,” he says.
Gore’s contemporary, Barry Swartzberg, with whom he left Liberty to start Discovery and remains an executive director, was asked recently how the two complemented one another.
“He’s more thoughtful, works on aspects, takes a long time to mull over ideas.”
An actuary by training, Gore has spent the past 21 years changing the world of medical insurance in South Africa. Today, the company is a fully-fledged financial services entity after adding insurance and life asset management to its portfolio.
Gore now wants to change the world, and looks like he’s very much on the way—one country at a time.
In China, Discovery has a 25% stake in Ping An Health Insurance, the country’s largest private health insurer. It does business with companies like Volvo, Unilever and Goldman Sachs. In Britain, the company has created the fourth largest insurer in an alliance with old stager Prudential. It also has ties to Humana Inc in the United States, and the AIA Group in Singapore.
“China remains a huge growth market, with the estimated total healthcare spend expected to rise by over 90% by 2020. Private healthcare spend is expected to grow even stronger over this period. Ping An has established itself as the leader in Critical Illness Insurance and related spend, a strong position to be in given that approximately 65% of deaths are classified as non-communicable diseases. By increasing their stake, Discovery has identified this opportunity,” says Nick Crail, a portfolio manager at RMB Private Bank.
“Getting into these markets is brutal,” Gore says.
“There’s no easy way or short cut. Each market takes time.”
The market appears to approve of the AIA deal in Singapore. On the day it was signed, Discovery shares shot up 6.6%.
“The AIA deal entrenches Discovery’s footprint across the growth markets of Asia, excluding Japan, giving them access to 17 markets in the region with total assets of approximately $147 billion. Discovery has entered this market through their offering in Vitality. This will therefore be a cost exercise for them for the first few years, but should realise profits into the future,” says Crail.
“I think, judging by the rally in the share price, that the market has already priced in much of these ‘blue-sky’ ventures. Their recent trading update unsettled markets somewhat and we would expect investors to be more cautious in driving up the share price too strongly. Therefore we wouldn’t expect much more in the share price to year-end. Having said that, we like Discovery and believe in their long-term outlook.”
In Britain and the United States, Discovery entered markets that were already established, with a great deal of certainty, facing a myriad of competitors and very tight regulations. It made it difficult for Discovery to innovate as much, or as well, as it would have wanted. A developing market like China, on the other hand, while posing lots of possibilities, is a frontier that still calls for a fair amount of learning and cautious optimism.
Tenacity from the pioneering years of their South African operations has made Discovery able to withstand pressure and adapt.
“South Africa is a small but more sophisticated market than we are getting credit for,” says Gore.
Paul Theron, CEO of asset managers Vestact, says Gore’s character has been one of the key factors behind Discovery’s success.
“His growth has been amazing. It wasn’t a completely unique product that he was selling, coming out of Investec to start Discovery. But to go from that tiny firm to span into a global expansion has been brilliant.”
“They had some problems in the US. But in the UK they have been able to offer a good product around Vitality. The intellectual property is certainly something that will do well there. Incentivizing people with a healthy lifestyle will certainly take off. Along with the operational expertize having been around for a good number of years. Many people can come up with a good idea, but to actually make it work and have it run successfully over a number of years is an entirely different matter,” he says.
Discovery’s latest foray is into Singapore. It was announced in July, but Gore has little to say months later.
“We haven’t divulged the details of the transaction,” he says.
It is a trait of Gore that he has little to say about his missions until they are accomplished. This has been since the day he left Liberty Life, after developing the itch to start a small medical insurance unit within financial services group FirstRand, through the listing on the Johannesburg Stock Exchange to unbundling from the parent company. It led to Discovery claiming more than half of the South African health insurance market. A story of more bite, less bark from the man who keeps to himself.
Laurie Dippenaar, who is 23rd on the FORBES list of the 40 Richest Africans and the father of FirstRand, was the man who gave Gore his shot. He has a clear memory of their first meeting.
“You could immediately see this guy was different. He was not the typical chartered accountant nerdy smart. You could see he had intelligence but he also had business sense, all the qualities that make you a success. I think he is actually one of the smartest business people I have ever met.”
According to Dippenaar, Gore’s first pitch didn’t go as well as he planned. The life insurance scheme was too much like others.
“To this day he says I got it wrong. A year later he comes up and says he’s got something completely different. From life insurance he had gone to a health insurance. He started to describe what he had in mind and I could immediately see he was onto something.”
This something was Discovery.
“When he described that medical savings account, it was a pioneer move in South Africa. I remembered when I was a bachelor and paying all these premiums for health insurance. You are young and healthy you don’t need to claim. All you do is pay premiums. Here was a product where you could carry forward some of the premiums if you were not claiming. In theory you could get into a situation where you didn’t have any premiums to pay,” says Dippenaar.
Gore left his job and Dippenaar gave him three months to draw up a business plan, in Dippenaar’s own offices.
“He never had any hesitation. He came up with the numbers. We liked it. So we backed him,” he says.
Gore is undoubtedly a darling of his shareholders, as well as share speculators, but that’s not to say he is liked by all. He has made enemies and detractors. He stands accused, for example, of squeezing competitors out at every opportunity, a charge Gore denies vehemently.
“I don’t think that is fair. We are strong competitors and more competition is good for society. We do nothing unfairly.”
It’s not only competitors who are unhappy. Doctors have taken issue with Discovery’s payment rates, where practitioners are forced to cap their rates and accept smaller fees. Gore’s defence? Nothing wrong with the practice.
“After all, we are the paymaster.”
What about the hundreds of thousands of people covered by Discovery Health? Some of them think Discovery is making huge profits on the back of above-inflation medical rate increases, while bombarding them with peripheral benefits like gym contracts.
Furious customers, writing on a business news website on the day of Gore’s announcement of financial results, complained bitterly about forever shrinking benefits, while others used words like “robbery”, “rip off” and “gimmicks” to describe Vitality, Discovery’s rewards-for-healthy-living scheme.
“These are natural issues,” Gore says, “they see the money we make.”
It doesn’t bother him much, though, as experience shows that customers stick with Discovery.
“The customer satisfaction rate is very high,” he says proudly.
Honesty and optimism have been driving forces at Discovery from the day it was established, says the man who prides himself for being, in his own words: innovative and prudent.
“Building insurance around making people healthy may be quite soppy”, he says, but it has been the key to success in international markets.
“We know where to be bold, and when to be reticent. We are pushing hard on the ground, taking no prisoners. We are ruthless.”
Gore’s steely, and ruthless, determination is often likened to that of Steve Jobs, the late genius who founded Apple and who was liked and hated in equal measure; depending, of course, who was telling the story.
There are two framed pictures of Steve Jobs in Gore’s office. One is from a business leadership article and the other is from a cover of the Economist magazine.
Gore is at pains to explain that Jobs graced the cover in the same edition that carried a story about Discovery. In the piece, the Economist hails the innovation of Discovery’s Vitality program as an example of how quickly new ideas are starting to flow out of emerging markets to challenge the world.
As for Jobs, Gore finds him very inspiring—especially for his obsession with one product.
“The obsession with a solution for society,” says Gore, who says he uses this belief at Discovery.
“Every organization must be started by someone,” Gore says, “owner-manager culture has a certain drive to it, a certain authenticity.”
Discovery’s success owes much to its founding team, most of whom are still with the company.
“But what’s most exciting about Discovery is that the future is ahead of us,” Gore says.
That future, though, may be under threat. At least, according to analysts.
The private health care industry is nervous about the announcement by the South African government—the continent’s biggest economy and a huge contributor to Discovery’s profits—that it is planning to introduce National Health Insurance (NHI). It will be funded through taxes and administered by the state; the NHI will strive to give health care to all.
Some analysts believe it will make a huge dent in medical insurance industry profits, big enough to send a few of them under. They single out Discovery as one company on the risk list because of high administration and managed care charges.
“We will have to adapt in some way, but I don’t think it’s threatening at all,” says Gore.
Gore says while NHI was excellent and rational and could strengthen the public system dramatically, it won’t supplant the country’s private health system and will take much longer to introduce than the 12-13 years the government has given itself.
If history is anything to go by, there can be no doubt Gore and his team—called the best brains in the industry—are busy preparing, which probably explains Discovery’s involvement in at least one NHI pilot project.
“Status quo is undesirable. You can’t have huge portions of the population with no access to proper health care. It’s not good for the country. I don’t think a great business exists on the back of dysfunctionality. You can’t exist at the expense of society. You’ve got to be part of society,” says Gore.
But what is he doing for that society? That is, when not ensuring that everyone is covered, or spending time with his wife, his two university student daughters, and the son he takes to school every day.
Driven by a philosophy that only entrepreneurs create jobs, Gore chairs Endeavor South Africa, the local chapter of a global non-profit organization that seeks to identify and nurture young entrepreneurial talent. It’s where he hopes to find, mentor and offer a break to future Gores – perhaps in pretty much the same way Dippenaar did for him 21 years ago. First lesson, don’t take prisoners.

A Maverick  In Rude Health

Adrian Gore, South Africa’s undisputed king of health insurance, has done pioneering stuff before—as a matter of fact that’s all he has done since the day he founded Discovery 20 years ago—but none as daring as his latest venture.
In a world where Africa has become China’s happy hunting ground, Gore is hunting in the opposite direction.
Discovery recently bought 20% of Ping An Health Insurance, a wholly-owned subsidiary of China’s biggest, and the world’s second largest, insurance company.
“It could have been a much bigger stake, were it not for the strict Chinese foreign ownership rules that prescribe that outsiders can own a maximum of 20%,” says Gore.
Discovery is hungry for global expansion. It surpassed expectation in their forays into the United States of America and Britain, buying up Destiny Health in the US and 50% of Prudential Health in London.
China offers a compelling opportunity and a vast number of customers. China has more than 1.3 billion people, compared to the 50 million in Discovery’s home territory of South Africa. China spends R2 trillion ($237.6 billion) a year on health, South Africa’s R250 billion ($29.7 billion) pales by comparison.
Gore is the first to admit, though, that medical insurance is not something the Chinese do, or know, but all this is about to change.
“The health market in China is going to be huge, one gets a sense that if you get in early you can help shape the system,” says Gore.
His confidence stems from the Chinese government’s plan to introduce major health reforms, including health insurance.
“Chinese private companies are already buying health insurance in huge quantities, while individuals are already starting to buy what they call social health insurance. There are many Asians that understand this stuff. It’s more effervescent.” And sure to help the situation is the strong culture of self-medication and check-ups among the Chinese, what Gore says is an established “prevention mindset”.
Discovery’s entry into China is through its flagship Vitality product, which according to Gore, is the world’s largest incentive-based wellness program.
Vitality encourages healthy behavior that reduces long-term healthcare costs by rewarding members who do things that improve their health by going to the gym, eating healthier and getting regular health assessments. Gore believes Vitality helps to reduce both the occurrence and severity of diseases like obesity, diabetes, heart disease and cancer.
“I feel very strongly that business must have a social purpose. I don’t mean that in a soft, CSI [corporate social investment] way. Business is about progress. We try to create progress for society. A business must straddle innovation and prudence at the same time.”
“I actually think—and I’m not drawing parallels—the Apple obsession with products, is similar to ours. When we started out, our competitors in the medical aid space used to go to boardrooms. We sold our products on the road. I’m a product junkie. I find that inspiring. I’m an actuary by training, but I’m not inspired by money, but by progress.”
Also, he says, gone are the days where people put money in, and never got something out. In China, Discovery and Ping An have already struck deals with China Airlines and fuel retailers for discounts.
“Health and life insurance are typically grudge purchases. Our fundamental success in this market has been making health insurance sexy, cool, accessible and different,” says Gore.
To mark their entry into the market, Discovery and its partners are targeting in excess of 100 million Chinese who are in the middle to affluent bracket; 80% of whom pay for healthcare out of their own pocket. The good news is that Discovery is not going to do the on-the-ground slogging; the potential risk may come with vast cultural differences.
Ping An—which has 70 million customers and is serviced by close to half a million brokers—will do all the selling. Discovery will focus on building the underlying insurance company.
Gore maintains there’s no pressure to make this venture immediately profitable.
“Our approach, generally, is that you don’t bet family jewels in any one transaction. So, at end of the day, if something goes wrong, it doesn’t dramatically affect us. We haven’t committed huge amounts of capital. It’s as aggressive as we can go, but on the other hand, if it’s a complete and total failure, it doesn’t dramatically affect us.”
“If you’re building the underlying insurance company, that takes time. We’ve grown our earnings per share at 25% a year for 20 years. If China takes time, I won’t be concerned.”
Put to him, that his shareholders may have gotten used to quick gains and may no longer be the patient bunch they once were, when they started, Gore maintains: “Our shareholders—and I’m one of them—are long-term focused.”
One of few African successes in China has been Tencent, an internet business owned by South African multinational Naspers. Last year, China alone contributed R2.1 billion ($251 million) to Naspers’ core headline earnings of R5.3 billion($634 million). Interestingly though, Naspers CEO Koos Bekker could only attribute his company’s success to “simply, bloody luck.”
Gore says his industry “is slightly different. You’ve got to do the basics well, build quality relationships with your partners, regulators, and so on. It’s a tough market, and you’ve got to be brilliant”.
“We’ve spoken to a lot of people. We’ve done a lot of work. We’ve got a good feel for all the issues. In China, the relationships and trust are very important. The advantage of being an African company is that you do those things anyway.”

Tag: Adrian Gore

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Bank On This Man

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