JOHANNESBURG – Investment holding company, Rand Merchant Insurance (RMI) hopes that the type of entrepreneurs who started OUTsurance and Discovery will emerge from its next generation financial services platform, AlphaCode.
RMI’s investments include Discovery, MMI Holdings, OUTsurance and Rand Merchant Bank (RMB) Structured Insurance.
Launched at the beginning of this month, AlphaCode is essentially a club where membership is given to “worthy and interesting entrepreneurs who we would like to participate in our endeavour,” said RMI CEO, Herman Bosman via telephone from Johannesburg.
“What we are trying to create is a space where entrepreneurs can – through management services, interaction with other entrepreneurs and access to our network of associate companies – start the businesses they dream of,” Bosman explained.
The club has 25 gold members so far, including three entrepreneurs from SME lending business Merchant Capital, in which RMI took up a 25% stake earlier this month. Using technology, Merchant Capital’s business model allows clients to repay their loans based on the cyclical nature of their businesses.
AlphaCode membership is categorised according to four levels: green, gold, platinum and diamond. Platinum and diamond memberships are offered by invitation only, with platinum membership geared for high-potential BEE entrepreneurs and diamond membership offered to high-growth businesses.
What types of businesses is AlphaCode looking for? Essentially anything pertaining to the disruption of traditional financial services.
“We like data analytics, we think the power of processing and understanding consumer behaviour through data is incredibly strong,” Bosman said.
He said the “socialisation of finance” – such as peer-to-peer lending and crowd funding – and the automisation of wealth management, through robo advisors for example, are also areas of interest.
“We are quite weary of payment processing. We think it’s over populated and a very competitive part of fintech,” Bosman said.
AlphaCode’s investment decisions will be made based on a view of what the future of financial services will look like, said Bosman, listing regulation, collaboration, demographics and technology as some of the themes shaping this future.
In its results statement for the year to June, RMI said that it is “actively seeking to fund and scale new disruptive business models”.
“RMI has recognised that the core business of its underlying portfolio companies is now, more than ever, being influenced by new, disruptive ventures given the rise of shaping forces such as technology, social media and the millennial generation,” RMI said.
In the year under review, RMI grew earnings 5% to R3.2 billion, a solid but not exceptional result, said Bosman.
He pointed out that the strong operational performances achieved by its portfolio companies were diluted due to the significant investments made by Discovery, MMI and OUTsurance into the future growth of their businesses.
Natural catastrophes in Australia had a significantly negative impact on OUTsurance’s Youi business in the country, Bosman said, causing OUTsurance’s normalised earnings to fall 4% to R1.4 billion.
RMI added another portfolio to its stable during the year in the form of RMI Investment Managers, which has made a number of investments into asset managers. Its distribution partner is MMI.
Bosman said he is happy with the cash generation and leadership stability across the portfolio of companies, as well as the positioning of the group going forward.
RMI declared an ordinary dividend of R1.16 per share, a 7% increase on the prior year.