AVBOB
AVBOB
A Funeral Insurance Provider Like
No Other PRODUCTION: Timothy Reeder
AVBOB is the largest mutual assurance society in Africa, providing a complete, one-stop funeral insurance and funeral service solution. It offers the entire spectrum of funeral services via an extensive national infrastructure consisting of more than 280 offices and a manufacturing plant, employing nearly 6,000 people.
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INDUSTRY FOCUS: FINANCIAL SERVICES
FRIK RADEMAN
AVBOB
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The AVBOB Group, consisting of AVBOB Insurance, AVBOB Funeral Service and AVBOB Industries is South Africa’s only mutual society that provides a one-stop funeral insurance and burial service solution. The Group is deeply rooted in South Africa with a history dating as far back as 1918. At this time it existed as a society in the form of a benevolent fund, or burial society, that happened to have the additional capacity to conduct funerals. Almost a century later, AVBOB continues to make affordable insurance available so that all people, whether rich or poor, are given access to a dignified and personal send off when such a time arrives. We asked CEO Frik Rademan to provide some background to the society’s formation, as it nears next year’s celebrations of a century of being woven into South African history. “We started in 1918,” he starts, “primarily because, at that time, many soldiers were bringing the Spanish Flu back with them, which meant that a lot of people died.” Rademan refers here to one of the worst viral epidemics of modern time, which by October 1918 had killed anywhere between 50 and 100 million worldwide, and more than half a million in South Africa alone. In response to the rising funeral numbers, and as a result prices, the Afrikaanse Verbond was established, later to become Afrikaanse Verbond Begrafnis Onderneming Beperk, or the more workable AVBOB. “AVBOB was established when a couple of the poorer citizens came together and, working for nothing, strove to supply or make money available for a decent funeral,” Rademan tells us. “From then the group grew to where we are now, with 320 branches throughout South Africa as well as approximately 24 in Namibia. We have 1.7 million policyholders which equates to 4.7 million lives insured, and offer the entire spectrum of funeral-related products and services.” AVBOB continues to build its family today, and fulfil the objective which was core to its establishment in 1918 of ensuring a dignified and respectful burial for each if its members. Next year will mark see it celebrate a century of playing an
integral part in the lives of South Africans, although as Rademan explains, even such a momentous occasion will play second fiddle to the needs of its policyholders. “We will have a centenary function in Pretoria on the 15th August next year, which will cater for almost 400 people, and we will also budget for allocated funds for all the regions throughout South Africa where we have people, in order that we can hold functions for each of these different provinces.” “Our intention is not to go overboard with parties and the like, however - we’d rather give the money to our policyholders and our employees. We are a mutual insurance company, and this is what differentiates us. As such we are owned by our policyholders and most important for us is to work for them. Over the past nine years we have declared a billion rand of surplus profits to enhance their policy values, and we plan next year to declare a fifth exceptional bonus, which currently we expect to be worth 2.5 billion rand in total. This will be the single biggest declaration to our policyholders to date.” “We have 7,500 loyal staff around the country and we want to ensure that we are rewarding them with a cash bonus, while we also wish to look after the pensioners and those people who have helped us throughout the last 100 years.” This outwardly benevolent approach is one which has also been applied to AVBOB’s sense of corporate responsibility. “Currently we are running a flagship project which sees us donating container libraries to underprivileged schools all around South Africa,” Rademan details of its social investment. Minister of Basic Education, Angie Motshekga, labelled AVBOB the single largest contributor of fully functional container libraries given to primary schools in South Africa, each of which is worth approximately R500 000 and comes with 2 500 books, to benefit thousands of learners. “The success of our involvement saw our original figure of 10 libraries increase to 50, of which we have so far provided 45,” Rademan explains. The delivery of the 50th and final library of this scheme next August will
see the project reach its end. In its place, the Avbob School Infrastructure Project was launched in July this year at the Joe Solomon Primary School in Heideda with a value of R150 million, and aims to provide the learners of nine beneficiaries in total with adequate classrooms in order to accommodate their large number of learners. The investment goes hand in hand with the National Development Plan that aims to eliminate poverty and reduce inequality by 2030. “We will rebuild and renovate nine schools in the nine provinces of South Africa in which we do business,” Rademan says. “It is an historic moment for AVBOB to be launching this project in Bloemfontein, because the society was established here in Mangaung on 15 August 1918.” Assistant general manager, Kebo Mosweusweu, added: “We at AVBOB strongly believe in uplifting the community and making sure that we equip it with the necessary facilities to succeed.” When pressed, Rademan identifies some key factors which have led to AVBOB’s dominance of the funeral insurance field. “We believe that we make it difficult for other players to compete with us; people come to us based on the value proposition,” he offers. “We believe that it is of critical importance that we stay on top of our niche market, and we must therefore be innovative in our products within the funeral market. We are able to offer a number of privileges based on the fact that we are mutual - free funerals, cash bonuses, a year’s premiums back after five years of payments, for example. There is huge competition around every corner, and so in a niche market it is imperative to be the market leader, which is where our mutual status yet again keeps us ahead of the rest.” The combination of these individual aspects has helped AVBOB to continue to excel in the midst of a harsh recent economic climate. “The economy has turned a little against us,” Rademan says, “and we have felt this particularly keenly in our business as we are at the lower end of the market - we work with the people who are losing their jobs, where mines and businesses are closing down.” Its annual
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INDUSTRY FOCUS: FINANCIAL SERVICES
report, however, underlined its resistance to the downturn, highlighting a premium increase of 17.3% to R2.7 billion and a net growth in new business by 7.5%, not to mention the special bonuses both paid and yet to come. “In this our 98th year, the AVBOB Group produced a strong set of results in a challenging economic environment,” Rademan announced at last years Annual General Meeting. “The Society performed exceptionally well, growing net new business by 7,5%. Over the five-year strategic planning period which ended 30 June 2016, the Society grew its net new business by a remarkable 121,0%. The resilience of the product offering, our one-stop service and the expansion of our insurance and funeral footprint supported this growth. This success allowed the Group to expand its workforce by 58,5% over this five-year period.” “Putting the needs of our policyholders first is a value that has been passed from generation to generation and is what gives us an advantage. We therefore base our capital management and strategic decisions in terms of our mutual status.” AVBOB has been a mainstay of recent South African history, and Frik Rademan part of the fabric of the company. As his time as CEO nears its end, we asked him to provide some insight into the legacy he will leave since taking up the post. “I have worked my way up through the Group over the course of the last 35 years,” he tells us. “I was appointed as CEO six years, at a time when things were not going terribly well for AVBOB. We had negative growth in more or less all sectors, but a focus on our strategies and our plan meant that we were able to turn things around, and at board level it is vital that we continue to apply these strategies and our differentiators.” “I have also been appointed to write a book about AVBOB and its history, which will be brought out next year. I have interviewed in the region of 110 people across the Group, a wide-ranging sample which includes pensioners, senior staff, funeral undertakers, and many more. What will be made clear in the book too is that since my taking over, the face of AVBOB has completely changed, but I have always
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tried to make these changes without frightening people or making it seem a daunting process. Without explicitly telling people, I started to implement new ideas and directives within the company, and in this way I got their support. I think the success of this is evident in our tremendous growth; over the last six years we have increased our business by 156% and our premiums by 142%” “I am very proud of what we have achieved, and of having become a top employer which would have seemed impossible six years ago. I cannot do anything without the right people, however, and it has been invaluable to have them behind me and have their support, which allowed us to make this transformation so successfully and position us where we are now.” Indeed, the research of the Top Employers Institute revealed that AVBOB provides exceptional employee conditions, nurtures and develops talent throughout all levels of the organisation and has demonstrated its leadership status in the HR environment, always striving to optimise its employment practices and to develop its employees. AVBOB’s 2016 annual report also refers to the mutual assurance society as the ‘pacesetter’ for the industry - the frontrunner with whom the rest must fight ever harder just to keep them in sight. With his customary humility, Frik Rademan justifies AVBOB’s current assessment of its position; after all, the nature of business dictates that one player must emerge ahead of the competition, and it would be near impossible to argue against AVBOB’s residing at the top of the funeral insurance game at this juncture. “Without wishing to sound arrogant, I believe we are the market leader,” he begins, “but there is still room for us to things better and more effectively. I do think that most people regard us as the leader in this industry, however, which ultimately is integral to our strategy.” Rademan is able to point to additional recent proof to further strengthen such a claim, revealing AVBOB’s success in the largest and most widely-referenced service excellence benchmark in South Africa. “In the AskAfriKa Orange Index
Service Excellence Awards we achieved the number one spot among the long-term insurers. To scoop this, we are competing against all of the big names - Mutual, Liberty, Momentum - and we are sitting within our niche market with our two or three main products. To be recognised to this extent underlines that we are doing exceptionally well.” Launched in 200l, the Orange Index’s longevity is testament to its ability to provide a reliable yardstick for service measurement in South Africa. With this in mind, we asked Rademan to turn his attention to AVBOB’s goals for the coming months and years. Would the continuing to increase its footprint into the rest of Africa, for example? “While we already have 24 branches in Namibia and it is certainly a big country, there are only two million people living there, which makes it a difficult place to do business,” Rademan lays out. “We are expanding toward the north though, as that is where most of the population is found.” “Our focus is more on obtaining growth in South Africa, and since last year we have been working towards this. Within the next two years we want to open another 100 branches, mostly in the rural areas, to get closer to our policyholders and provide them with an even better service.” “One of the key differentiators that sets us apart is that we are the only funeral insurance provider that can supply the funeral service itself, and we also have our own factory to supply the parts to the market,”Rademan begins to wrap up.“We believe that we can offer a one-stop service, and this, together with our mutual status, gives us the edge over our competitors. We believe that if we can grow organically, open branches and get our products to the people, there is still much room for growth and expansion. We will then consider if it is the right time for us to make our move into the rest of Africa.”
AVBOB +27 12 303 1000 info@avbob.co.za www.avbob.co.za
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AFRICA
THE BUSINESS MAGAZINE FOR AFRICA’S INDUSTRY LEADERS
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Issue No.64
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A S F E AT U R E D I N
ENTERPRISE AFRICA
OCTOBER 2017