IA: Most of us first heard about the plan to buy out RL360° from the Royal London Group on 14 Nov, but we were told that it had been in the works for months. How have the last five months been for you and your team?
David Kneeshaw: In a strange way, it’s been fairly uneventful, post the announcement. Life has largely just carried on as normal.
I suppose for those who were most closely involved, the most exciting time was actually the month leading up to the announcement.
Almost immediately afterwards, Simon Pack [sales director] and I went on a bit of a mini world tour, giving presentations – 12 countries in 14 days – leaving Natalie [Hall, marketing director] and the rest of the team to manage things in our absence for a bit.
Throughout the second half of November, we dealt with lots of people ringing up and emailing us, congratulating us, wanting to speak to us and see us and hear all our plans.
Since then, we’ve just been getting on with it, and things are pretty much back to the way they were. RL360° is, after all, at its core still the same business it was before the announcement.
IA: Is it really the same business? Have you not made major changes, now that you are no longer under the thumb of the Royal London Group?
DK: We want to grow and expand, we want to be bigger and better, of course. But that’s not a different direction for us. We always were looking to expand, to be bigger and better.
In fact, I think it is important to say that we are not looking to make major changes to what we were before. Our critics will probably say at this point, “well, you know, perhaps they should change”.
We did the buyout not to change the company, but because we like what we’re doing, and we wanted to carry on doing it. And Vetruvian [the private equity firm that is RL360°’s buyout partner] backed us, as did Munich re, and others, not because they wanted to change the company either, but because they didn’t want it to change, particularly.
One thing you have to remember is that even when we were owned by Royal London, we always had our own strategy, and our own infrastructure, and our own approach to doing business – apart from the group.
That was always one of the appeals of this business, that it was a holistic unit, with its own infrastructure. Therefore it could be bought as a turn-key operation.
There is one big difference though. That’s the fact that, now that we are an independent company, the total focus of our shareholders is on us. Whereas, the reality is that however good an owner royal London was – and it was a good owner – it had plenty of other things to focus besides us.
So that means the pace at which we can make strategic improvements, for example, is quicker.
Otherwise, apart from some branding – and some hard work has gone into that, including reminding everyone to call ourselves RL360°, and not Royal London 360° – and some IT separation, basically the business has just carried on as normal.
And I think that’s quite crucial: What people were buying into is what we’ve been doing for the last five or six years.
IA: So the business will remain much the same, but you are hoping to make it ‘bigger and better’. Does that mean you are looking to expanding abroad?
DK: We had a moratorium on [making major changes to the business] while we were negotiating the buyout.
But we have long seen our future growth coming from overseas, and we had been looking to move into South America for a while. A number of our rivals are there already, including Zurich, Friends Provident International, Skandia and Generali. And now, subsequent to the sale having gone through, we are able to just make a decision and do it.
We were helped in this by having obtained, in January, a glowing financial assessment report from AKG, the actuarial company that does financial assessments on life companies. Because after the buyout, obviously, we couldn’t continue to piggyback on the financial strength of the Royal London Group, as we had been able to before.
The AKG report therefore was really important to us, and so from a financial stability perspective, as well as to reassure our long-standing distributors and other business partners, it has been something we have been calling attention to. We want people to know how well capitalised we are.
IA: Do you have your sights on any other markets besides South America; is there a master plan, and if so, what does it look like?
DK: The phrase we use internally to describe our strategy going forward is “evolution, not revolution”.
Basically we see RL360°’s growth coming in three ways. The first is organic growth, which we see coming from doing pretty much what we have been doing. Over the last two to three years, we’ve been growing at roughly 25% each year, compounded, and we see no reason for that to change. And so organic growth in itself will make us a more substantial business.
New products and line extensions will be part of this strategy; for example, we introduced a capital redemption option for Quantum, our international regular savings product, at the end of January, and a capital redemption version of the PIMS portfolio bond at the end of March. We’re working on a capital redemption version of Oracle now.
[Under a capital redemption policy, a product has no lives assured, giving investors extra flexibility in their tax planning.]
The second area where we see growth coming from is in expanding into new regions. I mentioned South America, but we are also in the advanced stages of making our products compliant for the Qatar market, and we believe there’s more scope for growth in Southeast Asia, where we have had a Hong Kong office for some time.
Without wanting to go into detail at the moment, I can say that we would expect to have more of a presence in that region as well during the course of 2014.
Thirdly, we’ve never kept secret the fact that we’d like to acquire another life company at some point
The birth of Royal London 360° – now RL360° – came about by the bringing together of Scottish Provident International and Scottish Life International [in 2009]; so we know how to go about bringing two companies together. We’ve done it before, and made a success of it before, and we look forward to doing it again.
IA: What do you see as the big trends in the international life products industry right now?
DK: I see three main trends, which overlap and are playing out against each other at the present time.
The first is technology. There is and will continue to be a huge trend towards greater investment in technology, and it will always be ongoing. If you can’t keep pace with that, you’re going to struggle. You need multi-currency systems, you need online services; you need online dealing, you need extra-net.
Wrap platforms are a part of this technological shift. In the international space, those platforms that can provide a proper, multi-currency platform service, technical expertise, and which distribute in a number of important regions globally, are beginning to make big headlines right now.
We see this as absolutely core. If you’re a life company and you’re not linking up with the key international platforms in a properly integrated way, as we are, you’re going to be left behind.
The second big trend is growing regulation. I don’t think it is necessarily a bad thing, as some people do. It is just something that anyone who is working in the financial services industry today has to accept. You can complain about it or you can buy into it, but either way, it’s going to happen.
At RL360° we choose to buy into it, on the basis that where you get more regulation, you sometimes also get more clarity about how to operate, and greater opportunity. For instance, it sometimes lets you operate where you previously weren’t allowed to.
Growing regulation often adds costs, but again, you can’t complain, because it’s going to happen anyway, so you might as well roll up your sleeves and get stuck in.
Where it can get difficult, not to mention expensive and frustrating – for life companies as well as advisers – is where you don’t have consistency or clarity in the regulations being introduced, or where you get a set of directions, and then there’s a change two or three years down the road.
What we want, and need, in order to plan for the future of our business, is clarity, decisiveness and consistency in the regulations we must abide by.
The last big trend is the growing international nature of the life business. There are going to be some 4 billion more people added to the world population over the next 20 years. Three billion of those are going to be in
Asia, and 1 billion are going to be in Africa. These are the areas where there is going to be the fastest-growing middle class, who are the sorts of people who normally consume our products and services. The direction of change is clear, and it is not in the direction of Western Europe.
Again, you can either buy into that trend or not; we hugely buy into it.
IA: Which are your most important markets at the moment, and how, if at all, do you expect this to change?
DK: In pure revenue terms, Asia and the Middle East are probably the biggest. The UK, where we are sold exclusively through wrap platforms, represents roughly 15% of sales, so it’s important, but not dominant.
Looking ahead, as I said, I’m a huge believer in the potential of the African continent. Not just in financial services, but in its own development, and its own political development. I see Africa becoming the next Asia within the next 10 to 15 years. And a similar story for South America, where we are just starting now from a base of zero.
IA: As you’ve been going about setting up RL360° as an independent life company over the last five months, what has been the biggest surprise?
DK: The biggest surprise has been how much affection and support we received from the industry, and our friends.
After the deal was announced in November, I don’t think we got a single negative remark. From anyone – from advisers, from rivals. I even had some senior executives from rival companies writing to me, saying “this is fantastic, well done”.
Advisers have been absolutely unanimous in their support; we haven’t had an issue with a single one. I think the AKG report helped, by providing the reassurance that everything would be as good as it was before.
So that surprised me – I was slightly under-prepared for that wave of affection.
