With a history dating back to 1913, Assupol Life has grown to become a market leader in the financial services sector. CEO of Assupol Holdings Rudi Schmidt says: ‘The core of our business is built on the low-income market, unlike other players in the middle- to upper-income segment that offer products in this sector. We understand this market well and that’s why we can serve its needs better.’

Assupol was established in 1913 and registered as a long-term insurer under the Long-term Insurance Act in 1960. In the 1990s the company expanded its range of products to the public and is now a fully fledged life insurance provider with products that include basic funeral cover, pure life cover (both underwritten and not), an education fund, savings and retirement annuity.

Schmidt explains that currently funeral cover is the most purchased of its offerings as, for individuals in the lower LSM market, the ability to provide a dignified funeral for themselves and their family is vital. Education investment is also reflecting an increased interest as schooling becomes key for many families. ‘As financial literacy in this market improves, we expect interest in our savings and RA products to pick up,’ he says.

For its products to be affordable in the lower-income segment, the company has to be particularly conscious of its costs: ‘We don’t have an elaborate cost structure so we can offer affordable, relevant products.’

Assupol has accomplished much in the last century, but one achievement that stands out most is the demutualisation process of 2010. Prior to this, the company operated a Mutual Society owned by its members. Schmidt says: ‘The value belonged to our members, but they had no way of accessing it. Part of the strategy to incorporate the company was to allow for equity and release value to the members while giving us access to the capital and debt markets.’

The demutualisation saw the policy holders become shareholders of the company. More than 240 000 shareholders were offered the opportunity to convert their shareholder’s rights into a cash consideration, which resulted in approximately R891 million in cash being paid out to more than 210 000 policy holders in 2013.

‘For the lower-income segment, under the current economic pressure, there was more value in the cash than holding shares of an unlisted equity. This transaction was probably the largest wealth distribution of an unlisted company ever,’ says Schmidt, adding that up to 90% of the recipients were historically disadvantaged South Africans.

This process was an opportunity for Assupol to raise capital and acquire three key strategic investors – the International Finance Corporation, WDB Investment Holdings and Investec Private Equity – with shareholdings of 20%, 12% and 30% respectively.

At the start of the demutualisation, the intention initially was to list Assupol on the JSE but, Schmidt says, that has now become a medium-term strategy: ‘It is something we will look at doing further down the line as the company is well capitalised with no debt. Our key stakeholders came on board between 12 and 18 months ago, so they are not keen to sell their shares at this point.’

Those interested in investing in Assupol can now acquire shares through its OTC system via the company website. Schmidt says the share price has more than doubled since shortly after trading went live and there is around 12% liquidity, which provides access to potential investors.

Other players in the market are trading at their embedded value or at a premium to their embedded value, while Assupol is still trading at a discount to its embedded value, Schmidt says. ‘Assupol shares offer good value to the value investor via a good platform. If you look at the demographics, there are more people in the lower-income segment who need to be insured, which means more opportunity for the growth of the company.’

Niel de Klerk, CFO of Assupol, says the company has grown its sustainable profits in excess of 15% over the last five years, while its embedded value has grown by more than 22% over the same period. Investors can expect the value of the company to grow between 17% and 20%.

Assupol’s aim to make a difference in the lives of its clients will soon be extended to others in the community in which the company operates. As part of the demutualisation process, the company was able to create a community trust that owns 6% of the company, and this will contribute towards early childhood development in the areas where it does business. ‘The money will be deployed to uplift children in the emerging segment of the market. We believe we cannot be great if we cannot do good,’ says Schmidt.