Joburg Central Syndicate:

MBL5905 Booyse, Conrad

Geyser, Walther
79502377
79319882
ASSIGNMENT 2 Mahlangu, Thembisile 79306802
Mokabane, Aaron 79465536
Thabethe, Mpumelelo 79306829
Thathani, Frans 79466990
Potgieter, Craig 71673695
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QUESTION 1
Bryte Insurance Company (BRYTE) is a subsidiary of Fairfax Financial Holdings, who bought Bryte
from the Zurich Insurance Group in 2016 for R1.8bn. Fairfax has bought a further 7.15% stake in
reinsurer Africa Re and a 50% stake in specialist liability underwriter Camargue, through another of UNPARALLELED
its subsidiaries, Brit Insurance. SECTOR
INSIGHTS
In its April 2017 Monetary Fairfax has reportedly
Policy Review (MPR) the South identified significant growth
UNIQUE
African Reserve Bank (SARB) potential for insurance in BUSINESS RISK
South Africa, especially when SELLING PROVEN
anticipates slight SPECIALIST
improvement in growth over taking its developing POINTS EXPERTISE
its 2016-2019 forecast period. transformation agenda; and
Although there is a notion that a strong culture of insuring
the economys fundamentals valuable assets into account.
are be-coming less unstable, From a demand perspective, FORESIGHT
economic growth remains Fairfax suggests that this Bryte Insurance is the premiere proactive
weak by any standard. resembles other emerging business risk specialist. Applying our
markets where people are
Bryte is predominantly a short increasingly acquiring unparalleled sector insights, proven
term insurance and valuable assets needing to be expertise and foresight, we partner with PARTNERSHIPS
commercial risk specialist, insured something that is not
operating in Southern Africa necessarily the case in all customers and brokers to
with its parent company, countries. To this extent it is PROTECT THEIR BUSINESS and
Fairfax Financial Holdings, important to closely examine
being based in Toronto, the relative STRATEGIC IMPROVE THEIR RISK PROFILE in Africa.
Canada. RESOURCES- And CAPABILITIES CUSTOMERS &
available at Brytes disposal.
BROKERS
 RESOURCE AND CAPABILITY IDENTIFICATION

STRATEGIC RESOURCES CAPABILITIES

EXAMINED AN INDUSTRY-SPECIFIC
CONDUCTED A
FIELDS VALUE CHAIN
RESOURCE
CONSIDERED:
Value Chains describe the chain To identify engages
of activities in which an organisation commontoindustry competencies
add value to a product. A&value
capabilities
ANALYSIS
chain may vary in complexity from one industry to another, and also between competing firms within a given
industry. A general distinction is made between primary- and support activities that take place within the firm.
Physical
Price Waterhouse Cooper (PwC) China have proposed the following components in respect of the insurance
Resources CONDUCTED A FUNCTIONAL ANALYSIS OF BRYTE
industry value chain, which we present in the following modified model:
By interviewing functional heads of the business, in order to
establish the working dynamics within the Company
Intangible
Resources

Human CLASSIFIED THE RESPECTIVE RESOURCES & CAPABILITIES

Resources By sorting them across the range of threshold-;
distinctive-; and dynamic capabilities, in order to
understand Brytes competitive edge.
 TYPE RESOURCE ANALYSIS AT BRYTE
Head office premises taken over from Zurich
Insurance, located at 15 Marshall Street,
Physical
Johannesburg, together with numerous other
office locations around Southern Africa.
Newly developed Corporate
Identity, stemming from Zurich
Extensive
acquisition in 2016.
Intellectual
Established business systems
capital
(SEE NEXT SLIDE); largely
gained
BRYTE obtained through the acquisition
through
STRATEGIC of Zurich Insurance.
RESOURCES Intangible acquisition
Zurich customer databases and
incumbent infrastructure.
Organisational Culture within the human
capital base has vested through Zurichs time
of engagement.
Well-established range of specialised
insurance products and services.
The management team in particular has been
Human retained from acquisition, with the Company
Resources reporting on satisfactory historical
performance of this team.
STRATEGIC VALUE
Physical premises assist with conducting of
business and serve as regional anchor points
that will support the corporate strategy of
expanding across Southern Africa.
Intangible resources, according to Venter &
Louw (2013), can be leveraged in value
creation by extending the product and
market scope of the brand. In the case of
Bryte, there is a wealth of intellectual capital
that was acquired in the formal business take-
over in 2016, thereby placing the Company in
a competition-ready state, as compared to
having to build this particular asset base from
the ground up.
An established and experience management
team comes with important organisational
knowledge, which aids in delivering optimal
performance output.
 FUNCTIONAL ANALYSIS AT BRYTE
FUNCTIONAL
CLASS CROSS-OVER CAPABILITIES LNKED RESOURCES
AREA
Threshold Product improvement Human resources
Product
Threshold Customer value analysis Human resources
management
Threshold Profitability monitoring Analytical cost system
Threshold Analytical solutions Human resources
Actuarial Threshold Risk Management Strategy Human resources
Threshold Rating integrity processes Human resources
Threshold Distribution management IT Platform and portal
Sales and Threshold Customer relationship ownership Human resources
BRYTE Distribution Threshold Sales process improvement Human resources
STRATEGIC Threshold Pricing Analytical cost system
CAPABILITIES Threshold Record keeping Core information and workflow systems
Finance Threshold Planning and reporting Human resources
Threshold Financial capital management Human resources
Distinctive Large loss project management Human resources
Threshold Claims processing Core information and workflow systems
Claims
Threshold Claims cost control Supply chain partners
Threshold Fraud detection Automated fraud identification system
Threshold Risk selection IT platform and portal
Underwriting Threshold Policy acquisition and servicing Core information and workflow systems
Threshold Reinsurance Core information and workflow systems
Strategic leadership and
Management Threshold Management Team
human capital management
QUESTION 2
Schoemaker (1995) suggests that scenario planning amounts to a disciplined [and structured] method for imaging
possible futures in which organisational decisions phase
The Preparation may of betheplayed out. Inrequires
TAIDA model order the
for analyst
us to have conducted
to put in place the a successful
scenario analysis of Bryte, it was essentialfollowing
to settlematters,
first upon
prior a
to guiding model
commencing with any
hence theactivities-:
tracking Kairos Future TAIDA process
model was selected. The model entails 5 steps (Tracking, Analysing, Imaging, Deciding and Acting), preceded by an
extensive preparation phase, which 1. serves
Defineto
the purpose and
channel of theguide
process toentire
the be undertaken
analytical- and planning process.
2. Identity the system [or part thereof] that has to be analysed
3. Determine the organisational context (i.e. its history, competitive landscape and
main indicators of changes in its environment)
PREPARATION TRACKING ANALYSING IMAGING DECIDING ACTING
4. Define the focal question
5. Set the time horizon
PURPOSE ORGANISATIONAL CONTEXT aimed at becoming the premiere, proactive
This preparation phase, according to Lindgren and
The purpose of this analysis is to present a scenario Brytes history dates as far back as the 1800s when business Bandhold (2003), forms
risk specialist an Africa.
in Southern
planning framework to Bryte that will aid essential part ofCompany,
the its ancestor the overall scenario
Star Life, soldanalysis and sets the relevant context and
its first policy.
Company in strategic decision making, and to Thereparameters for the
were several later balance
exchanges of the
over thecentury
scenario planningtoprocess.
According Bryte CEO Edwyn ONeill, about 80% of
develop recommendations for future strategy affecting Company ownership until the Zurich Brytes business comprises commercial and specialist
development at Bryte, based on the scenarios Insurance Group was formed in 1984. Between 2015 lines of insurance written through independent
tested during this exercise. and 2016, Zurich undertook a comprehensive brokers. Whilst the Company continues to focus on
PARAMETERS OF THE CURRENT PROCESS strategic review in order to re-plot its position in the these lines through specialist in-house underwriting
In order to influence strategic decision making at a global marketplace, and in July 2016 Fairfax managers, it was reported in Business Day Live (2017)
high level within the Company, it was important to Financial Holdings made a bid to take over the that Bryte would soon consider entering other
ensure that an organisation-wide analysis was business. Once regulatory approvals were obtained African countries and pursuing growth strategies
conducted. The outputs of the scenario planning within South Africa, Botswana and Mauritius, the once it had bedded down its own transformation.
process should then be filtered down into the Bryte brand was launched in February 2017 with an Bryte therefore currently competes in the highly
Company as a means of guiding strategic planning. innovative brand strategy and business operation regulated short-term insurance market.
COMPETITIVE LANDSCAPE AND MAIN INDICATORS OF CHANGE
Over the last five years, the Gross Written Premium (GWP) within the South African insurance market has grown by 27%,
with an improvement in underwriting profitability of 12%. Bryte grew their business by only 9%, with profitability decreasing
by 4% since 2012. Bryte has reportedly not demonstrated the same growth and profitability trends as the rest of the local
insurance industry. For purposes of an accurate analysis, it is necessary to understand the interdependencies between
various past- and future business- and economic factors. According to the International Monetary Fund, growth for 2018
is projected at 1.9% for developed economies, and 4.8% for emerging/ developing economies. The main areas of risk to
be considered relates to increasingly inward-looking policies, geopolitical tensions, weak governance and corruption.
The effects of these risks could disrupt global supply chains, lower global productivity and less affordable consumer
goods, harming low-income households (World Economic Outlook Update, July 2017). Despite various economic
challenges, the insurance industry shows good promise, considering historical growth and favourable profitability trends.

Focal question: how can Bryte grow business profitably, and increase
market share over the next five years?
SHORT-TERM INSURANCE INDUSTRY

As in most industries, organisational capability in the insurance

KEY INDICATORS (PwC, 2016):

industry is greatly influenced by developments in technology.

According to KPMG (2017), robotics, machine learning and
block-chain technology are some of developing technologies
proposed to disrupt the way that the business of insurance has
been done for the last few decades. Investing in these as
productive assets could potentially enable insurers to build
distinctive and dynamic capabilities.
 PREPARATION TRACKING ANALYSING IMAGING DECIDING ACTING

DRIVING FORCES TRENDS

The process of establishing which trends, drivers and uncertainties influence the focal question
Technology a) Offering basic
Sustaining services free of
technologies (h)charge
and disruptive
Business improvement b) Consolidation of supply chains
Corporate-social Responsibility business
c) Variety
models
in channels
In this analysis,
(j)of are
the main
the
interaction
driving
most
forcesand
dominant
integration
of change and of
Organisational Culture uncertainty
communication
driving were identified
trends. The and studied,
platforms
most relative to known
dependant trend
Economy d)trends within the
Self-service insurance industry that inform adjustment
functionalities
relates to capital
or development within investments
the current set of
e) Real-time tracking of claims and transaction
(k) by insurers
strategic in
resources
and capabilities. In line with the Kairos TAIDA process, trends
f)sustained
Customertechnologies
reward programmes suchofas; self service
were sourced using a combination media scanning,
g) Radicalmedia cost
watch cutting
and measurers
qualitative interview methods.
functionalities, real-time tracking and platform
h) Sustaining technologies/ investment in incremental
integrations.
improvements Theandcombined
innovation forces, including
i) Linking
Increasingly
back to thesoftfocal
market environment
question, a cross-impact analysis
disruptive new business models and the sustained
j) (LEFT) was performed
Disruptive business in models
order to further explore impact
of particular
k)technologies,
Capital uncertainties
appear (i.e.
investment to the
be effect of disruptive
interrelated with
entrants on the market; and the decision to invest in
soft market
incremental conditions,
technology driven and
improvements byinnovation)
noticeable on
scenario planning.
capital investments in replacing operating-
and workflow systems.
 PREPARATION TRACKING ANALYSING IMAGING DECIDING ACTING

The process of establishing interdependencies between trends and creation of a strategy map
IMPACT OF DISRUPTIVE BUSINESS MODELS

Minor Major
The Analysing phase of the TAIDA model requires the creation of a
scenario matrix whereby the two greatest driving trends identified
Minor in the tracking phase be plotted in a 2x2 matrix. The matrix depicts
scenarios with low impact at the top left quadrant and high
Not in the game Fighting chance
impact at the bottom right quadrant

INVESTMENT IN
TECHNOLOGY Leader
Fightingof the pack
Chance
In
Notthis
Bryte scenario
inhas
the commited
game Bryte the impact of
to investing in disruptive business
start ups models
has not
been
The
but lacksevere and
of investing
neglects as a
in precautionary
technology, resources and Bryte
competitors buildinghasup
embrace invested
dynamic
technology
Survivor Leader of the pack
extensively
capabilities
and leave Brytein
hastechnology
taken
behind resources
Bryte that
out of the is improving
game technical
and failure is
efficiency
Survivour and resulting in the reduction of the operating costs.
imminent.
Major Brytes market
Bryte invests in share is increasingand
new technology in terms
keepsofup gross
withwritten
the
premium
competition andbut thedoes
operating costs
not stand are
out ofreducing
the crowd asand
seen in the
combined ratio reducing
maintains market share
 PREPARATION TRACKING ANALYSING IMAGING DECIDING ACTING

Once Tracking and Analysing is complete, the future visions of the scenarios are imagined

Underlying assumption in all

scenarios is that the Industry GWP
Scenario
Scenario
D:A:
Scenario
Scenario B:analysis
Not
C:LeaderSurvivor
inofthe
Fighting game
chance
the pack growth rate remains at 5.8 % per
300
300
300 6.0%
6.0%
8.0%
12.0% year
Bryte
Bryte GWP
GWP
Bryte
Bryte GWPGWP
7.0% Bryte GWP
250
250
250
250
250 5.0%
5.0%
10.0% (R
(R(Rbil)
bil)
(R bil)
bil)
(R bil)
6.0%
200
200
200
200
200 4.0%
4.0%
8.0%
5.0%
150
150
150
150
150 3.0%
3.0%
4.0%
6.0% Scenario
Scenario
Industry
Industry
Industry
GWP
Industry
Industry
((Rbil) Scenario
NotSurvivor
in the game
Scenario
100
100
100 3.0%
2.0%
2.0% GWPGWP (R
GWP R(bil)
bil)bil)
( RR bil)
100
100 4.0% GWP
Leader of the
Fighting pack
chance
2.0%
5050
50 1.0%
1.0%
50
50 2.0%
1.0% From2017
From 2017Bryte
Brytestagnates
continuesgrowth
to grow
000 0.0%
0.0% From
Fromat 2017
and only%Bryte
1.8
2017 GWPinvests
Bryte
manages to in
growth
embraces new
rate
keepnew
00 20122012
2012 2013
2013
2013 2014
2014
2014 2015
2015
2015 2016
2016
2016 2017 2018
2017
2017 2018 2019
2018 2019 2020
2019 2020 2021
2021 2022
2022 0.0%
0.0% Market
Market
BryteGWP
Bryte GWP(R (Rbil)
bil)
2012
2012
3.4
3.4
2013
2013
3.8
3.8
2014
2014
3.5
3.5
2015
2015
3.7
3.7
2016
2016
3.7
3.7
2017 2018
2017
3.8
2018 2019
3.8
2019 2020
3.9
2020 2021
4.0
2021 2022
4.0
2022
4.1
Market
Market
Market
share
share
business
compared
business
market models
share to
models and
at the
and
4.4 % sustains
insurance
increases
through
Bryte GWP (R bil) 3.4 3.8 3.5 3.7 3.7 4.3 4.5 4.7 5.0 5.3 5.6 share
share
BryteGWP
Bryte GWP(R
IndustryGWP
Industry
Industry
(Rbil)
GWP((R
GWP
bil)
(RRbil)
3.4
3.4
bil) 72.4
bil) 72.4
72.4
3.8
3.8
75.8
75.8
75.8
3.5
3.5
81.8
81.8
81.8
3.7
3.7
88.4
88.4
88.4
3.7
3.7
92.1
92.1
92.1
4.29 6.16
4.87 5.03 7.57
97.1 102.3
97.1
5.84 9.11
102.3 107.8
6.73 10.80
7.69 12.65
107.8 113.7 119.8 126.3
8.73 share technology
industry
market share
technology push effectively
rateinvestment.
ofat5.8 %. per
0.5% Effectivly
year
Bryte
IndustryGWP
Industry GWP( (RRbil)bil) 72.4
72.4 75.8
75.8 81.8
81.8 88.4
88.4 92.1
92.1 97.1 102.3
97.1 102.3 107.8
107.8 113.7
113.7 119.8
119.8 126.3
126.3
Marketshare
Market
Market share
share
Marketshare
Market share
4.7%
4.7%
4.7%
4.7%
5.0%
5.0%
5.0%
5.0%
4.3%
4.3%
4.3%
4.3%
4.2%
4.2%
4.2%
4.2%
4.0%
4.0%
4.0%
4.0%
3.9% 4.4%
4.4% 3.7% 4.4%
4.4% 6.0%
3.6% 4.4%
4.9% 7.0%
3.5% 4.4%
5.4% 8.0%
3.4% 4.4%
5.9% 9.0%
3.3%
6.4% 10.0%
6.9%
increases
losing market
GWP+-growth
0.2 % ofkeepshare
market at
share%per
1.0
to industry
4.7% 5.0% 4.3% 4.2% 4.0% 5.0%
peryear
benchmark year5.8 %
PREPARATION TRACKING ANALYSING IMAGING DECIDING ACTING

The process of establishing which trends, drivers and uncertainties influence the focal question
PREPARATION TRACKING ANALYSING IMAGING DECIDING ACTING

The process of establishing which trends, drivers and uncertainties influence the focal question