Professional Provident Society (PPS), the financial services company focused solely on providing intelligent financial solutions for graduate professionals, delivered a good 2019 performance despite the prevailing economic conditions. It managed to outperform most of the strategic goals it had set for itself in 2019, thereby delivering substantial member value.
PPS is the only diversified financial services company in South Africa operating under the ethos of mutuality. This means that members with qualifying products participate exclusively in the profits of the PPS Group through the allocation of all profits to their unique Profit-Share Accounts, which accumulate with investment returns.
“It is somewhat surreal talking about 2019 numbers when the whole world has suddenly changed after the year end, within two months, due to the COVID-19 pandemic. Nevertheless, our members benefited from strong operating profits as well as good investment returns in 2019,” says CEO of PPS, Izak Smit. “In addition, we paid R3.7 billion in valid claim and benefit payouts to members. The cover that we provide to members will be even more important in the prevailing environment. Our financial position remains very strong, enabling us to honour all valid claims.
Commenting on the performance, Smit said that, although the business is very happy allocating R4.2 billion in total profit with its members, a big portion of that is reliant on the investment markets, which fluctuate. “And this has been illustrated since year end in the market sell-off due to the COVID-19 pandemic. But we shall remain long-term focused. Our objective remains to outperform inflation by a good margin for our members over the medium to longer term. Such a high growth objective will always be somewhat volatile but is achieved through a balanced portfolio. While growth assets had a torrid time in 2018, we stayed focused and it was good to see these recover in 2019. Given the recent sell-off, 2020 is likely to again be a very tough year in the markets. But we shall not knee-jerk in our investment strategy,” says Smit.
Proving that through its mutual model, PPS gives more to its members, there are 6 804 PPS members with more than R1 million in their Profit-Share Accounts.
Smit added that the Group’s life insurance business continued to grow, with new business volumes up 10% on 2018, supported by lower than industry lapses. “This growth is pleasing in an industry that contracted in the segment that we serve,” says Smit. All the subsidiaries outperformed the profit goals set for 2019, especially PPS Investments, which is on a solid growth path.
“Our members are by no means immune to the prevailing environment,” adds Smit. “In fact, many of our members in the medical fields are on the front line fighting the COVID-19 pandemic. But our experience is that professionals generally display responsible personal risk management, an unwillingness to unnecessarily terminate insurance cover, an urgency to return to their professions after falling sick, and the desire to continue in their professions well into an advanced age. These behaviours lead to lower lapses and claims and ultimately to more profits to share between members,” says Smit.
PPS says that its goal is to be the voice of the professional by playing an influential role where certain factors have a significant impact on graduate professionals. Top of its strategic thinking is the movement of professionals, as their qualifications and experience enable them to choose where to practice and live. Professionals are crucial to the economy due to the skills they provide and the taxes they contribute. Smit says: “We are not shying away from our responsibility to have constructive engagements with policymakers, to contribute and provide the professionals’ perspective on developments such as the National Health Insurance (NHI).”
Independent financial advisers are important business partners in serving PPS’s unique niche market. “It is our purpose as a premium brand to help professionals live the lives they want to live,” adds Smit. “We enable this by delivering best-of-breed intelligent solutions that uniquely serve their needs.”
Among the innovations introduced in 2019 is the PPS Investments Family Network, an industry-first that provides opportunities to build intergenerational wealth at lower administration fees. This fosters a family culture of saving. Pregnancy complications cover was further enhanced to provide female professionals with broader cover in the event of complications during pregnancy and delivery. In response to market shifts, the PPS Health Professions Indemnity was introduced for professionals in the healthcare disciplines to help members focus on their professions with peace of mind.
In further solving the needs of graduate professionals, PPS launched the Functional Disability provider, which covers individuals based on assessment of their ability to function, rather than their capacity to perform specific occupations. This means that PPS’s disability products are now available to a wider range of professionals than before.
Looking ahead, Smit says that the effects of COVID-19 and its impact on the markets and economy will be significant. But in conclusion, he added “It is especially for times like these that PPS was built. It brings us closer to our purpose, looking after the financial security of our professional members. Our resilient staff is committed to this. PPS is well positioned for the new decade and the Group is confident in its strategic agenda. We’ll remain long-term focused and our financial position remains very strong”.
PPS is an authorised FSP.
By Izak Smit, PPS Group CEO