ICMIF member the Professional Provident Society (PPS), the financial services group focused solely on providing customised financial services solutions for graduate professionals in South Africa and Namibia, has announced that it has returned exceptional value to its members in 2023, as operating performance improved. The Group announced total profits that were added to its members’ notional PPS Profit-Share Accounts™ in South Africa and Namibia of ZAR 4.54 billion.

“Our operating performance in 2023 demonstrates the resilience of our mutual model, which has served and added value to graduate professionals in South Africa for more than eighty years. The COVID-19 era has shown that it is professionals who – through their disciplined training and experience – drive the solutions that society needs for various challenges. They are also key to the country’s tax base and create millions of jobs. By serving them, our business has a very big impact on society,” said Izak Smit (pictured), PPS Group CEO and Vice-Chair of ICMIF’s Board of Directors.

The Group announced that it had returned ZAR 6.12 billion in total benefits to its members in South Africa and Namibia in 2023, compared to ZAR 5.04 billion in 2022. Of this, ZAR 2.12 billion was in the form of Profit-Share payouts to members who have exited their life risk cover phase, mainly due to retirement. “If we did not operate in a mutual framework, this value would have been paid to outside shareholders. The beauty of our model is that this value was returned to our members with qualifying products, over and above the cover they enjoyed and claims paid to them,” said Smit.

Total gross insurance claim payments were ZAR 4 billion, ZAR 165 million in short-term insurance claims and ZAR 3.84 billion in life claims. Total life claims were ZAR 3.4 billion in 2022. “Although we have seen the number of life claims returning closer to the levels before the COVID-19 pandemic, it is still somewhat higher than our longer-term actuarial expectations, and average claims values were also slightly up. There is still a small COVID-19 impact. However, it is difficult to say what this impact is exactly, because fewer people test these days,” Smit added.

The Group’s life insurance gross earned premiums in South Africa reached ZAR 6.0 billion, an increase of 8.7% compared to 2022. PPS says this strong growth was supported by the Group’s enviable low life insurance lapses, which remained at just under 4.7%. This is despite the challenging economic conditions in South Africa. These low lapses can largely be attributed to the lifetime value PPS offers its members through its mutual model – which cannot be matched by other insurers because PPS says, profits are ultimately returned to members. Life new business in South Africa in 2023 amounted to ZAR 254.4 million, slightly down from a record performance in 2022.

In the ZAR 4.54 billion profit that was announced, ZAR 1.2 billion was operational profits and ZAR 3.34 billion was investment returns. “It is good to see operating profit returning to more than ZAR 1 billion, the level it was before the COVID-19 era. This is of course very much impacted by the claims experience. Paying valid claims always remains our first priority and commitment to our members. Allocating Profit-Share to their PPS Profit-Share Accounts™ after that is an added benefit that our members enjoy, that no other insurer can match,” said Smit. PPS also reported that the strong investment returns were supported by good returns on overseas equities and rand weakness. The last quarter of 2023 was especially strong in the equity markets, pushing annual returns in balanced portfolios for 2023 to double digits after a flat performance in 2022.

Smit said: “Our subsidiary and associate businesses are also starting to make a meaningful contribution to the profits that we are able to allocate to our members. Here we can especially mention strong growth in PPS Investments, where assets under management have grown to ZAR 84 billion in 2023, while the investor number grew to more than 66,500. Net inflows were a positive ZAR 2.5 billion. This in a year when many other bigger asset managers experienced net outflows for the first time in many years due to the challenging economic environment. Our short-term insurance business, which includes personal and business insurance product lines, as well as PPS Health Professions Indemnity, have also returned a profit in 2023. We continue to expect strong growth in future. It was a brave move to enter the healthcare indemnity space five years ago, after many requests from our members, as that market was in distress in South Africa. But we have built this business responsibly and now have a healthy book of insured professionals that grew by 21% in 2023 to more than 12 600. Service is a key differentiator and not only contributes to the low lapse rate but continues to drive the ongoing growth in the number of insured graduate professionals choosing PPS Health Professions Indemnity as their indemnifier of choice.”

PPS Healthcare Administrators’s revenue grew to ZAR 358 million in 2023. A major achievement in 2023 was securing its first client outside of South Africa with administration services being provided for the Botswana Public Officers Medical Aid Scheme.

The Group’s associate business in Australia, PPS Mutual (Australia) is becoming a South African success story in that country, with already more than 11 000 graduate professional members. “We support the operations in Australia from our back-office in Johannesburg and are very proud to have been voted in a survey by the independent Australian intermediaries as the life office that provides them with the best service in 2023,” Smit commented.

In its reporting guidance to its members, the Group cautions against over enthusiastic future investment return expectations based on the good investment market performance in 2023. “Financial reporting is a short-term snapshot in a longer-term continuum,” Smit explained. “It is the long-term average returns that matter. Yes, good years like 2023 push those long-term averages up, of course we are happy about that and want to participate in those bull-runs. But investment returns of growth assets, which usually deliver the best long-term returns, will always be volatile over shorter periods. Given the long-term nature of our members’ tenure with us, we have a unique competitive advantage that allows us to focus on investing in growth assets. Although those assets will experience shorter-term market volatility at times, it is those good long-term returns that we target.”

“We expect conditions to remain challenging in South Africa over the foreseeable future. But we believe that challenges create excellent opportunities. We are working on some exciting projects. Expect market announcements within the next few months about a development that we believe will impact the insurance landscape in South Africa! In everything, we remain true to our purpose, to focus on our members, assisting them to hedge against life’s catastrophes and adding value to their lives,” Smit concluded.