Purpose of mutuality clear for PPS as it shares profits with members following unprecedented year

19 April 2021


In a year in which COVID-19 impacted lives and livelihoods, South African ICMIF member PPS remained focused on delivering its core purpose of paying valid claims and protecting its members’ financial health.

Despite the challenges of the pandemic, due to its strong balance sheet and inherent profitability of its risk pool and the businesses, PPS was still able to allocate ZAR 2.2 billion (USD 154 million) in 2020 in total profit to its members with qualifying products.

Over the last 10 years, PPS has shared ZAR 27.7 billion (USD 1.9 billion) in total cumulative Profit-Share allocation to members. The company, which operates on the ethos of mutuality, also announced that there were 7,561 “Profit-Share millionaires” (members with more than ZAR 1 million in their Profit-Share Accounts) in 2020, an increase of 11% from the previous year.

The ethos of mutuality as a differentiator

PPS celebrates its 80th anniversary in 2021 and, throughout its existence, it has demonstrated resilience, recorded steady growth and consistently provided services to its members without disruption.

PPS says it is unique in the South African financial services industry, differentiated by its ethos of mutuality. “This has proved its value as we mark 80 years since PPS was founded by a group of hard-working dentists who chose a methodology which is nowadays not so common in financial institutions. Mutuality permeates every aspect of our business – from the way we are structured to how innovations are designed. The past year has again confirmed the purpose of our existence: to protect our members and their families so that they can focus on their professions and the lives they want to live,” says Izak Smit, PPS Group CEO.

PPS members who hold a range of qualifying products offered by PPS and its affiliates are eligible to earn a portion of the profits that PPS generates. The greater their contributions to, and participation in these products, the greater the members’ Profit-Share.

Members’ Profit-Share is allocated annually into their notional PPS Profit-Share Account, which grows with investment returns, further profit distributions and vests on retirement from the age of 60 subject to contractual requirements. Profits accumulate simply as a result of members having qualifying products.

Among the innovations introduced in 2020 to address the evolving needs of professionals, is the enhanced PPS Profit-Share Cross-Holdings Booster. This makes loyal members’ Profit-Share work even harder for them in the long term, rewarding them based on the combination of products from PPS Investments, PPS Short-Term Insurance and Profmed medical aid that they hold over and above their PPS Life Risk Products.

“Our resilience as a business, strong organisational values, the performance-driven culture of our people and our trusted relationship with financial advisers added to the sustainability of PPS through this difficult year. Our performance is significant against the backdrop of spending nine months of our 2020 financial year operating under lockdown. These results demonstrate the effectiveness of mutuality in providing financial security and long-term benefits to our members,” says Smit.

Resilience produces sound performance in an unprecedented year

PPS’s strategy of delivering value to members, its strong balance sheet, coupled with growth of the business, contributed to its solid performance in this tumultuous period.
“We entered 2020 with solid capital reserves and with good momentum. This meant that we could act swiftly to put relief measures in place, pay claims reliably, secure our adviser network and maintain our full staff complement throughout the lockdown. The unique situation presented by the pandemic also served as a catalyst to accelerate the process of expanding and implementing our digitalisation strategy,” says Smit.

Commenting on the performance, he adds: “PPS has been able to provide a reliable financial safety net for its members. Because there are no outside shareholder interests to protect – we do not have such stakeholders – we looked for opportunities to assist members. This includes adjusting claim and premium protocols specific to the pandemic while ensuring fairness between different cohorts of members.”

“In 2020, the Group paid ZAR 4.84 billion in benefit pay-outs and valid claims to members. This is 29% up from ZAR 3.74 billion in 2019. Focusing on life claims in particular, this amounted to ZAR 3.12 billion in 2020, up 45% on the ZAR 2.38 billion in 2019. Of this, PPS paid more than 4 200 COVID-19-related claims to the value of ZAR 389.8 million between March and December 2020. As expected, medical professionals were most affected by the pandemic and accounted for 74% of these claims.”

Looking ahead, Smit says that it is impossible to make firm predictions for 2021 as the pandemic continues to evolve, and the long-term impact thereof is not yet known. A certainty is that the effects of COVID-19 will continue to be a market disruptor and a creator of opportunities.

“We are bracing ourselves for further waves, but an aspect that works in our favour is that many professionals in the frontline in fighting the pandemic, particularly those in the health professions, were the first to be vaccinated. We are confident that the professionals for which PPS was founded will continue to show the significant role that they play in ensuring the health and well-being of South Africa’s citizens and economy,” concludes Smit.

For member-only strategic content on the cooperative/mutual insurance sector, ICMIF members have exclusive access to a range of online resources through the ICMIF Knowledge Hub.

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