The Professional Provident Society (PPS) — a financial services group focused on providing a diverse range of financial solutions for graduate professionals in SA, Namibia and Australia — experienced a positive financial year in 2022, supporting members and returning value to them. 

The group's operating performance exhibited significant differences in 2022 compared to the previous year. The upswing in the life insurance business’s profitability was a notable development, primarily attributed to the decrease in life claims as the Covid-19 pandemic started to subside. However, the investment markets faced turbulence and headwinds in 2022 after a robust performance in 2021. 

In 2022, the total value of the benefits paid to members by the group was R5bn, lower than the R6.1bn in 2021:

• Life claims reduced meaningfully, especially in the latter part of 2022. 
• Sickness and life claims paid totalled R3.4bn in 2022 compared to R4.3bn in 2021. Sickness (health) claims increased by 6%. 
• The number of Covid-19-related sickness claims remained stubbornly high, though reducing by 34% to about 7,700 in 2022 compared to 10,900 in 2021. 
• The total value of Covid-19-related claims in 2022 was R264m compared to R1.4bn the previous year. 
• Covid-19-related death claims dropped significantly to only R39m in 2022 from R975m in 2021. This reduced total death claims by 52% to R957m in 2022 from R2bn in 2021.  

Commenting on the group's performance, CEO Izak Smit said: “It is in our DNA to come through for our members when times are challenging. New business flows — where most new business is from independent intermediaries — are a barometer of the health of a financial services business.

"On both the life insurance side and in our investments business, new inflows were strong in what was a flat market. In fact, PPS’s new life insurance business written in SA was up by 10%. Gross new investment flows increased by almost 9% year on year.”

Group insurance gross earned premiums in SA reached R6bn, an increase of 7.6% on 2021. Annual premium income of new business written in 2022 in SA was R280.4m, up from R253.7m in 2021.

Mutuality and profit-share allocation

Membership lapses remained low, supported by the group's model which ensures that all insurance premiums paid by members who hold qualifying products are ultimately returned to them through claims paid or investment growth allocations to their notional PPS Profit-Share Accounts^* after business running costs. No premiums are charged for the PPS Profit-Share Account which embodies PPS’s ethos of mutuality — sharing success with members.

Though claims attributable to Covid-19 declined, which supported underwriting profit, the investment markets substantially affected Profit-Share. Therefore, in 2022, PPS allocated R619m to members with qualifying products’ PPS Profit-Share Accounts compared to R5.5bn in 2021. 

Investment market turbulence

“While 2021 was a strong year in the investment markets and our funds performed exceptionally well, we cautioned our members against exuberant future expectations. Brilliant years such as 2021, when markets might get a little bit ahead of themselves, are usually followed by a year or two of mediocre and even negative performance. Especially overseas equities and bonds had a tough time in 2022,” said Smit.

“Our bias to growth assets, which generate maximum long-term benefit for our members, is due to our world-leading low lapse rates, where our members’ policies stay on our books for a generation or more on average. This allows us to take a long-term approach to investing, which is a unique competitive advantage, helping us to ride out short-term market volatility and corrections such as in 2022.”

PPS Investments exceeded many peer benchmarks, more than doubling both assets under management and the number of investors it serves during the five years from 2017 to 2022. Gross new investment flows to PPS Investments were R7.7bn, and net flows came in at R3.3bn, up 21%. Profit before tax increased to R121m, up from R98m in 2021.

This strong performance was further supported by the continued transition of the investment portfolio to the in-house multi-manager, enabling the group and its members to benefit from economies of scale. This decision was taken after the business established a 15-year track record. 

Looking ahead

“We will continue to challenge ourselves on living our purpose, protecting the lives and livelihoods of our members, and assisting them to live the lives they aspire to,” said Smit.

“We remain cautiously optimistic but alive to the continued affect to our business due to low economic growth and investment market pressures worldwide. Our focus remains steadfast on our unique exclusive member value proposition and innovating solutions, advancing our digitalisation journey, and addressing the sustainability agenda as part of PPS’s purpose.”

For more information about becoming a member of PPS, visit the PPS website. To access the PPS 2022 Integrated Report, click here.

This article was sponsored by the Professional Provident Society.

_{*Allocated to members with qualifying products. Past performance is not indicative of future performance.}