Environmental conditions were particularly difficult for the insurance and investment industries in South Africa in 2015. Very slow economic growth, rising unemployment, electricity supply uncertainty and political blunders combined with declining commodity prices and a dramatically weakened currency have not inspired business or investor confidence. The Alsi ended the year without growth and many members will have experienced a below inflation return on their personal investments.
However, at PPS we always take a long-term view and our strategies, both investment and operational, are geared to weather such conditions to the extent possible. The Society continues to do well in all the key areas, thanks largely to our stable and growing membership and our diversification across local and international assets and the growing number of profitable products. The professional market in which we exclusively operate is affected by economic factors to a lesser extent, and our 98% take up rate of our auto increase and our lapse rate of 4% support this view.
Finally PPS’ mutual model, which accumulates all profits for members as a retirement benefit, remains the jewel in the crown of PPS membership.
Members will be aware that the full value of their PPS Profit-Share Account is paid out tax-free at retirement. This value includes all operating profits and investment returns declared during the member’s tenure with PPS. This benefit, on retirement, is the primary advantage of PPS’ mutual model, where there are no outside shareholders – all profits accrue to members.
During 2015, 942 members retired with a total value of R508,4 million. Individual amounts varied from R100 000 to R2 million depending on the tenure with PPS and the amount of the premiums paid together with the number of products held, over the years.
PPS had an excellent year with respect to growth in sales and membership. An expanded product range was launched in March and support from independent and our in-house intermediaries has been exceptional. As a result, both our broker channel and our in-house life advisory consultants exceeded their targets and had record years. Our risk new business sales of R235 million (Annual Premium Income) exceeded last year’s production by 16% and independent research has shown that we have gained market share in our segment. Our number of in-force risk policies now stands at 249 790 – a new record.
PPS Investments new flows of R3,5 billion was 13% up on prior year.
New members were 7 050, up by 39% on prior year, and particularly pleasing is the growth in student members from across a broad spectrum of campuses. Of the new members 47% were African/Indian/Coloured, compared to 40% in 2015.
Over and above the new members there is an increasing number of existing members who are availing themselves of our new products such as short-term insurance and investments.
Profmed and Key Health remain the two medical schemes under administration, and both schemes have had excellent years from both a growth and a financial point of view. Profmed celebrated a record growth year and achieved the 30 000 member milestone. Profmed remains the preferred medical scheme for professionals and PPS members of Profmed receive a share in the administration profits.
The Defence Force post-retirement medical scheme continues to be administered by PPS Healthcare, who has an excellent relationship with this Defence Force unit.
During the year Professional Medical Scheme Administrators (PMSA) was renamed “PPS Healthcare” and moved to a new PPS-owned building in Centurion.
This division of the Group has had another excellent year. Notwithstanding slow growth in the savings industry and extremely negative markets, members continue to trust PPS with their savings and investments. Assets under management exceeded R21 billion (+15%) and 28 500 members now have accounts with PPSI. The individual investor base has grown 36% per annum over the last five years. New flows at R3,5 billion were 13% up on the prior year.
A seamless conversion of the administration platform took place in December. Old Mutual (OMIA) is exiting the administration business and PPSI together with Coronation jointly moved their administration to a new platform at Maitland. The new system will allow a more agile administration, more efficient portfolio reporting, and enable the development of new products to meet the needs of our members.
PPS launched short-term insurance to its members in 2007, via the formation of an insurance brokerage. This meant that PPS took no underwriting risk and was not exposed to underwriting losses or profits, but benefited from being able to assess members’ appetite for this product and as a broker, earned commissions on the premiums. Hollard Insurance was selected as the underwriter. This initiative showed that members did indeed desire to place their short-term insurance with us but many were serviced by brokers and were reluctant to move their business away from this, often, long-standing relationship. In addition the call centre distribution model was not always acceptable to members even if they did not currently have a broker.
Notwithstanding the above restrictions, this business has built up premiums of over R139 million per annum and 11 600 members. However, real growth would always be restricted by the above business model and so it was decided to apply for a licence to enable PPS to become the insurer and remove any broker conflict. To provide the quality of service at claims stage members deserve, it was decided to partner with Santam whose claims facilities nationally are unsurpassed.
As a 49% partner, Santam would also provide expertise and capital to the business.
The new entity moved to new premises in Parktown in November and was launched nationally in February 2016. The new structure means that members will be able to benefit when the business becomes profitable in the future, but in the meantime will enjoy competitive premiums and top level service.
The need for objective financial planning among PPS members is particularly relevant. Members are busy professionals who often do not devote enough time to their own financial affairs – especially long-term financial planning. Many advisers focus on a particular product set and do not have the inclination or expertise to provide advice on a number of products ranging from medical aids to life, investments and short-term as well as tax, wills and trusts. As members are accustomed to charging for their time and expertise, we believe they will be willing to pay a fee for specialist advice affecting their financial future. The division was launched in September and planners will be available in the Cape, Gauteng and KwaZulu-Natal from January 2016.
Members will be free to implement the agreed plan through this or any other division of PPS or through their own adviser.
Since inception, 75 years ago, PPS has focused exclusively on professionals in South Africa and Namibia. This “country dependence” was not an issue for the business in the early growing years but increasingly the need to expand beyond our region has become important for the long-term sustainability of PPS. Over the years management has conducted viability research in several countries in Africa but in each case the number of professionals who would meet PPS’ eligibility criteria was too small to justify the significant investment required. In addition, the legal and regulatory requirements differ by country, and can be very onerous and expensive and carry significant risks. Therefore, to justify the investment and return on risk, a critical mass of members is essential.
Research was conducted outside Africa and all indicators showed that Australia would be the most desirable option. A number of factors support this conclusion. Independent research showed that there are significantly more eligible professionals in Australia than South Africa, supported by the fact that the economy is four times bigger than South Africa’s. There is also a strong body of professional associations and the income per capita (at 67 000 USD per annum) is one of the highest in the world (nine times higher than South Africa’s) with a very low unemployment rate.
The legal/regulatory environment is similar to South Africa and there are a large number of financial advisers and professionals working in Australia who are ex-South Africans.
Based on the above, a business case was developed which was approved by the boards and we set about recruiting a specialist team in Sydney. One of the teams’ first tasks was to test the acceptance of a mutual insurer specialising in professionals among advisers, and they received a very positive response.
The bulk of the back office administration of the Australian business and consequent staff members will be based in Johannesburg, with a notable positive impact on viability.
Due to the lack of experience in the Australian market and the high cost of a life licence, it was decided to partner with a local insurer and “white label” the new company PPS Mutual Australia. In addition, to reduce the indemnity risk we partnered with a major international re-insurer.
Although the above mentioned decisions will impact on the initial profitability, they materially reduce the risk to South African members, who will benefit in the long run from the admin fees, royalties earned, and interest on the start-up loans.
The structure and ethos of this new entity will be very similar to SA, but the business will be owned by the Australian members with PPS South Africa having the final say on a number of key strategic issues.
We are very excited about this new venture, which received Australian regulatory approval in December 2015, and South African members now have a potential additional profit source for their Profit-Share Accounts that is not dependent on the South African economy.
During 2011, the Financial Services Board (FSB) introduced a new methodology for statutory reporting of assets, liabilities and solvency capital requirements for South African insurers, aligned to the European Union Solvency II standard. The target date for full SAM implementation is 1 January 2017. The initial parallel run commenced in July 2014, was enhanced during 2015 and will continue in 2016. PPS’ dedicated project team has been in place for the past few years dealing with the implementation of all the requirements under SAM. This has taken substantial time and focus from key management resources, as well as the Board and its various sub-committees, to ensure the required milestones around this implementation were successfully achieved.
PPS participated in the FSB’s consultative process preceding the implementation of SAM and numerous SAM returns have subsequently been submitted including quantitative impact studies, annual returns, quarterly returns and an own risk and solvency assessment (ORSA). Based on these, PPS Insurance remains financially strong under the SAM framework and is well positioned to deal with SAM requirements.
Many commentators believe that 2015 was a watershed year for emerging markets and South Africa in particular. Our currency is at all-time lows and economic growth continues to be insufficient to create jobs. However, professionals continue to be in high demand as a vibrant professional sector is essential for economic growth. As the Society enters its 75th year, PPS will continue to serve its members by providing world-class financial services covering needs from graduation to retirement.
Our governance structure with the PPS Holdings Trust and PPS Insurance Board continues to serve us well and I would like to thank all the Board members for their continued commitment to PPS and its members.
Mr M J Jackson
6 April 2016
PPS had an excellent year with respect to growth in sales and membership. An expanded product range was launched in March and support from independent and our in-house intermediaries have been exceptional. Our number of in-force risk policies now stands at 249 790 – a new record.
Highlights for 2015
Since 1941 the PPS brand has evolved into a major force in the financial services industry, catering exclusively for the unique needs of graduate professionals. The PPS model is unrivalled in South Africa as all profits are shared with our qualifying members, and only select graduate professionals qualify to join PPS. PPS Marketing has focused on creating better awareness of these unique benefits to grow our membership base and product take-up across the PPS Group.
Our major competitors are also targeting the professional market, with far larger marketing spend, and we have to be clever, tactical and innovative to reach our target market. Over the past five years we have acquired unique insights into media consumption of professionals and have used it to our advantage. Public relations (PR) were also used cleverly to ensure that we get editorial coverage and that our brand is seen as a thought-leader.
From an advertising campaign perspective, the two highlights of 2015 were:
From a PR perspective, we have enhanced the PPS Professional Confidence Index (PCI), the quarterly survey issued to members since 2011. The PCI is now well established in the public domain and serves as a barometer for graduate professionals’ opinions and views. It positions PPS as a thought-leader on issues that affect our members, and joined with the major professional trade associations to issue various press releases. From early 2015, we also included the WITS inflation perception survey questions in the PCI, and issued three PPS/WITS media releases in conjunction with Professor Jannie Rossouw.
PPS Marketing launched the Student Confidence Index (SCI), with the key issue the transition from university life to the professional workplace. We have consequently engaged with PPS members to allocate ‘’pro bono’’ sessions with the future students to mentor and coach them and in turn equip the students with the right skill set.
A key part of our brand building initiatives is to measure the effectiveness of our efforts, and implementing changes if required. In addition to considering factors such as the number of qualifying online applications for membership and product take-up (which were at an all-time high in the history of PPS in 2015), Consulta Research currently conducts two different research projects on behalf of PPS.
The PPS brand has reached a level of consistency over the last year, with all scores on the measure remaining very high. The sharing of profits continues to be the strongest attribute associated with the PPS brand, along with the exclusivity of the company. Members also feel that PPS is in a strong financial position and is a well-respected brand in the market that they are proud to be associated with.
The single most important metric of marketing effectiveness internationally is the likelihood of existing members promoting the brand to friends, family and colleagues, referred to as the Net Promoter Score (NPS).
The PPS NPS has remained very high over the last 12 months. PPS has maintained a NPS score in excess of 40, which is seen as exceptional in the Life Insurance industry.
With members as brand advocates, the levels of awareness among qualifying non-members improved significantly since 2013, with numbers doubling since the middle of 2014. This clearly indicates that PPS is at the forefront of innovative advertising messaging and we are reaching our potential market successfully.
From a business sustainability point of view, a healthy, growing member pipeline in South Africa is critical and it requires effective marketing of our brand to the professional market, also at their place of study. Our CSI initiatives therefore focus on education: bursaries, financial assistance at universities and universities of technology and various sponsorships.
PPS bursaries are awarded on financial need and academic record to full time university students to assist students financially to cover tuition and/or text book costs for one academic year. To be eligible for the PPS bursary, the student must be registered at a participating South African university or university of technology registering for a fourth academic year of study or post-graduate degree and must be studying towards a profession, which on qualification, would be eligible for PPS membership.
Our total budget for bursaries in 2015 increased to R2 million. Applications opened in September 2014 through the PPS website, social media and the Youth Division. In consultation with the PPS Youth Division we received 800 bursary applications, and 75 students were awarded with a bursary.
From left to right: Anton Louw, PPS Branch Manager (Cape Town North), Sandi Goodwin, PPS Graduate Marketing Specialist, Sikhumbuzo Sibali, PPS Bursary Recipient (Final Year Dentistry student) and Prof Yusuf I. Osman, Dean of the Dentistry faculty (University of the Western Cape)
(Below) From left to
right: Anton Louw, Branch manager, Cape Town North, Sandi Goodwin, PPS
Graduate Marketing Specialist, Martha Bronkhorst, PPS Dean bursary
recipient, Prof Jimmy Volmink, Dean of Health Sciences and Eben Mouton,
Finance Director at Stellenbosch Medical campus
The PPS Financial Assistance Programme is an annual project where PPS assists supporting universities and universities of technology with the enhancements or, in some cases, the establishment of projects that benefit our future graduate professionals. These projects vary according to the needs of the university and the students.
In 2015, PPS contributed R2 million to various universities. We received 17 applications for 2015.
Approved projects were:
|University of Cape Town||Engineering and Built Environment|
|University of Johannesburg||Postgraduate Centre, Research and Innovation|
|Durban University of Technology||Chemical Engineering|
|University of the Western Cape||Economics and Management Sciences|
|University of Fort Hare||Faculty of Science and Agriculture|
|Nelson Mandela Metropolitan University||Centre for Community Technologies|
|University of Pretoria||Veterinary Sciences|
|Cape Peninsula University of Technology||Health and Wellness Sciences|
|University of Free State||Medical|
|SAICE - Walter Sisulu University|
|Tirisano-Mmogo Primary School|
From left to right: Rebecca Seabela, PPS Graduate Marketing Specialist, Judy Bennett, Postgraduate Funding Support (University of Johannesburg) and Dudu Mbatha, Postgraduate Funding Support (University of Johannesburg).
From left to right: Professor Kobus Visser, Dean of Economic and Management Sciences and Sandi Goodwin, PPS Graduate Marketing Specialist
A strategic objective of PPS is to be a thought-leader to the niche market we serve and meaningful engagement with the PPS member base is of paramount importance to understand and address pertinent issues affecting our member’s daily concerns and opinions. Much of these engagements take place by way of interactions with the professional trade associations where we often share membership – or attempt to increase PPS membership.
To communicate and demonstrate the value of membership to professionals, we engaged with professional associations to capitalise on our unique, relevant and sustainable business model in a way that would be good for retention, acquisition and conversion of new members.
PPS placed print advertisements in 19 professional trade publications; we achieved a total readership of 557 400 in the publications with a total circulation of 90 205. In 2015 PPS participated in over 57 association events where we generated 1 758 new membership leads.
PPS advertises on the websites of 11 professional associations and gathered 310 visitors to the PPS website as referral traffic. Of the 310 visitors, 193 of them were new visitors to the PPS website.
A major part of our professional association initiatives were about student engagement. PPS Marketing arranged that PPS partnered with a number of professional associations on their various campus roadshows, thereby giving our graduate specialists an opportunity for presentations to the students and to generate leads. The joint student events gave both PPS and the associations an opportunity to secure younger members.
With each activity that we engage with we monitor the impact and determine drivers for improvement based on:
This event followed on similar events in 2013 and 2014. For 2015 the objectives for the campaign were:
We received 35 nominations for 2015, significantly higher than previous years and a new record.
The prize-giving and Women’s Day event was held on 7 August 2015, with the theme “Inspirational You”.
Cindy Ross from the Jala Peo Foundation, which empowers underprivileged youth from the Diepsloot community through cycling, enterprise development and life skills programme, received the main prize of R75 000.
The runner up, who received R25 000, was Alta-Mari Grebe from the Role Models Foundation, the organisation which built the first Imfundo Educare facility in the country and provides foundation education to children (between three and six years old) from disadvantaged communities.
From left to right: Kim Austen, Manager National Training and Development at PPS, Cindy Ross, winner of the Professional Woman of the Year award, and Macy Seperepere, Professional Associations Manager at PPS
From left to right: Kim Austen, Manager National Training and Development at PPS, Alta-Mari Grebe, runner up in the Professional Woman of the Year award, and Macy Seperepere, Professional Associations Manager at PPS
Since its founding in 1941, PPS is the only mutual financial services company in South Africa that has focused exclusively on graduate professionals, providing tailor-made insurance, investment and healthcare solutions to our members.
To be an exclusive organisation of graduate professionals, belonging to its members, which provides exceptional insurance benefits and a range of financial services to members, their families and associates.
We further strive to provide peace of mind, security and consequently wealth for our members during their working lives and in retirement.
The needs of the graduate professional have been central to PPS’ strategic intent for the last 75 years. We have designed our products and servicing models accordingly and believe that the mutual model provides long-term benefits to our members that cannot be matched.
Our strategy therefore focuses on:
PPS, the financial services company focused exclusively on graduate professionals, is the largest financial services company in South Africa that operates under the ethos of mutuality. Unlike most financial services providers that pay profits to external shareholders, all PPS’ profits are allocated to PPS members on an annual basis by way of allocations to their PPS Profit-Share Accounts.
This means that ALL the profits and investment returns generated by the PPS Group are allocated to its qualifying members.
Mutuality is central to our success. Profits and investment returns are reinvested, with a long-term mindset, on members’ behalf. These funds accumulate in our members’ PPS Profit-Share Accounts, (irrespective of their claims) and vests free of tax at retirement, resignation from PPS or death. This benefit has no rival in South Africa.
PPS is not focused on delivering short-term returns to shareholders. PPS is focused on creating and sustaining long-term growth and wealth, recognising that there is an alignment of the interests of policyholders – unique to the insurance industry in South Africa, where some of the profit is distributed to shareholders.
The mutual structure allows our stable management team and the Board to adopt a truly long-term approach to running the business, deploying sustainable long-term strategies, which make the most efficient use of capital, and benefit all the generations of professionals we serve.
On average, members were credited with 33% of their qualifying premiums paid to PPS in bonus allocations for 2015 and PPS members shared in excess of R2,2 billion of PPS profits and investment returns during the year.
PPS has shared a total of R14,1 billion in profits and investment returns with its members over the last five years, and almost R22 billion (R21,96 billion) over the last 10 years.
Retiring members, on average, received back ALL the premiums that they paid to PPS over the lifetime of their membership – irrespective of whether they had ever claimed or not. This is a truly unique statistic in the South African insurance sector.
PPS Insurance is a registered insurer and is subject to the same governance requirements as a listed insurer. A unique additional layer of governance is the fact that our members and professional associations are represented at the PPS Holding Trust Board level – the ultimate control structure of the Group.
There is no other insurance company in South Africa where policyholders are specifically represented at Board level.