The cover provided to professionals like doctors becomes even more important during the current challenging environment created by the coronavirus pandemic, where many of them are working on the frontlines, Izak Smit, CEO of the Professional Provident Society said on Wednesday.
PPS is an authorised financial services provider focused on graduate professionals, including doctors, dentists and lawyers. According to Smit it currently has about 160 000 members.
Smit says PPS, whose results came out on Wednesday, is being reminded of its "true purpose".
"PPS was actually started in 1941, the time of the Second World War. Fighting Covid-19 is like fighting a war and that is what we have been built for. In a time of crisis our true purpose comes out," he says.
Billions paid out
A total of R3.7 billion in valid claim and benefit pay-outs were made to members during 2019 – the highest in its history. Of this R2.3 billion were claims and the rest payments to members who retired.
"We don't have shareholders hungry for dividends. Any profit we make goes to our members. In 2019 this amounted to a total of R4.2 billion. It consisted of R1.1 billion in operating profit for 2019 and the rest returns on investments on past profits," says Smit.
He cautions that the latter figure depends on market returns where one can expect volatility. For example, 2018 was not a good year, while 2019 bounced back again. He points out that 2020 is likely to again be a very tough year in the markets, but PPS will not "knee-jerk" in its investment strategy.
"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," says Smit.
"These behaviours lead to lower lapses and claims and ultimately to more profits to share between members. It is, however, still early in the development of the pandemic in SA, so we are bracing ourselves for what might come, and our actuaries are running models on the pandemic impact. This could be a year where we won't see the kind of operating profit that we saw in 2019 as lot of it might go out into claims."
Since many members, whose income is negatively impacted by the lockdown, are worried about paying their premiums, PPS is allowing a 5-month grace period in which members can elect not to pay and catch up with what their dues after that.
Looking ahead, Smit foresees that the effects of Covid-19 and the impact on the markets and economy will be significant.
"Times like these bring us closer to our purpose, namely looking after the financial security of our professional members. We will remain long-term focused and our financial position remains very strong," says Smit.
For example, in response to market shifts, the PPS Health Profession Indemnity was introduced for professionals in the healthcare disciplines. PPS also launched the Functional Disability provider, which covers individuals based on assessment of their ability to function, rather than their capacity to perform specific occupations.
Other innovations introduced in 2019 includes the PPS Investments Family Network and broader cover for pregnancy complications.
Furthermore, the group's life insurance business continued to grow, with new business volumes up 10% on 2018.
"We are very well positioned for the future. We have a very strong balance sheet. Solvency is one thing we do not worry about. We are well positioned for 2020," says Smit.
"Furthermore, because of the fiscal situation in SA, we realise the private sector has to step in and help. We are also contributing funds and can help in areas like the distribution of protective gear. It is about saving lives and we see astonishing goodwill out there."