Boutique life insurer PPS Mutual has closed out its inaugural financial year by announcing it will release its first round of profit sharing to members.
The life insurer notified members yesterday they would receive an assignment of 8% of total premiums paid during the 2016-17 financial year.
PPS Mutual Chief Executive, Michael Pillemer said the insurer was not currently disclosing the dollar amount of the profit share but that it had exceeded the insurer’s own expectations after it had been cautioning members that it may not issue a profit share this year.
“We are pleased that we have been able to issue a profit share in our first 12 months and it reflects the pattern we have seen in South Africa with PPS,” Pillemer said.
He added that the 2017 profit share does not include any investment returns but those will be included from 2018 onwards as profits are channelled into a range of low risk, long term investments.
“It also demonstrates that our model is viable and that as a mutual we can take a long term view…”
PPS Mutual members are required to retain their policies for 10 years to gain partial access to the profit share funds. Full access is granted after 20 years or upon reaching age 65, making a TPD or trauma claim, being diagnosed with a terminal illness or at death.
“We decided to grant partial access after 10 years because we recognised that for many of our policy holders premium costs will increase with age and we want to help offset that cost,” Pillemer said.
“It also demonstrates that our model is viable and that as a mutual we can take a long term view because we do not have shareholders on our back each year,” he added.
Pillemer said PPS Mutual had accredited 130 non-aligned advisers across Australia since launching in ?? 2016 and these had been important in building the business as they had been able to attract a group of professional clients with stable incomes.
Despite this, Pillemer said future profit share issues would still be dependent on claims and lapse experiences but PPS Mutual policy holders tended to have lower risk profiles.
“Our experience in South Africa has resulted in a lapse rate of 4.5%, compared with the Australian average of 15% and we expect higher retention rates over the medium to long term which is a strong driver of profits,” he said.
