The Professional Provident Society (PPS), the financial services company focused exclusively on graduate professionals, has acquired the remaining 49% shareholding held by Santam in the PPS short-term business.
The deal results in PPS Short-term Insurance (STI) becoming a wholly-owned subsidiary of PPS. PPS operates on a mutual model where members with qualifying products benefit from all generated profits.
“The purchase of Santam’s stake was approved by both the Santam Board and the PPS Board,” says Izak Smit, CEO of PPS. “PPS has been involved in short term insurance for almost a decade now, first on the distribution side, but over the last few years also on the underwriting side, in partnership with Santam, who held the 49% stake in STI.”
Smit explains that the major reason for the acquisition of Santam’s share is competition related. “It is somewhat sad to lose Santam as an equity partner, but we always have to be very mindful of competition legislation, and this made the partnership, especially in relation to certain strategic objectives that we want to pursue, difficult. However, the decision was also related to the maturity of the business – it can now stand on its own legs without the need for an equity partner. It is growing, the claims ratio is good, the fundamentals are in place.”
PPS and Santam entered into the partnership in 2016 to provide access to short-term insurance solutions to professional graduates. As South Africa’s largest general insurer, with a great track record over the past century in terms of short-term risk solutions, Santam was the clear partner for PPS, providing the expertise and scaleability required to manage insurance claims on behalf of STI.
“We are grateful to Santam for the trust it has shown in PPS when we were establishing the business and have learnt a lot through our partnership. We value the strong shareholding relationship we have enjoyed and look forward to continuing our connection albeit in a different capacity. Whereas Santam has previously provided claims management services and administration, it will now become a service provider to STI through its administration platform Brolink,” explains Smit.
“STI, since receiving its short-term insurance licence from the Financial Services Board in February 2016, has recorded a cumulative gross written premium to the value of R246.3m,” adds Smit. “We recognise that the short-term insurance industry is undergoing dynamic changes as regulatory amendments, technology, economic pressures and environmental shifts disrupt the marketplace. As a wholly-owned subsidiary, we believe that STI is now well positioned under the leadership of the CEO, Werner Bosman, to provide the PPS service experience our professional members have come to rely on. “While the market is highly competitive, STI is in the unique position to offer tailored solutions specifically for our graduate professional members.”
“We are grateful for the role that Santam has played as shareholder of the business and look forward to continue the relationship with them as administration service provider,” concludes Smit.