Tides turn and seasons change, but our commitment to our members never does. Life is a beautiful cycle. 2021 PPS NAMIBIA INTEGRATED REPORT INSURANCE NAMIBIA
Life is a beautiful cycle.
From the tides and photosynthesis, to animal migration and the rotation of the earth’s water supply, there are many natural cycles that bring growth and sustain life. After 80 years, we know how important it is to remain steadfast during life’s ebb and flow, because tides will turn and seasons will change. Over the past year, we paid R6.1 billion in benefits to members. Of this, R1.4 billion were for claims where members acknowledged it was COVID-19 related. Notwithstanding this, we are grateful to be able to announce a healthy Profit-Share for all. And so we look to the new season with hope, and together we continue to stand firm. PPS Integrated Report 2021 1 | Introduction
PPS Integrated Report 2021 Contents | 2 Contents Who we are and what makes us different 8 Strategy 32 PPS doing good 28 Total benefits paid in 2021 14 Human capital management: our people 20 Leadership commentary Chairman’s statement CEO’s message to members 36 About our integrated report 4
PPS Integrated Report 2021 3 | Contents Material matters and risk management 76 PPS Group performance at a glance PPS Life Insurance PPS Advisory Services and Enablement PPS Investments PPS Short-Term Insurance PPS Healthcare Administrators PPS Insurance (Namibia) Board 52 Abridged Financial Statements PPS Group consolidated statement of financial position PPS Group consolidated statement of profit or loss 82 Key performance indicators 85 Corporate governance report 87 Annual financial statements 116
PPS Integrated Report 2021 About our Integrated Report | 4 About our integrated report
PPS Integrated Report 2021 5 | About our Integrated Report Scope and boundary The PPS Integrated Report 2021 is a report on the performance of the PPS Holdings Trust (the PPS Group) for the 12 months ended 31 December 2021. It is intended for the information of our members and includes reporting on relevant events that have occurred between year-end and publication. The report deals with the PPS Group’s strategy, operations and performance, touching on issues such as our approach to sustainability, value creation, employment equity, innovation and service delivery. We aim to give a comprehensive and balanced view of both our financial and non-financial performance in South Africa and Namibia, as well as to provide accessible information about our strategic direction, operating environment, operational management, efficiency, quality, corporate governance, accountability and corporate social responsibility. Disclosure and assurance The PPS Group’s executive and management have aimed to achieve the highest standard of disclosure in this report and to provide meaningful, accurate, complete, transparent and balanced information. The PPS Holdings Trust Board of Trustees (the Board) together with its committees and management was closely involved in finalising all disclosures and assumes responsibility thereafter. The annual financial statements were prepared in accordance with International Financial Reporting Standards and were independently audited by PwC South Africa. The non-financial information contained in the report has not been independently assured, as this is not required. Board responsibility The PPS Integrated Report 2021 was approved by the Board on 30 March 2022. The Board acknowledges its responsibility for ensuring the accuracy of all information supplied and has applied its collective expertise to the preparation of the report. In the Board’s opinion, this report addresses all issues material to members and presents a holistic view of the PPS Group’s performance in 2021. Forward-looking statements Some of the remarks contained in this report are forward-looking statements and should not be considered as guarantees or predictions of future performance. Like all other businesses, we face risks and other factors beyond our control, which may impact our performance in 2022 and beyond.
PPS Integrated Report 2021 Section title | 6 The seasons are a beautiful cycle. Life would not be possible without the yearly seasonal cycle. The winter months are an essential rest period in nature – certain plants and seeds, for example, cannot bloom and germinate without a period of cold. And then there is Spring, which, of course, is the ever-important catalyst for growth and new life. | 6
7 | Section title PPS Integrated Report 2021 7|
PPS Integrated Report 2021 Who we are and what makes us different | 8 At PPS, we do not have shareholders, we have members; graduate professionals who qualify for membership. Who we are and what makes us different
9 | Who we are and what makes us different PPS Integrated Report 2021 PPS was founded 80 years ago during a time of great social and economic upheaval. Its founders intended to establish a powerful vehicle to create wealth and provide personal financial security. Our unique mutuality model has proven to be exceptionally robust throughout our long history and has enabled us to remain dependably sustainable. Even as we navigate another period of global upheaval, we continue to provide a consistently reliable and professional service to our members and to allocate all profits to those with qualifying products.” Izak Smit | Group Chief Executive Officer “ The PPS story As PPS marks 80 years since it was founded, we are proud to say that, for all those years, we have demonstrated resilience, recorded steady growth and reliably provided services to our members without disruption. The fact that we have been able to continue to do this throughout yet another very challenging year is testimony to the vision and objectives of our founders. PPS was established in 1941 by a group of eight hard-working dentists who appreciated the value of a good day’s work and wanted to protect their ability to earn an income from that work. Even then, the methodology they chose was rare in financial institutions; the practice of people joining together to benefit from pooled resources. This concept of mutuality still permeates every aspect of our business, from the way it is structured to how innovations are designed and implemented. At PPS, we have members rather than shareholders; highly educated graduate professionals with a qualifying tertiary qualification. In South Africa, professionals holding postgraduate qualification(s) represent only about 1.5% of the total population. Members who have one or more product(s) from a range of qualifying products are eligible to earn a portion of the profits that PPS generates. The greater their contributions to and participation in these products, the greater is their part of the annual Profit-Share, Profit-Share which grows with investment returns and further profit allocations. This vests on retirement. Profits accrue simply as a result of members having qualifying products. Over the years we have steadily expanded our product range, moving beyond our initial focus on income protection to include other financial products and solutions. Today, the Professional Provident Society Insurance Company Limited is a registered financial services provider and our members include leading academics, captains of industry and prominent members of the various professional sectors. Our mission and values give expression to what it is we aim to deliver to our members. Our mission Our mission is to enhance the financial security of our members and we aim to ensure that, from a financial perspective, they can live the lives they want to live. We deliver on this mission by providing exceptional insurance benefits and a range of financial services that are specially designed for graduate professionals. We help our members secure their current and future financial position by providing peace of mind throughout their professional careers and during their retirement years.
PPS Integrated Report 2021 Who we are and what makes us different | 10 Our values At PPS, we believe that what we value internally will drive our behaviour externally and we live by three core values: • We take extreme ownership. Our people are empowered to deliver service excellence to our members and we encourage leadership in all areas of the business. • We are eternally curious. We are not satisfied with the status quo and are driven by the goal of constantly improving the solutions we offer our members. We are committed to innovation, giving staff the opportunity to innovate while recognising and responding to the unique, complex and changing needs of our members. • We do the right thing. We conduct our business with empathy, authenticity and care, but with the highest standards of ethics, fairness, governance and respect for all. The ethos of mutuality Although it is a model that is not commonly used in the South African financial services industry today, the ethos of mutuality is what defines PPS. This takes us back to the original roots of insurance and the true purpose of the insurance industry. PPS is not listed on any stock exchange and has no external shareholders who receive dividends. Members who hold qualifying products benefit directly from our profits through their dedicated Profit-Share Accounts. The ethos of mutuality is at the heart of PPS and is in our DNA. It permeates every aspect of our business and is fundamental to our success. That is why our members – through elections – are represented on our board and contribute greatly to good governance within the PPS Group. Their input – in conjunction with that of board members representing various professional associations – ensure members’ voices are always heard. We invest profits and investment returns on behalf of our members, taking a long-term view of wealth creation. Irrespective of the claims our members may submit a share of the profit accumulates in their individual Profit-Share Accounts and vests on retirement or on death. This is a unique feature in the South African insurance sector and there is no benefit to rival it. Once our members retire from their professional careers at or after the age of 60, the profits they have accumulated in their Profit-Share Accounts throughout their membership become available to them through a Vested PPS Profit-Share Account. Although this is available at that time for members to withdraw in full without any reductions, many choose to keep these assets invested as part of their post-retirement savings to generate further returns and to supplement their retirement incomes. The benefits of mutuality are clear. There can be no tension between the interest of shareholders and members because all members are treated as shareholders and receive a Profit-Share where they hold qualifying products. Members who have products from PPS subsidiaries and affiliates in addition to qualifying life insurance products, qualify for additional Profit-Share allocations. The PPS Profit-Share Cross-Holdings Booster is awarded over and above the existing allocation and is based on holding qualifying products across PPS subsidiaries and affiliates. The more diverse a member’s portfolio is spread across PPS subsidiaries and affiliates, the more their Profit-Share allocation will be. Many longstanding members have at times, in fact, received more in Profit-Share allocations in a particular year – over and above product benefit payouts – than they have paid in premiums in that year. In a sense, we have a counterintuitive situation in which members are paid to enjoy product benefits. A business that in effect pays its members to enjoy its products? That is what the mutual model at PPS delivers for many of our long-standing members. Professional focus In addition to the ethos of mutuality, PPS is defined by its professional focus. To begin with, we are very discerning about granting membership. Only graduate professionals with a qualifying tertiary qualification qualify to become members. This qualifying criterion spans across industries and professions, making PPS a leader in the professional segment. Then, not only are our products, services and solutions specifically tailored to meet our members’ needs, financial advisers must go through a strict selection and accreditation process to ensure that they are suitably qualified to market and sell our products. PPS-accredited financial advisers have industry-specific knowledge that enables them to offer informed advice on the specific issues and challenges our members face. Last, but not least, PPS’s membership profile significantly reduces our business risk, ultimately enhancing returns to members.
11 | Who we are and what makes us different PPS Integrated Report 2021 There is a subtler element at play too. Professionals generally display certain behavioural traits that are common to the professional ethos of their chosen professions. They typically embrace certain personal risk management principles, an unwillingness to terminate insurance cover unnecessarily and an urgency to return to their professions after a period of illness. This leads to lower lapses and claims, which supports profitability. It ultimately yields more profits to share between members. Our members value the common pool of resources and wish to preserve its value. Meeting the financial needs of professionals Professionals have different needs that span the full spectrum of financial products. We at PPS uniquely meet these, providing both advice and customised solutions that draw on a comprehensive range of products and services. Financial planning and advice Research shows a strong correlation between financial security and sound advice and planning. Providing an advice and planning service is, therefore, always the first step when our financial advisers suggest new solutions or changes to existing ones. Our ethos of mutuality has a fundamental role to play here too, as it does in every other aspect of the business. In practice, this means foregoing a one-size-fits-all, packaged approach in favour of bespoke solutions that are tailored to meet each member’s specific needs. Personal financial planning spans many fields and includes areas such as risk insurance planning, business continuity planning, savings and investment planning, estate and legacy planning, tax planning, retirement planning, short-term catastrophe hedging and much more. Members can access financial planning services that cover all these areas in several different ways. Usually – and most frequently – they do so through our large network of independent and accredited financial advisers, some employed by PPS directly, throughout South Africa and Namibia. The relationship between a financial adviser and a client is an important and special one, which often develops over time into a high-trust affiliation that allows for dreams and requirements to be shared and discussed. Good financial advisers ask the right questions, protect their clients from irrational or emotional decisions and ensure that the necessary discipline is in place to adhere to a pre-agreed plan. A trusted financial adviser is a sounding board, a coach and a source of wisdom. HOW PROFIT-SHARE WORKS Investment returns on past operating profits and investments returns Operating profit Claims Expenses MEMBERS’ PREMIUMS Reserves Profits Total members’ Profit-Share Accounts Members’ benefits Cost of running a business Guarantee future claims 100% allocation to ProfitShare Accounts
PPS Integrated Report 2021 Who we are and what makes us different | 12 The needs of our professional members are, however, often specialised and complex, and individual advisers cannot be specialists in all areas across the vast spectrum of personal financial planning. Therefore, all our advisers – whether employed at PPS or independent – can tap into the resources available from our Specialist Support Services (S3) unit. The S3 team – a group of highly qualified and skilled individuals – is available to assist members’ financial advisers with specialised input. They are not intended to replace financial advisers, though, and are not permitted to implement the advice. Their role is to be a resource that can be drawn on for specialised interventions. In summary, our promise at PPS regarding the S3 value proposition is two-fold: firstly, professional members can engage with professionals when undertaking their financial planning (pro-on-pro) and, secondly, the interaction is void of any sales pressure, as implementation is not permitted. This arrangement is unique in South Africa and is fundamental to our value proposition to members. Income protection and life insurance Income protection and life insurance are the solutions most often associated with us and were the first to be developed and offered by our founders. Over the past eight decades we have continuously refined these original offerings, explored the ramifications of potential scenarios and developed added-value features and new products to provide additional peace of mind. The PPS Sickness and Permanent Incapacity benefit (sickness cover) is, for instance, a bespoke product for professionals that is unparalleled in the South African environment. It is the leading and most competitive product of its kind. The sickness cover pays out if a member falls ill for a period of time and – unlike competitive products – does so without the member having to prove that they did not receive any remuneration during the period of being incapacitated. PPS also offers life, lump-sum disability, accidental death, critical illness and education products that are all intrinsically superior to similar products available in the market as members who have them qualify and benefit from a built-in Profit-Share benefit. Other differentiators include automatically covering our members when they travel or reside outside of South Africa without loadings, restrictions or exclusions; no limit to the number of claims; and automatic cover for potentially hazardous pursuits such as scuba diving, flying private aeroplanes and motorcycle racing at no additional premium. With our in-depth understanding of the graduate professional market, we have made allowance for the fact that many members enjoy energetic pursuits outside of their professions. Also, unlike many other products from competitors, our members’ ProfitShare Accounts are not reduced if they claim. We believe that so-called no-claim benefits go against what insurance is all about. Savings and investments Saving and investing are fundamental to financial security. Over the years, members had often admired how their profits had been invested and expressed a desire to be able to benefit from our investment philosophy and business acumen, as well as from investment services provided at cost without leakage to shareholders. In keeping with the ethos of mutuality and the belief that success is better shared, we, therefore, made savings and investment solutions available to our members through PPS Investments (PPSI) – an investment management services provider for graduate professionals and their families. PPSI offers the full spectrum of investment solutions that professionals require for different tax benefits – including living and retirement annuity funds, personal pension funds, preservation funds and investment accounts – and across different risk-return fund solutions. Whether investing ultra-long-term for retirement, saving for a more specific short-term goal or preserving existing savings, PPSI offers members tax-efficient savings and investment solutions for every stage of life. A major differentiator – aligned with the principle of mutuality – is that members with qualifying risk products are eligible to share in the investment administration and management profits. Short-Term Insurance Following on our success with our sickness and permanent incapacity cover and life insurance – and driven by the desire expressed by some of our members to have all their financial services products housed within the PPS community – we started offering short-term insurance solutions via PPS Short-Term Insurance which addresses members’ motor vehicle, home and business insurance needs. PPS Short-Term Insurance is unlike any other shortterm insurance business. Firstly, we only serve graduate professionals. The solutions and unique added-value services we provide are exclusively tailored to meet our members’ specific needs. Secondly, the short-term insurance business, like the
13 | Who we are and what makes us different PPS Integrated Report 2021 PPS Group, is operated according to the principles and ethos of mutuality. Since there are no external shareholders, any profits generated after paying expenses and honouring valid claims are shared with members who hold qualifying products. After paying for the costs of running the business, all money from premiums and investment returns is eventually returned to members, either in the form of claims payments or as additions to their ProfitShare Accounts. Paying an invalid claim means money that could have been added to the general Profit-Share pool is wrongly paid to a particular member, so it is the short-term insurance team’s role to ensure that all claims are valid. Our eligibility criteria for membership of PPS and how we underwrite risk enables us to ensure that the risk pool remains healthy. Professionals generally display certain behaviours, such as acting in accordance with certain codes of conduct and managing risks responsibly. This leads to lower claims and ultimately to lower premiums. It also means there are more profits to share between members: a virtuous cycle. Health Professions Indemnity Designed for South African healthcare professionals registered with the Health Professions Council of South Africa, PPS Health Professions Indemnity offers innovative features that provide peace of mind for professionals engaged in clinical practice. A contractbased insurance product, it was created in response to precipitous increases in professional indemnity costs and a progressively more aggressive legal environment. Developed in collaboration with a US partner that is highly experienced in medical malpractice litigation, it is specifically designed to provide the indemnity insurance needed by contemporary healthcare professionals and to help them manage the risk profiles of their practices. Its most important benefit is that it enables members who have this product to focus on their clinical practices, secure in the knowledge that they are indemnified by a brand they know and trust. Like all other PPS insurance products, PPS Health Professions Indemnity has an added mutuality benefit, which allows for members with qualifying life risk products to share in the profits generated by the PPS Group. Medical aid Via a PPS affiliate, PPS offers access to a closed medical aid scheme Profmed, which provides medical and healthcare benefits to members, their families and even eligible students. Profmed was launched by PPS more than 50 years ago and focuses on providing cover for major medical events. This scheme is administered by PPS Healthcare Administrators. Professionals appreciate access to an efficient scheme that supports them, especially if they require major procedures, expensive treatments and extended recovery periods. With five benefit options to choose from, the PPS ethos of mutuality is again applied by offering a profit allocation for members who use the scheme and who also hold certain qualifying life products. It provides exceptional service that respects the time constraints under which professionals operate and is renowned for its timeous, hassle-free payouts. Our members benefit from the scheme’s lower risk profile as all members of the scheme are either graduate professionals or eligible students. Wills and estates A life well-lived is one that leaves behind a meaningful legacy. With our focus on long-term benefits and protection, we aim to protect a lifetime of accumulated wealth from being eroded due to poor planning. Informed by an intimate understanding of the provisions that need to be made for beneficiaries when a member passes on, we offer a range of fiduciary services that encompass estate planning, Wills, trusts and estate administration. The estate planning service aims to ensure that members’ estates are well structured and distributed according to their wishes when they pass away. Effective estate planning can ensure that estate duty, taxes and other costs are minimised as far as possible and can make extending a legacy to multiple generations much easier. This service enables our members to provide for and protect beneficiaries with special needs. At the centre of all estate planning is a valid Will, which specifies exactly how a member’s estate is to be distributed. All people over the age of 16 should have a Will and this should be updated as necessary to accommodate important life stage events such as marriages, divorces, births and deaths. Equally important is making provision for the administration of our members’ estates. Estate administration – which is another of the fiduciary services we provide – is a process that needs to be handled with empathy, efficiency and professionalism in the shortest possible time after a member’s death. Specialist advisers are dedicated to informing our members about our fiduciary services and options, and to guide them through the process of planning for the final chapter of their life stories.
Total benefits paid in 2021 R1 095m Sickness Benefits Paid +15% from 2020 R700m Permanent Incapacity Benefits Paid +12% from 2020 R239m Lump-Sum Disability Benefits Paid +43% from 2020 R377m Critical Illness Benefits Paid +44% from 2020 PPS Integrated Report 2021 2021 highlights | 14
+27% from 2020 R6.14 billion Total Benefits Paid R1 850m Life Cover Benefits Paid +65% from 2020 R1 745m Exit Payments +9% from 2020 R139m Motor and Household Benefits Paid +18% from 2020 PPS Integrated Report 2021 15 | 2021 highlights
* Allocated to members with qualifying products. Past performance is not indicative of future performance. 2021 highlights R5.5bn Total profits allocated* to members’ PPS Profit-Share Accounts +25% from 2020 R54bn Total Assets Under Management +42% from 2020 22 336 Sickness claims processed R5.6bn Gross Premium Revenue +4.7% from 2020 11 780 COVID-19 claims paid to the value of R1.4bn +25% from 2020 9 450 Profit-Share Millionaires PPS Integrated Report 2021 2021 highlights | 16
The PPS Financial Results 2021 Highlights At PPS we believe in sharing above all else, even in the most challenging times. The more qualifying products you hold with us, the bigger your Profit-Share allocation. The PPS Profit-Share Cross-Holdings Booster is allocated over and above the existing allocation. It is tiered according to the number of products a member holds. If they hold PPS life risk products and they buy a qualifying product(s) from one of our subsidiaries or affiliates (PPS Short-Term Insurance, Health Professions Indemnity, PPS Investments, Profmed) this will increase their allocations by a specific percentage. The Profit-Share Cross-Holdings Booster allocations are not fixed and may differ every year. Allocations take place annually and will be declared alongside Profit-Share. The allocations are dependent on the profitability of PPS subsidiary products. PPS reserves the right to discontinue this offering at its own discretion. Past performance is not necessarily indicative of future performance. TOTAL CUMULATIVE PROFIT-SHARE ALLOCATION TO MEMBERS OVER THE LAST 10 YEARS R31.5bn R3.0bn R7.1bn R10.3bn R12.5bn R15.2bn R19.0bn R19.6bn R23.9bn R26.0bn R31.5bn 2012 2013 2017 2015 2019 2014 2018 2016 2020 2021 0 10 billion 20 billion 30 billion PPS Integrated Report 2021 17 | 2021 highlights
PPS Integrated Report 2021 | 18
Rock formation is a beautiful cycle. Although rocks do not immediately strike one as life giving, their formation is also indispensable to life on our extraordinary planet. The rock cycle is the ongoing process whereby rocks are formed, eroded and reformed. During this process, a number of amazing things happen, including the creation of surfaces upon which the earth’s ecosystems thrive, formation of soil which allows plant life to flourish, and the release of essential minerals which sustain animal life. PPS Integrated Report 2021 19 |
PPS Integrated Report 2021 Human capital management: our people | 20 Human capital management: our people
21 | Human capital management: our people PPS Integrated Report 2021 The past two years have fundamentally changed how work is organised and how we interact with colleagues and other stakeholders.” Masenyane Molefe | Group HR Executive “ Overview At the beginning of 2020, it would have been hard to predict how much the world of work would have changed a short two years later or how work itself would come to be perceived. Among many other things, the COVID-19 pandemic has accelerated the pace of digitalisation and has made us re-examine how business is organised. At the start of the first lockdown in March 2020, the move to remote working was, for instance, seen as a temporary measure and, in general, companies envisioned returning to “normal” fairly quickly. Little could we have known at the time how fundamentally the pandemic would change every aspect of our lives. By the end of 2021, we had formalised our learnings over the past two years into a hybrid (remote and office) working policy. In short, it has become essential for both employers and employees to be flexible, and for staff members whose work is not site-specific to have the skills and ability to work from home. With this in mind, we have been improving our leadership programmes over the past two years to ensure that we have a strong leadership capacity to take us into the future. One of our flagship programmes, called Leading the PPS Way, was redesigned and updated to reflect the needs of the current leadership context. Our human capital philosophy Our human capital management philosophy has always been based on a strong employee value proposition (EVP), which has proven its worth throughout the pandemic. PPS continues to attract, develop and retain select employees who are committed to and capable of delivering on our member value proposition and this will remain consistent going forward. Within this context, we consciously foster a valuesdriven culture based on the principle that how we treat our employees ultimately defines how our employees treat our members. Our EVP, therefore, defines the value we place on our employees and the kind of working environment we aim to create and maintain. Now, more than ever, the financial services labour market is highly competitive, and talented individuals have many sought-after employers to choose from. To attract and retain the best people, PPS offers a differentiated EVP, making it a great place to work.
PPS Integrated Report 2021 Human capital management: our people | 22 Our culture PPS management and staff continue to engage regularly to discuss the kind of culture we wish to create and sustain; a culture that supports our strategic objectives, our brand leadership vision and our values. The positive effect of this was demonstrated by the results of our 2021 PPS Employee Engagement Survey, which indicated that staff have a higher level of job satisfaction than they did before the advent of COVID-19. One of our biggest concerns when we had to make the rapid transition to remote working was the mental health of our staff and the possibility that they could experience depression and/or burnout. Our partnership with Reality Wellness Group has, however, provided all of our staff with a comprehensive range of wellness interventions and activities, which they can tap into to manage the challenges they may be facing at work and in their private lives, as well as their physical wellness. Our people PPS exists for the benefit of its members rather than outside shareholders and our employee profile is naturally evolving to reflect the demographics of South Africa’s professional population. The staff profile is majority black (75%) and 64% female. Employment equity statistics 25% 19% 12% 44% African Coloured Indian White PPS is a young and vibrant organisation, with 44% of our staff being under the age of 35. This means that the organisation benefits from fresh thinking and innovative ways of solving problems. Age group breakdown 5% 37% 51% 7% 21 to 25 26 to 35 36 to 55 56+ In line with its youthful staff profile, six out of ten employees have been with the organisation for five years or less. A considerable number, nevertheless, have much longer tenure, balancing youth and innovation with skills, experience and rich institutional knowledge. We celebrate employees who have been with the business for longer and believe that those with longer tenure ensure that skills and knowledge are transferred to younger colleagues. Tenure of PPS Sta 4% 1% 42% 35% 18% 0 to 11 months 1 to 5 years 6 to 10 years 11 to 15 years 16 years or more Our total headcount has increased by 5,2% from 1 414 in December 2020 to 1 488 in December 2021.
23 | Human capital management: our people PPS Integrated Report 2021 PPS Training Academy PPS is committed to constantly investing in the development of our people, and we do this through our dedicated PPS Training Academy. In 2020, we launched a “lockdown curriculum” and encouraged staff to take up skills and development programmes that were made available to them online. Uptake was high and staff not only signed up for courses within their skills areas but within more general subject areas such as interpersonal and business skills. Some of these offered invaluable new skills designed to build robustness and reliance in the face of change. The lockdown curriculum continued in 2021. On a practical level, the Academy launched a dedicated digital literacy programme called “Race to 150” in 2021. The programme was specifically designed to assist staff members to develop the skills they need to interact effectively in a digitalised world. The Academy also started offering courses and interventions for members and intermediaries, which are designed to help them deal with the stresses and challenges they may be facing in their own practices and businesses. Many of these are accredited and offer members the opportunity to earn mandatory continuing professional development (CPD) points. In 2019, the Academy was ranked as one of the Top 125 training institutions in the world in the Global Training Organisations Competition. In 2021, we made it to the illustrious Top 100. Staying competitive through people We remain committed to transformation and employment equity and have plans in place to continue on our road to being an inclusive organisation. Finally, we have revisited our rewards and recognitions programme to take new ways of working and new market realities into account. We now have a Groupwide annual recognition awards programme that celebrates the top performers in the organisation.
PPS Integrated Report 2021 Section title | 24 Animal migration is a beautiful cycle. Many animals take part in migratory journeys to acquire food, better living conditions, or to reproduce. These journeys are not always easy and sometimes cover astonishing distances, but ultimately they bring life.
25 | Section title PPS Integrated Report 2021
Mr I J Smit B Com (Hons), FASSA Group Chief Executive Officer Mrs T Boesch B Com (Hons), CA(SA) Group Chief Financial Officer Mr N J Battersby BSc, B Com (Hons), MBA, CFP, AMP (Harvard) Group Chief Operating Officer Mr L du Plessis B Juris, LLB, M Com (Business Management) Group Executive: Legal and Compliance Mr W Bosman B Compt (Hons), CA(SA) Chief Executive Officer: Short-Term Insurance Mr Q J Augustine BSc, PG Dip (Actuarial Science), FIA Group Executive: Member Value Proposition Mr V E Barnard B Com Group Company Secretary Mrs K Govender GIBS Executive Leadership Programme Group Executive: Life Operations PPS Group Executive Committee Mrs S Bassudev B Pharm Chief Executive Officer: PPSHA PPS Integrated Report 2021 PPS Group Executive Committee | 26
Mr J A Thomas B Com (Hons) (Actuarial Science), FASSA Group Executive: Actuarial Services Mrs A N Seboni B Com, MAP Group Executive: Marketing and Stakeholder Relations Mr J P Loubser AMP, MBA, CAIB(SA), PB(SA), MDP, EDP Group Chief Information Officer Mr W J Mouton B Proc Group Executive: Life Broker Services Ms M D Molefe B Com, MBA, MSc (HR Management and Development) University of Salford Group Executive: Human Resources Mr M M Mtshali B Com, MBA Group Executive: Advisory Services and Enablement PPS Integrated Report 2021 27 | PPS Group Executive Committee
PPS doing good PPS Integrated Report 2021 PPS doing good | 28
Overview At PPS, we are deeply committed to supporting the development of South Africa’s pipeline of professionals. Through the PPS Foundation, which is a registered Public Benefit Organisation, we implement social development initiatives that are aligned to two of the United Nation’s Sustainable Development Goals: • Goal 4: Quality education • Goal 8: Decent work and economic growth We support efforts that lead to access to quality education. As part of our long-term commitment to supporting South Africa’s youth, PPS has multiple initiatives that are designed to assist with learning, socio-economic development, skills development and the creation of employment opportunities. Standing with the class of 2021 The impact of the ongoing COVID-19 pandemic continued to be felt in many areas during 2021. This was particularly acute for learners in underserved communities, with the disruption of face-to-face classes during the third wave of the pandemic and the effects of the digital divide compromising their ability to keep up with the curriculum. As we did in 2020, we provided financial support to the YouthStart Foundation, which is a non-profit organisation that facilitates youth development programmes for high school learners from underserved communities. This was used to assist matric learners from these communities to catch up on missed lessons in mathematics and physics. 29 | PPS doing good PPS Integrated Report 2021
Bursary Programme Despite the challenges of the past two years, the PPS Foundation Bursary Programme remained firm in its mission to support students and bursary payments were reliably made to beneficiaries at the beginning of each semester. In total, 78 bursaries were funded in the last year alone. Bursaries are awarded to full-time public university students with a bias towards science, technology, engineering and mathematics (STEM) disciplines. Awards are based on financial need and academic record. They are comprehensive in scope, covering tuition, meals, accommodation, data and laptops where requested. University Support Programme Requests for assistance are accepted from public tertiary education institutions. The projects for which they are seeking funding have a direct and positive impact on the teaching and learning experience for students. In 2021, we supported five universities with funding, ranging from the upgrading of an optometry lab to assisting in funding digital devices for students. One such project was when we supported the University of Cape Town financially following fire damage to its library in April. LEAP Work Readiness Programme LEAP is an acronym for Learned, Engaged, Accelerated Professionals, and this work readiness programme assists graduates to make the transition from tertiary education to the workplace. It provides professional development workshops on topics such as personal branding, communication skills, presentation skills, CV writing, interview preparation and financial wellness. It is delivered on request to all of the country’s universities. With the country opening up and certain academic institutions conducting some classes on campus, many LEAP sessions were facilitated using the hybrid approach. More than 500 students attended this programme in 2021. Graduate Internship Development Programme Young and ambitious graduates can apply to participate in a one-year Graduate Internship Development Programme (GIDP) at PPS and, on completion, have the prospect of being offered permanent employment within the PPS Group. The GIDP has been a successful pipeline development programme for PPS. Over the last seven years, it has allowed the organisation to access top young talent, some of whom have grown within the business. The graduate programme supports South Africa’s imperative of reducing youth unemployment by providing recently graduated youth with an opportunity to benefit from comprehensive training, gain valuable work experience and develop their soft skills. All candidates are supervised by a formal mentor throughout the internship. To date, PPS has taken 140 young people through the graduate programme with an average retention rate of 80% over the years. Our commitment to youth development does not end with the GIDP. Staff, younger than 35 years and showing high potential are eligible to participate in our flagship development programme, the Young Leadership Forum (YLF). Each year a cohort of ten young leaders are selected to participate in the programme. The YLF is offered academic enrichment through UNISA’s Thabo Mbeki African Leadership Institute (TMALI). This is complemented by a bespoke programme supported by the PPS Academy. The purpose of the YLF is not only to develop young leaders but to also tap into their perspectives to solve business problems. Paying it forward In 2020, the Foundation created a donations platform to broaden its donor base. This safe and easy-to-use portal, which can be accessed at https://ppsfoundation.pps.co.za, allows members, other professionals and the public in general, to donate towards the Foundation’s activities. Donations are encouraged through regular campaigns, such as the Chairman’s Challenge, and all contributions made to the Foundation are tax-deductible. PPS Integrated Report 2021 PPS doing good | 30
Metamorphosis is a beautiful cycle. There are many incredible transformational cycles that happen in the animal kingdom, particularly in amphibians, fish and insects. Frogs, of course, start out as tadpoles with gills and swimming tails, and become creatures that can move around and breathe on land, whilst caterpillars come out of the egg as crawling insects and then soon take the form of a creature that can fly. Different phases adapted to different environments – which means that adults and juveniles never compete for the same resources. PPS Integrated Report 2021 31 |
Strategy PPS Integrated Report 2021 Strategy | 32
Overview Since its inception 80 years ago, PPS has been driven by a single focus: meeting the financial needs of graduate professionals. Our unique products, services and solutions are designed to leverage off this model and to provide unrivalled benefits for members. In today’s uncertain environment, we understand how important these benefits are for our members, not only in the short term but throughout their careers and into retirement. We understand that professionals want more than just smart financial products and efficient services; they want deeper engagement with an inspiring and collaborative community. This is a unique added value that we constantly strive to provide and improve on. Purpose Our purpose is to help graduate professional members and their families secure their financial security and worth, protect their dreams, and live the lives they want to live. In other words, we want to enrich the lives of graduate professionals. 33 | Strategy PPS Integrated Report 2021
Strategic vision Our strategic vision is to continue to build PPS as an aspirational brand aimed at meeting the financial services needs of graduate professionals and to be an undisputed brand leader in the markets we serve. This vision is supported by the following seven strategic themes: 1. EXCLUSIVE MEMBER VALUE PROPOSITION 2. DIVERSIFIED REVENUE STREAMS 4. ADVISER VALUE PROPOSITION 5. BRAND LEADERSHIP 7. CULTURE 3. HOLISTIC SOLUTIONS 6. DIGITALISATION To realise this vision, we have strengthened our business focus and developed a set of actionable workstreams that will support the delivery of our strategic themes. These are to: • unlock cross-solutioning and make our member value proposition (MVP) and our adviser value proposition (AVP) unique across all channels; • create, lead and sustain remarkable member and adviser services by improving our processes, systems and people capabilities; • develop a boundaryless global strategy by expanding PPS in territories outside of South Africa and to create globally relevant products within and outside South Africa; • continue to be relevant to all our members, across all life-stages, with emphasis on our mature members; • maintain and enhance our marketing and communication capabilities which will be used to promote our unique PPS value proposition in our current and new markets; • enrich and exploit our Profit-Share Account uniqueness through continuous innovation; • focus on our people as talent becomes a competitive advantage in the current and post-pandemic world; and • create sustainable value and growth by making a difference through Environmental, Social and Governance (ESG) outcomes. PPS Integrated Report 2021 Strategy | 34
The earth’s water sources are a beautiful cycle. The water cycle continuously purifies and distributes the earth’s water sources across the planet’s surface, making sure all living organisms have access to this essential elixir. Evaporation, condensation, precipitation, transpiration, infiltration and surface run-off – a finely-tuned process – with each stage being equally important to sustain life on our planet. 35 | PPS Integrated Report 2021
PPS Integrated Report 2021 Leadership commentary PPS remains unique in the South African financial services industry, differentiated by its ethos of mutuality. This again proved its value in 2021, as it has done throughout our 80-year history. | 36
PPS Integrated Report 2021 In 2021, PPS had to confront the ongoing effects of the COVID-19 pandemic, protracted economic uncertainty and civil unrest and had to adjust to a world that has changed permanently. The magnitude of what we, our members and advisers have gone through over the past two years, should not be underestimated.” Dr Sybil Seoka Chairman: PPS Holdings Trust Board “ 37 |
Chairman’s statement PPS Integrated Report 2021 Chairman’s statement | 38
Overview As in 2020, the ongoing COVID-19 pandemic and the economic uncertainty this created were significant challenges we had to face during the year, both as a country and as a business. These were exacerbated by the impact of the civil unrest that occurred in Gauteng and KwaZulu-Natal in July 2021. Together these events slowed the local economy’s recovery and made many of us feel unsure about the future. Unemployment climbed to a new record high of 34.9% and consumer spending declined markedly. Of particular concern is the youth (age 15-24 years) unemployment rate that reached a record high of 66.5%. And, while the unemployment rate for graduates in this category is much lower than for the cohort as a whole, graduate unemployment is still a notable feature of the South African socioeconomic landscape. PPS fell victim to a malicious cyberattack in March 2021 but no member data was compromised. Our IT team has since restored all systems and we remain vigilant to protect our systems from similar attacks. Within this context, PPS’s mutuality model continued to provide a high level of stability in a very unpredictable environment, with all PPS Group subsidiaries performing well. With its strong balance sheet and the highly profitable model – very much due to the focus on the professional segment which has behavioural traits that support low lapses and a long-term focus – we were able to support our members to a level that would have made our founders of over 80 years ago proud. It was a year during which the focus was on claims support. All valid claims, many of them COVID-19-related, were settled. This is testament to strong leadership, equally strong values and a performance-driven culture. Since profits are in any event returned to members with qualifying products, we were able to apply protocols that were different to those of the market. I shall elaborate more on this below. Yet, despite the tremendous claims support, we did manage to end the year with a small operating profit. It was also a year of very good investment returns. Investment markets look forward and often make their big moves when the night seems darkest. This allowed us to make significant additions to our members’ Profit-Share Accounts. However, investment markets, and particularly growth assets, can at times make negative corrections and I must remind members that expectations for future returns should be tempered – they can even be negative at times. 39 | Chairman’s statement PPS Integrated Report 2021
Challenging times often bring opportunities. Our focus lately was very much to bed down some of the exciting new initiatives that we kick-started over the last few years – transforming PPS from an income protection and life-insurance focused business to a more holistic financial services provider. We continue to investigate opportunities that can fuel further future growth and value creation for our members. Our strategy of bedding down new initiatives is proving to be successful and our subsidiaries performed well in 2021. An example is PPSI, which delivered exceptional performance. In this case, the positive results were due to our investment managers recording significant outperformance relative to mandates and peers, and also due to good operating cost management. This enabled us to continue to provide a reliable financial safety net for our members, sustain Profit-Share allocations, guarantee job security for our staff, support our advisers and, just as importantly, sustain our business. As a company operating under the ethos of mutuality and with solid capital reserves, we have not been under pressure to cut costs or to preserve capital in the same manner that certain other large, listed companies have been. For the past two years, this has enabled us to act swiftly to put various relief measures into place for our members, pay claims reliably, secure and support our adviser network, and maintain our full staff complement on full salary throughout the various levels of lockdown. We have also been able to execute a comprehensive information campaign, offering both general and specific information to help members, advisers and staff to deal with the impact of the pandemic. Our response to COVID-19 PPS is always responsive to member needs and, as in 2020, our responses to the various challenges that presented themselves throughout the year were immediate, often extending beyond the parameters of our existing offerings. We were quick to develop claims protocols in the first weeks of the pandemic. Many of these remained in place throughout 2021. We continued to offer financial relief options, which meant that members across all professions could continue to benefit from critical cover such as life insurance for a period even if they were unable to pay their premiums. In certain circumstances, we even provided members with access to their Profit-Share Accounts to enable them to fund the premiums for their PPS products, an option that is obviously not available at competitors. This made it possible for them to use their regular income, which had been significantly reduced by the pandemic, to cover other essential costs. We also actively engaged with various professional associations and used their insights to develop solutions to serve our members better. These included COVID-19-specific underwriting protocols for our life products, which relaxed some of our standard underwriting requirements and allowed members to access new or additional products during the pandemic. From an operational point of view, we continued where we left off in 2020 to support remote and hybrid working in a way that was seamless to our members. Technical support for staff working from home has been ongoing, as has wellness support for all, which is provided through our Employee Assistance Programme. Sadly, we lost several staff members to the pandemic and many others experienced the loss of loved ones from COVID-19-related complications. This naturally placed a heavy emotional burden on individuals, teams and advisers. Together with our wellness partner, Reality Wellness, we continued to offer a range of interventions to help them deal with bereavement, financial challenges and rapid change in both the home and the workplace. In the area of managed healthcare, PPSHA continued to work with the schemes it administers to mitigate the effects of the pandemic. Members under financial pressure were offered assistance with option changes so that, wherever possible, they could retain their coverage. As we enter our ninth decade of operations, I am again humbled and proud that PPS has been able to navigate the challenges of the past two years, and, in particular, in the way that it has. This period of social and economic upheaval has again demonstrated the value of our mutual model, which enables us to protect our members and their families and to provide them with the means to live the lives they aspire to. While it remains difficult to make any firm predictions for 2022, I feel certain that PPS will continue to steer a steady course as we adapt to the realities of living in an uncertain and changing world. PPS Integrated Report 2021 Chairman’s statement | 40
RkJQdWJsaXNoZXIy NzI4MzY4