2020 INTEGRATED REPORT

OVERVIEW It is my privilege to report to members that PPS has weathered the extraordinary events of 2020 quite well. We could not have asked for a more challenging backdrop to prove that our mutual model provides us with a solid base to stay true to our purpose: supporting our members and providing financial security in times of great need. A crisis has the ability to either expose the flaws in a model and a team, or to prove its robustness and to make a team stronger. I count myself fortunate to be part of a team and a model that can look back at 2020 with immense pride. I have commented in previous reports that our staff members at PPS are often humbled by the niche market segment that we serve, which includes some of South Africa and Namibia’s most educated and influential individuals in the various professions. It is a privilege and a huge responsibility. But in 2020, pride was indeed the emotion that surfaced. We are proud to be associated with professionals who were at the forefront of helping the greater community to deal with the challenges. PERFORMANCE Economists debated during the year whether the pandemic-induced recession would be V-shaped (a quick bounce back), U-shaped (longer trauma before the recovery), L-shaped (no meaningful recovery for quite some time), or W-shaped (a double-dip). Eventually most economists started to agree that it is actually K-shaped (for some it was a very good environment and for others bad) recovery occurs after a recession when certain parts of the economy resume growth while others lag behind indefinitely. For many industries, businesses, families, and individuals, it was the worst of times. Businesses collapsed, and lives and livelihoods were lost. And on the other leg of the “K”, it was for some the best of times, record profits, families reuniting, less time wasted. And for most of us it probably was both: very good and very bad simultaneously. What we certainly experienced was a crisis of unprecedented scale, and in the PPS Group we also noticed this K-shaped state of affairs. Despite many of our members experiencing significant financial strain, our lapses remained very low on the life side. We noticed a renewed appreciation of the value of life and sickness cover, as professionals tried not to lapse their policies. New life insurance business, although down on 2019, as in the very strained and locked-down environment, still surprised us, especially in the latter part of the year. Paradoxically, Profmed – and as a result, our medical administration business – had a strong year: medical aid cover was highly sought after, leading to low terminations. Some elective medical procedures were postponed, and the general hygiene consciousness in society and social distancing led to less sickness in general, which was beneficial to medical schemes. Fewer vehicles on the road helped our short-term insurance business to declare a profit for the first time, even after returning money to members in the form of a premium discount. The strong markets towards the end of the year supported members’ investments. These are examples of the tailwinds during the year. But there is also the other leg of the K-shape, and as expected from a business that provides life cover and income protection to professionals, our claim payments increased significantly. Our business was, by default, in the eye of the storm. But that is what PPS is all about, supporting members and paying valid claims as per the contractual agreements with our members. Given our mutual ethos, we went further than that, beyond what policy contracts stipulated. We looked for ways to assist our members, while being fair to the member base in total. We developed protocols around supporting members when they had to quarantine and were unable to earn an income. We developed ways to support members who struggled to meet premiums, something that was only made possible by our model. It is testimony to the strength of our mutual model, that despite the unprecedented increase in claims, we were still able to declare an operational profit at the end of the year that will be distributed to members. The year was also a lesson in the futility of timing investment markets. The big market sell-off at the end of the first quarter, when the reality of the scale of the pandemic and the impact of lockdowns became apparent, is understandable. However, the strong recovery in investment markets in the second quarter and again towards the end of the year, despite the economic damage, caught most people by surprise. At PPS we follow a well-diversified and very long-term approach in our investment strategy. We can afford to have a long-term view because our members’ policies generally stay on the books for a generation or more. This long-term perspective is a competitive investment edge. It allows us not to have knee-jerk reactions, so we remained fully invested in growth assets during the year, resulting in strong returns that we can return to members. PPS INTEGRATED REPORT 2020 | 45