2020 INTEGRATED REPORT

PPS SHORT-TERM INSURANCE The PPS Short-Term Insurance business performed well and made a profit for the first time, of R3.8 million, against a budgeted loss of R25.4 million. The loss in 2019 was R26.9 million. The COVID-19 pandemic had a significant impact on the financial results, which is evident from the lower number of new policies written. The number of new policies dropped by 30% compared to 2019. The business did, however, benefit from lower claims, as members used their vehicles less and stayed at home. This resulted in a net loss ratio of 51% achieved for the full year, against a budgeted expectation of 67%. The loss ratio for 2019 was 69%. Members were clearly under financial strain due to the economic contraction, which is evident in the increased lapse ratio of 20%, compared to a budgeted ratio of 15%. To assist, we provided premium support in the form of a 20% relief on motor premiums for April (R2.1 million). We have also assisted many of our policyholders during the year on an individual basis by reviewing their cover where the need arose. Expense management was a key focus. Total operating expenses for 2020 were R73 million, an increase of only 3% on the prior year. The value proposition was enhanced with the launch of a mobile app and concierge services. Members with PPS Short-Term Insurance cover who also have qualifying life policies will enjoy Profit-Share distributions for the first time in 2021. A business that we recently started under our short-term licence is the provision of indemnity insurance cover to our members in the healthcare disciplines. By year end, more than a thousand PPS members were covered by PPS Health Professions Indemnity policies, with gross written premiums more than doubling those of the previous year. The quality of the insurance portfolio is reflected in the insignificant loss experience to date. The bottom-line financial performance of the business is well ahead of budget (a loss of R8.5 million vs a budgeted loss of R17.9 million), mainly due to good loss experience and expense management. This new business line is in tune with the purpose of PPS: helping members to focus on their professions, enabling them to practice. PPS HEALTHCARE ADMINISTRATORS (PPSHA) PPSHA had an exceptional 2020. Revenue at R297 million was 9% up on 2019. Expenses came in also 9% up on 2019. Profit before tax was 10% up on 2019. This is mainly as a result of the growth in membership in the schemes (mainly Profmed and KeyHealth, where membership by year end was 2% higher than expected), reduced membership resignations across the schemes, the provision of additional services to existing clients (such as disease and dental management), good cost control and financial management, and operational efficiencies. It is worth noting that the member-to-staff ratio has increased from 1:301 at the start of the year to 1:363 by the end of 2020. PPS members who are also Profmed members essentially get administration services at cost, since most of the profit generated from these administration services are returned to PPS members with qualifying products in the form of Profit-Share. At the same time, they enjoy industry-leading administration services from a highly professional team. PPS NAMIBIA PPS members in Namibia enjoyed a good year, despite the pandemic and significant economic challenges. Claims of R71 million were 47% more than the very good experience of 2019; but 5% growth in net premium revenue and good expense control, delivered profit of R48.2 million in 2020. This was 22% lower than in 2019 due to the higher claims. New business inflows were fairly strong, with new annual premium income of R16.9 million, exceeding the 2019 number of R15.9 million (7% up). New member acquisition fell short of expectations, with 254 new members against a target of 322. This was mainly due to the closure of the tertiary campuses as a result of the pandemic. The pressure on disposable incomes of members is a reality, leading to lapses. The strengthening and localisation of the executive team and Namibia Board continued with the appointment of Stefan de Bruin as Board Chair. New product lines were rolled out in Namibia early in 2021, and we expect this business to experience continued good growth over the next year. CEO’S MESSAGE TO MEMBERS | 47