huge responsibility. I am surrounded by a team that strives to live up to our purpose and our values every day. I can report to members that the challenges of the past year have indeed made the team stronger. Opportunities and strategy Social distancing protocols between the second and third waves of the COVID-19 pandemic in 2021 allowed most of the senior management team to participate in a physical strategy offsite, although some had to attend virtually. In fact, we are now becoming quite experienced in facilitating such hybrid events. When our non-executives joined a few weeks later, the third wave’s social distancing and other restrictions prevented another physical event. Yet, this was not much of an issue. The way we go about strategy formulation in the PPS Group is robust and well entrenched. The overall Board guidance during the pandemic was to follow through on existing strategies but to be cautious on bold new initiatives. However, we are also conscious that a crisis often presents good opportunities. The strength of our balance sheet allows us to throw some fertiliser for the future in a responsible manner. As we exit the pandemic, we expect to invest more in growth opportunities. Our strategic process is such that all executives and senior managers are involved in strategy formulation and execution, more than a hundred of them. It is a meaningful part of the scorecards on which they are measured – there is real skin in the game. It also facilitates good cross-team collaboration (typically a weakness in many organisations). The management team is then grouped into a number of smaller strategic execution teams (SETs) that focus on particular themes and aspects that support our strategy. I mentioned in last year’s report to members that PPS fell victim to a malicious cyberattack in March 2021. I can again confirm that no member data was compromised. In fact, our core life insurance and investment systems were not impacted. However, it did impact our ability to serve our members in line with the high standards that they are accustomed to, as certain client service platforms were impacted. We managed to quickly set up alternative ways to serve our members. All systems were fully restored and cyber security will continue to enjoy significant attention and focus. Such cyber events assist us to make our security posture even stronger giving us confidence in the ability of our operational and IT teams to navigate such challenges. Especially in the professional segment where digital tools and platforms, interconnectedness and remote working become an ever-increasing feature of the operating landscape, we should remain vigilant of the scourge of cybercriminals. Indeed, threats to cyber security will pose an increasing challenge to individuals and companies, big or small. Performance snapshots for 2021 PPS Insurance The annual premium income of new life insurance business written in 2021 in South Africa and Namibia was up a significant 23% on new life business that was written in 2020. It is also 9% more than the previous record year in 2019. New business is the lifeblood of a life assurance business and our channels are indeed healthy and performing very well. Given the professional segment that we serve, the nature of our income protection and life products is such that advice is an important ingredient in the process. Therefore, our only way of distribution is through face-to-face advisers, both internal and external to PPS. About 75% of new business flows to PPS in 2021 were again due to external (independent) financial advisers. They remain important business partners to us, serving our professional members. The other 25% of new business was from our internally employed advisers. This internal channel had an exceptional year in 2021, growing life new business by 28%. Gross Life premium revenue went up by 4.5% in 2021 supported by a low lapse rate that came in at 5% at the end of the year. The big story of the year to report on is of course claims. As can be appreciated, it was very difficult to anticipate at the start of 2021 the impact that COVID-19 claims would have, despite actuarial model guidance from the South African Actuarial Society. Most of the impact of the second wave of COVID-19 that started towards the end of 2020, was felt in the 2021 financial year. The impact of the significant third wave, which reached a peak in July/August 2021, came through in our claims experience in the third and fourth quarters. Total claims were 36% more than in 2020, which was in turn 45% more than in 2019. COVID-19 claims (the ones that were formally acknowledged as such) alone amounted to R1.4 billion in 2021. In 2021, we paid 11 587 COVID-19 sickness claims to the value of R424 million. We also paid 193 COVID-19 death claims to the value of R975 million. We, therefore, paid almost 12 000 claims that were formally acknowledged to be COVID-19 related, but have reason to believe that this number is higher due to 49 | CEO’s message to members PPS Integrated Report 2021
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