some members choosing not to acknowledge this as the underlying reason for their claim. Almost one in ten of our members submitted a COVID-19 claim. These are high numbers from a historical perspective, but we could absorb these numbers in our income statement without dipping into negative territory (and ignoring investment returns). Our solvency remains strong as PPS continues to honour longterm future commitments to our members. Our foremost purpose remains to assist our members in times of need, which means paying valid claims; profit is a secondary objective. Due to our mutual model, more claims simply mean that more money is distributed to those (unfortunate) claimants and less to the general pool in the form of Profit-Share. Management expenses constitute the only leakage from the pool that will eventually be returned to our members, either as a claim payment or as ProfitShare. Hence, efficiency ratios are important metrics that we track. Management expenses were in line with budget and breached the target efficiency ratio slightly, mainly due to extra expenditure in relation to the recovery after the cyber event. PPS Investments (PPSI) PPSI reached its 15-year milestone at the end of 2021. It has now grown to a significant business with total assets under management of R54.0 billion, up by 25% from R43.1 billion at the end of 2020. It now serves more than 54 000 investors. The 2021 year was arguably the best year in PPSI’s history. Gross new business inflows were R7.1 billion. Surplus before interest and tax was 57% up on 2020. This strong growth in surplus demonstrates the benefits if an investment business grows to scale. The good surplus numbers were mainly due to strong financial discipline in expense management, benign investment markets and the good new business performance. Our members with qualifying life products benefit directly from these increased profits as it is added to their Profit-Share Accounts. However, more important than overall profitability is the individual fund performance. Investment performance (relative to benchmarks and peers) on both the retail and institutional side is very pleasing. In the latest Morningstar Fund Ratings, PPS Management Company which manages the PPS fund range ranked within the top three of the 46 competitors. PPS Short-Term Insurance With new business under pressure due to the COVID-19 pandemic, the PPS Short-Term Insurance personal and commercial lines business used the opportunity to focus on further digitalising the business as well enhancing the concierge services and introducing travel benefits. These initiatives to future proof the business are in response to the need for convenience by graduate professionals who are time poor. The introduction of Profit-Share and the Profit-Share Cross-Holdings Booster for Short-Term Insurance personal and commercial lines products are starting to positively impact cross-sell to the PPS membership. This resulted in an 11% increase in new premium written when compared to 2020. COVID-19 restrictions and an increase in working from home saw members using their vehicles less. This, together with mild weather, led to better than expected claims performance. The claims experience over the last few years, irrespective of the COVID-19 impact, supports our view that the professional market segment is a benign risk pool. This is due to certain behavioural traits common to professionals, like embracing certain personal risk management principles and a general professional ethos. Lapses were slightly higher than projected, driven mainly by economic conditions; however, it is pleasing to see that the trend shows a decrease in lapses from the previous year. Our Health Professions Indemnity business continues to be on an aggressive growth path. In 2021, the number of insured health professionals reached 1 732 and represents organic growth of 63% for the year. During the year, Pharmaceutical Society of South Africa Scheme (PSSA) members were also migrated bringing the total number of insured health professionals to 4 309. Gross written premiums increased by 67% from the previous year. The focus on underwriting and understanding the specific risks have resulted in a quality insurance portfolio as reflected in the insignificant loss experience to date despite a highly litigious environment. The bottom-line financial performance of the business is well ahead of budget, mainly due to good expense management. This business is well on its way to a breakeven position in the next year or two and on track to becoming sustainable in five years. New business distribution will be stepped up in 2022, as the proposition of quality indemnity cover is so much in tune with the purpose of PPS: helping members to focus on their professions, enabling them to practice. PPS Integrated Report 2021 CEO’s message to members | 50
RkJQdWJsaXNoZXIy NzI4MzY4