PPS 2023 INTEGRATED REPORT Mutuality for the of our members greater good
* All references to “PPS” refer to “PPS Group”. At PPS we believe that every member of our ecosystem should prosper collectively. At the start of 2023 we asked ourselves how we, as a Group, could deliver even better on our promise of mutuality for our members and financial advisers. The answer? Greater integration for the greater good. The numbers in this report are a reflection of the past year’s efforts, from the number of ways we have created value and streamlined service delivery to our 100% commitment to world-class innovation and future-proof sustainability. Because, when it comes to mutuality, we take it as seriously as our professionals take their professions. Mutuality for the greater good
TABLE OF CONTENTS 2 4 5 9 10 12 14 22 28 30 32 36 38 42 46 49 51 52 80 CHAPTER ONE CHAPTER TWO CHAPTER THREE About our Integrated Report Highlights Who we are and what makes us different Mutuality Strategy Leadership commentary Chairman’s statement CEO’s message to members Group performance PPS Life Solutions PPS Advice and Distribution PPS Investments PPS Short-Term Insurance PPS Healthcare Administrators Material matters and risk management Abridged financial statements Key performance indicators Corporate governance report Annual financial statements 1 Table of contents
The report covers the Group’s strategy, operations and performance, and touches on issues such as our approach to sustainability, value creation, employment equity, innovation and service delivery. The goal is to present a thorough and balanced perspective of the financial and non-financial performance. The intention is to provide accessible information about our strategic direction, operating environment, operational management, efficiency, quality, corporate governance, accountability and corporate social responsibility. The information provided complies with relevant national and international legislation and regulations. Disclosure and assurance The PPS Holdings Trust Board of Trustees (the Board), has aimed to achieve the highest standard of disclosure in this report and to provide meaningful, accurate, complete, transparent and balanced information. The Board, together with its committees and management, was actively involved in finalising all disclosures and assumes responsibility for the information contained therein. The annual financial statements were prepared in accordance with International Financial Reporting Standards and were independently audited by EY South Africa. The non-financial information contained in the report has not been independently assured. Scope and boundary The PPS Integrated Report 2023 deals with the performance of the PPS Holdings Trust and its subsidiaries (the Group) for the 12 months ended 31 December 2023. It is intended for the information of our members and contains reporting on relevant events up to the date of publication. Board responsibility The PPS Integrated Report 2023 was approved by the PPS Holdings Trust Board of Trustees (the Board) on 3 April 2024. 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 Group’s performance in future. Forward-looking statements Some of the remarks contained in this report are forwardlooking statements and should not be considered as guarantees or predictions of future performance. Like all businesses, we face risks and other factors beyond our control, which may impact our performance in 2024 and beyond. ABOUT OUR INTEGRATED REPORT 2 About our integrated report
That’s value creation for the greater good of our investors. Let your Family Network build your net worth, when you invest with PPS Investments. The Family Network enables clients to connect their family’s investments on our platform to ensure that the family can benefit from a reduced administration fee. PPS Investments (Pty) Ltd and PPS Investment Administrators (Pty) Ltd are authorised Financial Services Providers. 3 About our integrated report
+ = 2023 R6.12bn Annual gross benefits paid 2023 R10.66bn Annual gross benefits and Profit-Share allocations 2023 R4.54bn Total profits allocated to members’ PPS Profit-Share Accounts™ HIGHLIGHTS* *All numbers are for PPS Insurance Company (South Africa) and PPS Insurance Company (Namibia) unless stated differently. ** Excluding Profit-Share allocations. 2019 2020 2021 2022 2023 Annual operating profit allocations R1.20bn R0.93bn R0.12bn R0.49bn R1.11bn 2020 2021 2022 2023 R3.34bn Annual investment profit/(loss) allocations 2019 R3.14bn R1.67bn R5.34bn (R0.31bn) 2020 2021 2022 Annual gross benefits paid to members** 2019 R3.75bn R4.84bn R6.15bn R5.04bn 2023 R6.12bn 2020 2021 2022 2019 2023 PPS Profit-Share Millionaires 6 804 7 561 9 450 9 565 11 025 4 Highlights
WHO WE ARE AND WHAT MAKES US DIFFERENT The PPS story For more than eight decades, PPS has demonstrated remarkable resilience, recorded growth and consistently provided valuable services and peace of mind to our members. The fact that we continue to do so today, despite the challenging environment we have navigated in recent years as a business and a society, is testimony to the vision and objectives of our founders. PPS was established in 1941 by a group of eight forwardthinking dentists who wanted to protect their ability to earn an income. Even at that time, the model they chose was rare in financial institutions; a mutuality model that enables a group of people to benefit from pooled resources. The values inherent in this model still inform every aspect of our business. In addition to enjoying the benefits of our wide range of solutions, including life and short-term insurance, investments, healthcare, fiduciary and advisory services, members also share in the returns generated by PPS. The greater the members’ contributions to and participation in qualifying products, the greater their share in the form of allocations to the notional PPS Profit-Share Account™ (PPS Profit-Share Account™). These allocations grow through investment returns and further allocations to become a valuable asset for members in their personal financial planning. Starting out with income protection, we have steadily expanded our range over the years to include a comprehensive selection of financial products and solutions. Today, the Professional Provident Society Insurance Company Limited (PPS) is a registered financial services provider. Our multi-generational membership comprises industry leaders and academics, pivotal in serving South Africa’s populace and economy. Our mission and values express our commitment to our members. Izak Smit Group Chief Executive Officer In the South African financial services landscape, PPS takes a distinct approach. Rather than shareholders, we have members – graduate professionals who qualify for membership and the benefits of that membership based on their qualifications. When the Group was established more than 80 years ago, its forwardthinking founders aimed to create a community that would ensure personal security and generate wealth for these professionals. Our enduring mutuality model, resilient through wars, social upheavals and economic uncertainties, remains steadfast in delivering unwavering services. Each year, we allocate Group returns equitably to qualifying product-holding members, ensuring continuing sustainability. “ “ 5 Who we are and what makes us different
WHO WE ARE AND WHAT MAKES US DIFFERENT Our purpose All mutual organisations have a clear purpose that defines their existence. PPS, founded in 1941, is no exception. By providing specific financial solutions within a mutual framework, we aim to assist our members to live the lives they want in a world worth living in. That is why we offer a comprehensive range of financial solutions that cater to graduate professionals’ needs. We help our members secure their current and future financial positions by providing peace of mind throughout their professional careers, during their retirement and in leaving their legacies for future generations. Our values At PPS, we believe that what we value drives our behaviour. We live by three core values: • We take extreme ownership. We take full responsibility for our impact, avoid blame-shifting, tackle problems with solutions and act as owners of resources. We focus on results and expanding influence and understand that success comes from decisions, not conditions. • We are eternally curious. We are not satisfied with the status quo and are driven to constantly improve the solutions we offer to our members. We are committed to innovation, giving staff the licence to innovate and experiment while recognising and responding to the complex and changing needs of our current and future members. • We do the right thing. We not only conduct our business with empathy, authenticity and care, but also with the highest standards of ethics, fairness, governance and respect for all. The ethos of mutuality At PPS we view mutuality as a deep and authentic form of cooperation. A shared benefit and partnership that goes beyond the superficial or transactional aspects of a relationship. It signifies a commitment to creating a genuinely mutually beneficial environment for all stakeholders, including members, advisers and the broader community. Mutuality is more than a promise. It is our members’ path to empowerment, personal transformation, success, growth, prosperity and achievement. We invest profits and investment returns on behalf of our members, taking a long-term view of wealth creation. When members retire from their professional careers at or after the age of 60, the allocations accumulated in their PPS Profit-Share Accounts™ throughout their membership become available for their use through a Vested PPS Profit-Share Account™. When the ProfitShare vests, many members choose to keep these assets invested with the Group as part of their post-retirement savings to generate further returns and supplement their retirement incomes. One of the ways in which PPS shares its success with members is through allocations to the PPS Profit-Share Account™. When a member obtains a qualifying life-risk product, we open a PPS Profit-Share Account™ in their name. As a result, members with a qualifying life-risk product can share our operational and investment returns through annual allocations to their PPS Profit-Share Accounts™. The operational returns feed into the Apportionment Account section of the PPS Profit-Share Account™, while investment returns are directed to the Special Benefit Account section. Over time, these allocations grow to become a valuable asset in personal financial planning. Thanks to the synergistic power of the PPS Profit-Share Account™ and the PPS Profit-Share Cross-Holdings Booster, many long-standing members have received more in Profit-Share allocations in a particular year than they have paid in premiums for that year, over and above solution benefit payouts they may have received. 6 Who we are and what makes us different
The PPS Profit-Share Cross-Holdings Booster The PPS Profit-Share Cross-Holdings Booster represents an innovative enhancement designed to elevate the PPS Profit-Share Account™ experience for members. Functioning as a strategic mechanism, this booster amplifies Profit-Share allocations. Members who hold a PPS life-risk product alongside qualifying offerings from our subsidiaries or affiliates, such as PPS Short-Term Insurance, PPS Investments, PPS Health Professions Indemnity and/or Profmed, stand to benefit from enhanced allocations. Operating on a tiered system, the booster increases allocations equal to the diversification of members’ portfolios across these entities. The booster allocations are not fixed and can differ each year and PPS reserves the right to discontinue this offering at its own discretion. In 2023, allocations were boosted by 14%, 20% or 30% depending on whether the member holds products from one, two or three additional subsidiaries/affiliates respectively. Therefore, diversifying a portfolio across PPS subsidiaries and affiliates not only potentially leads to additional returns allocated to members’ PPS Profit-Share Accounts™ from individual products but also “boosts” these allocations, courtesy of the PPS Profit-Share Cross-Holdings Booster. Reserves/Members’ Profit-Share PPS Mutual Model - = Members’ premiums Benefits paid to members Cost of running the business Reserving: guarantee future claims Operating result Apportionment account notional allocation Investment returns on past allocated profits Special benefit account notional allocation 7 Who we are and what makes us different
WHO WE ARE AND WHAT MAKES US DIFFERENT Professional focus In addition to the ethos of mutuality, PPS is further defined by its focus on the professional market segment. Our exclusive membership criteria mean that only graduate professionals with a qualifying postgraduate degree or similar are eligible to become members. This requirement applies across all industries and professions. As a result, PPS is a leading provider of financial services to the professional market segment. Our services and solutions are specifically tailored to the needs of our graduate professional members. That is why financial advisers go through a strict selection and accreditation process to ensure that they are suitably qualified to market and provide advice on our solutions. PPS-accredited financial advisers have industry-specific knowledge that enables them to offer informed advice on the specific issues and challenges our members face. 8 Who we are and what makes us different
MUTUALITY About The ethos of mutuality is sacrosanct and core to our identity; it drives everything we do. When individuals join PPS they start a lifelong journey based on trust and reciprocity. In 2023, more than 1 800 PPS members retired. Many of them had been members since their student days and entrusted us with their financial well-being throughout their careers. Over time, they would have faced challenges and experienced life events that led to claims. However, they will attest to the value of our mutual model which is proven by the R353 million that was paid to them, in the form of Profit-Share, as their share of PPS’s success. Review of 2023 In 2023, PPS embarked on a journey to reimagine and expand the concept of mutuality as lived by our company. Naturally, we are keeping the best elements such as sharing PPS’s returns with our members through our innovative PPS Profit-Share Account™ and the PPS Profit-Share Cross-Holdings Booster. Mutuality is also finding ways to create more value for members by leveraging the network effect of PPS. For example, Family Network, an investment concept pioneered by PPS Investments, helps members to reduce fees by taking advantage of the collective scale of their family members’ individual investments. Our emphasis on youth and skills development has deepened our connection with universities. Through our University Support programme we allocate grants to universities to fund capital projects, which has helped strengthen our relationship with academic institutions. We are committed to nurturing tomorrow’s professionals and have invested in the training and skills development of educators in mathematics and science through our partnership with the Vula and Vuma programmes – both running in KwaZulu-Natal via Hilton College. There are many other initiatives which are housed under the broader mutuality banner. The launch of the South African Health Business Academy (SAHBA) – a business skills development initiative for medical practitioners – was a resounding success. The Transition to Practice and Practice Growth Strategies programmes were designed to provide members with a better understanding of the business aspects of running a practice. The goal of these programmes is to help practitioners to optimise their time so that they can enjoy the benefits of both running a successful practice and living a fulfilling life. Members who attended the SAHBA programme got a sneak preview of our digital tools under development. These tools aid in crafting financial roadmaps and enhancing overall well-being. 9 Mutuality
STRATEGY Vision The execution of our strategic planning is typically oriented over successive five-year periods (2017 to 2022, 2023 to 2028). At the start of each period, new goals are set and plans are formulated to achieve them. These goals are then executed and tracked. However, we are also focused on defining PPS’s vision for the future. We sincerely appreciate the foresight and diligence demonstrated by the past stewards of our business. Hence, in embracing our inter-generational duty, we accept the responsibility of shaping a purposeful and impactful PPS for future generations. During 2023, in envisioning that future PPS, we embarked on a piece of work that eventually crystallised in the mini-restructuring of some of our business areas and a set of strategic shifts that articulate the essence of our ambitions for the future. The benefit of defining these shifts is that our colleagues throughout the organisation can relate to those who are closest to their individual roles. Consequently, regardless of business unit, geography or functional role, PPS employees are practically aligned with how we intend the PPS purpose to show up in years to come. These strategic shifts guide our strategic agenda, particularly our five-year strategic plans. Some are internally oriented around how we operate and engage with members and advisers (internal focus); others are broader in their intention (external focus). Strategic shifts (relating to external focus) “Being serious about being mutual” is the shift which we believe will deliver added mutuality benefits to members in addition to the unique PPS Profit-Share Account™. As part of our mini-restructure during the year, we created and resourced a dedicated Mutuality capability to design, develop and embed mutuality throughout the organisation. “Creating the PPS Prism” is a shift within PPS to strengthen relationships with members and financial advisers. Our goal is for PPS to support members throughout their lives with access to specialists and support mechanisms. We aim to provide our financial advisers with top-ranked propositions by leveraging their strengths and our member relationships. This will help fortify the PPS ecosystem. We recognise PPS members’ integral role in South Africa’s future. Through our shift, “Paying it forward”, we aim to lead mutual growth. Sustainability is vital for personal, corporate and societal futures. Strategic execution pillars (themes) To ensure we deliver on our five-year strategic plans, we continue to organise our senior leadership team around strategic pillars and into strategic execution teams (SETs). These SETs have been in place for several years. Collectively, they have significantly accelerated our delivery of strategic objectives. In addition to accelerating execution, they have also proven to be excellent catalysts for keeping the different leadership teams aligned around the common objectives and for individual leadership development to be sustained. We shared seven strategic themes in previous reports, covering all aspects of our ecosystem. In 2023, we added Sustainability as an eighth focus area, recognising its importance to our business strategy. Sustainability now stands alongside our existing areas of focus, demonstrating our commitment to delivering long-term value to our members and stakeholders. We evaluate our sustainability objectives rigorously, benchmarking them against industry peers and best practices. Strategy 10
To summarise our eight strategic pillars or themes: 1. Exclusive Member Value Proposition At PPS, we view our members as owners of the business, rather than mere clients. Through our mutuality model, we offer tailored financial and lifestyle solutions, enriching our members’ lives. We want to enhance their professional lives and offer industry-leading products while fostering a vibrant community experience. 2. Diversified revenue streams Diversified revenue streams are pivotal in enhancing member benefits and protecting against external uncertainties. Our strategy involves supporting member uptake of new solutions and services and entering new markets sustainably in other geographies and segments. 3. Holistic solutions We are committed to offering holistic financial solutions that maximise the benefits of mutuality for our members. We strive to become a trusted partner throughout our members’ professional journeys. 4. Adviser Value Proposition Advisers play a crucial role in our relationships with members. Therefore, empowering them with the right tools and solutions is essential. Our goal is to establish ourselves as the financial services provider of choice for advisers who advise professionals, enabling them to deliver consistently excellent service to their clients (our members). 5. Brand leadership Effective brand positioning is paramount in attracting new members and establishing PPS as a thought leader in the graduate professional market and as an organisation that contributes to the greater good. 6. Digitalisation Efficient digital services are essential for meeting the needs of time-starved graduate professionals. At PPS, we are committed to developing an omnichannel sales and service experience that enhances member engagement and satisfaction. 7. Culture Our high-trust organisational culture is the cornerstone of our success, driving results, learning and caring across different aspects of our business. We strive to create a culture where employees feel empowered and engaged, fostering a learning mindset that drives results while prioritising the member experience. 8. Sustainability Embedding sustainability principles into our operations showcases our dedication to economic growth, social development and environmental stewardship. Through active engagement with stakeholders and aligning with the United Nations Sustainable Development Goals (SDGs), we actively pursue a positive societal impact while safeguarding our business’s enduring success and resilience. 6. Digitalisation 1. Exclusive member value proposition 2. Diversified revenue streams 3. Holistic solutions 4. Adviser value proposition 5. Brand leadership 7. Culture strategic themes 8. Sustainability 11 Strategy
LEADERSHIP COMMENTARY Group Executive Committee Front (from left to right) Mr J A Thomas, B Com (Hons) (Actuarial Science), FASSA | Ms A N Seboni, B Com, MAP | Mr S G Johnson, B Com Acc (Hons), CA(SA), Postgraduate Diploma in Specialised Accountancy | Ms M D Molefe, B Com, MBA, MSc (HR Management and Development) University of Salford | Mr I J Smit, Group Chief Executive Officer, B Com (Hons), FASSA | Mr W Bosman, B Compt (Hons), CA(SA) | Mr J P Loubser, N Dip Electrical Engineering, B Tech Electrical Engineering | Ms S Bassudev, B Pharm 12 Leadership commentary
Back (from left to right) Mr A J Fraser, MBA, BSc (Comp Sci), CFP | Mr L du Plessis, B Iuris, LLB, M Com (Business Management) | Mr J M Nieuwoudt, B Com (Ins Sc), MBA, IFA | Mr W J Mouton, B Proc | Mr S Ruiters, B Com (Econ), B Com (Hons) (FAPM) | Mr N J Battersby, Deputy Group Chief Executive Officer, BSc Mech Eng, B Com (Hons), MBA, CFP, AMP (Harvard) | Mr V E Barnard, B Com | Mr M M Mtshali, B Com, MBA, AMP (Harvard) 13 Leadership commentary
CHAIRMAN’S STATEMENT Overview It is our ethos of mutuality that has enabled us to deliver exceptional value to our members throughout our long history and to contribute in a meaningful way to the greater good. Now, as we have done many times before, we are evolving in response to changes in the financial services landscape and the changing needs of our members. During 2023, we took bold steps to further position the PPS Group so that it can deliver on its vision and ethos more holistically, offer even greater value for our members and extend the benefits of our solutions and services portfolio into new markets and territories. We have made a few changes to our organisational structure to ensure that it remains fit-for-purpose, enabling us to deliver maximum value as an integrated financial services provider and to introduce the benefits of mutuality to other segments and territories. The macroeconomic environment Focusing on the 2023 financial year, low growth continued to hamper economies worldwide, not only in South Africa. However, South Africa has unique challenges, where the unreliable power supply situation has a detrimental socio-economic effect. The weakening rand and above-inflation fuel and food price increases have hit consumers hard, digging deep into disposable income. Consequently, many South Africans have struggled to maintain their insurance and medical aid cover. Although our graduate professional members are more financially resilient than the rest of the population, these pressures have impacted their experience, as well. Although the unemployment rate declined marginally from the previous year, it remains intractably high. Of most significant concern to us is the high unemployment rate among young people in general and among recent graduates in particular. The PPS Student Confidence Index of 2023 revealed that 53% of recent graduates indicated that they were not confident of finding work within the next three to six months. The knock-on effect is that new graduates and young professionals are tempted to pursue opportunities overseas, where they feel they will achieve a better quality of life and a more secure future for themselves and their families. Together with the increase in the Every financial year brings new challenges and new opportunities. 2023 was no exception. We met it with the resilience and vision that PPS is known for. Given the strength and value of our mutual model, we are especially excited about the opportunities. It resonates with our founders’ simple but powerful goals: to secure the lives and livelihoods of graduate professionals and their families. It is a privilege to be part of fulfilling that vision. Dr Sybil Seoka Chairman: PPS Holdings Trust Board “ “ 14 Leadership commentary
emigration of older professionals since the pandemic subsided, this represents a burgeoning risk factor for PPS. However, at PPS we have always strived to look for the opportunity in any challenge. Our strategic approach Strategically, we are focusing on consolidating our position as a full-service financial services provider in the professional market segment, deepening the value of mutuality in that segment and expanding into new markets and territories. During the year, we revised our organisational structure to support these ambitions. From a corporate governance and strategic focus point of view, we have added Sustainability to our key strategic themes in recognition of the importance of environmental, social and governance objectives to our organisation and society. Despite near-universal consensus among scientists that humans globally are currently consuming at a rate above the carrying capacity of our planet to renew itself, which will lead to environmental collapse if we do not urgently come up with better solutions, society in general, for various reasons, finds it challenging to generate those solutions and act on it. At PPS, doing the right thing is one of our core values that we treasure. Hence, we aim to further embed best-practice sustainability principles and standards into our business model. But more so, when the world faces profound challenges and crises, it is often to professionals that it turns. The recent COVID-19 experience served as an example. Professionals are trained to develop the imaginative solutions that the world urgently needs. It humbles us that we serve this market segment. We will continue to challenge ourselves on our responsibility and what we can do to mobilise and assist our members, to in turn assist society as it grapples with these significant challenges. Business performance Group performance PPS continued to provide a high level of stability throughout 2023. As we have always done, we reliably paid all valid claims timeously, enriched our solution and service offerings, strengthened our advisory structures, maintained strong distribution channels and improved our systems to enhance the total member experience consistently. This year’s results again show the effectiveness of mutuality in providing both financial security and unrivalled longterm benefits for our members. I am confident that our members will be pleased with our results – good numbers. We continue to be grateful to our members for their loyalty, demonstrated by low membership attrition rates, policy cancellations and Profit-Share withdrawals. There can be no doubt that our shared resilience is a core strength. Many of our members remain with PPS for life and, in some cases, members of the same family have been with PPS for multiple generations. We also continue to see a steady increase in new membership numbers, with our membership profile increasingly reflecting the country’s demographics. The same is true for the Group itself, which achieved Level 2 B-BBEE accreditation in 2023, demonstrating our firm commitment to internal transformation. This is not only sound corporate practice but also good business management. Life Solutions and subsidiaries PPS Life Solutions continued to deliver worldclass offerings, unique in the market and bespoke for professionals. This business, which houses our range of life, accidental death, sickness, critical illness and disability solutions, is (still) responsible for more than 90% of the returns annually allocated to members with qualifying liferisk products via their PPS Profit-Share Accounts™. PPS Investments enjoyed a strong year with assets under management breaching the R80 billion mark for the first time and receiving new investment inflows of R7.6 billion for the year. This was in a year during which many asset managers reported net outflows. Except for certain strategic investments in other markets and territories, PPS Multi-Managers are now overseeing all our members’ ProfitShare assets; the transition from external asset managers having been completed in 2023. This move provides a diversified investment approach with a suitable long-term focus, backed by a great track record. 15 Leadership commentary
PPS Short-Term Insurance operates in a more volatile market segment and, as in the previous period, saw an increase in claims for climate-related events such as floods, fires and heavy hailstorms, as well as in claims for equipment and infrastructure damage caused by loadshedding. Yet, it performed better than planned and due to the scale built over several years, it is now in a breakeven position. PPS Healthcare Administrators (PPSHA) once again delivered superior service to the members of the schemes it administers, including Profmed. A significant development in 2023 was that the business started to provide services to the Botswana Public Officers Medical Aid Scheme (BPOMAS), bringing its first cross-border client on board. This aligns with the Group’s strategy of expanding into new markets and territories, both within South Africa and in the Southern African Development Community region and beyond. And finally, our associate business in Australia, PPS Mutual (Australia) is growing strong. We celebrated our 11 000th professional member in Australia in 2023. It has also recently been voted by the independent financial advisers in that country as the best life insurance business, something we are extremely proud of. Our South African members benefit from fee income and royalties from Australia. Due to our success in Australia, we are currently setting up a similar business next door in New Zealand. Innovation Throughout the Group, we continue to innovate to meet the evolving needs of graduate professionals. Our PRO-FiT member engagement platform, for instance, enables our members to have direct control of their PPS portfolios, engage with the larger professional community and explore ways to optimise the value of their PPS Profit-Share Accounts™. In 2023, we introduced a complementary intermediary engagement platform, which enables independent advisers to engage more efficiently with PPS and to view the portfolios of clients who hold PPS solutions on a convenient dashboard. We are also rolling out an artificial intelligenceassisted workflow engine called Pro-Flow, enabling us to automate and expedite many routine functions, such as claims processing and tracking. In 2024 we will roll out an enhanced Group app, which is currently in pre-release testing. This will give members and independent advisers alike a single mobile point of entry into PPS. Other innovations unique to PPS include the PPS ProfitShare Cross-Holdings Booster, which consistently adds value for members with qualifying products across the PPS Group. It is important to note that members not only gain from Profit-Share from the new solutions they take up (that is obvious) but also “boosts” the profit from existing holdings. Similarly, the PPS Investments Family Network, a first-in-South-Africa innovation introduced in 2021, promotes the aggregation of individual and family assets, enabling members to enjoy reduced fees due to a larger combined asset base. The PPS difference Due to our mutual model, PPS stands out as a distinctive entity in the South African financial services landscape. Since there is no value leakage to shareholders, we can provide a rich value proposition to our members. In an election year that will mark 30 years of democracy, we remain focused on delivering this value to our members. Ours is a hard-won democracy. We encourage our staff, members, the advisers we work with and the nation as a whole to exercise their valuable democratic rights and to cast their votes on election day. Regulatory changes and compliance Regarding regulatory issues, there were relatively few changes in 2023 compared to other years. Of note, however, is the fact that the National Health Insurance (NHI) Bill, which was introduced to Parliament in August 2019, was passed by the National Assembly on 13 June 2023 and by the National Council of Provinces’s Select Committee on Health and Social Services on 6 December 2023, paving the way for the introduction of a national health insurance scheme. However, our view remains that it will take a very long period to be implemented, with many details still lacking, including sustainable funding. We remain committed to representing the voice of professionals in legislative and regulatory processes. We will continue to monitor developments related to this legislation. CHAIRMAN’S STATEMENT 16 Leadership commentary
Corporate social responsibility PPS environmental initiatives Earlier I noted the environmental challenges we see. In 2022, we installed a hybrid solar electricity system at our corporate offices, reducing our carbon footprint and simultaneously reducing the business interruption risks associated with loadshedding. In 2023, we further upgraded this system, adding additional storage capacity that allows us to store energy generated during sunny periods for use on cloudy days or at night. A third of the electricity used at our head office is now solar-generated. We are installing similar systems at some of our regional offices. PPS Foundation The PPS Foundation, which has grown over the years, is the channel through which PPS delivers many of its social initiatives. We focus on key challenges we face as a developing economy, particularly those relating to our large youth population. Education, central to the professional ethos, is a big focus in particular and includes Bursary and University Support programmes. We are grateful for the contributions made by other companies and individuals who co-funded a number of bursaries. Many tertiary students participated in the LEAP Work Readiness Programme (Learned, Engaged, Accelerated Professionals). This programme helps prepare bursary holders and other graduates for the transition to the world of work. The University Support Programme remained dedicated to assisting vulnerable students, partnering with organisations such as Rise Against Hunger to pack and distribute meals for those facing food insecurity. After a few incubation years, we have started to scale up our Cultivating Tomorrow’s Professionals programme in partnership with seven schools in Gauteng and three in Cape Town. This learner-led programme is designed to provide matric learners with the resources and information needed to decide on further (hopefully professional) studies and build a skill set that will serve them well throughout their lives. Many staff members give free time over weekends to lecture on this programme, especially in mathematics and science. This demonstrates how deeply embedded our valuesdriven culture is and how it serves our members and our communities. In 2023, the PPS Bursary programme supported 70 students, out of which 17 successfully completed their degrees. The PPS Graduate Internship Programme continues to be popular, and in 2023, 17 participants were offered full-time employment within the Group after completing the one-year programme. These programmes provide excellent learning and employment opportunities and ensure a steady pipeline of talented individuals for the Group and its subsidiaries. And, as always, we are grateful to many of our professional members, who offer their time and expertise to develop new generations of graduate professionals through the PPS Foundation Mentorship Programme. PPS Training Academy The PPS Training Academy, internationally recognised for excellence, continues to be a learning institution we are immensely proud of. Our comprehensive Human Capital Report, available online, has more detail. Of special mention is that this training institution is not only for PPS staff, but also for financial advisers and ultimately also for our members. Our vision is that it will play a meaningful part in developing our members. Ethics and corporate governance Founded on the ethos of mutuality and offering holistic financial solutions for graduate professionals, PPS has an essential role in defending the interests of our members and the broader professional community in South Africa and the other territories in which we operate. In line with this, we consistently comply with all relevant legislation and our corporate governance practices are based on the principles of the King IV™ Code of Corporate Governance for South Africa (2016). In terms of both King IV™ and the Companies Act (No. 71 of 2008), PPS is governed through a unitary structure that includes a main board and its committees, and subsidiary boards and their sub-committees. All boards and their committees operate within the parameters of approved charters and terms of reference, which are reviewed periodically. A well-resourced Company Secretariat also supports them. 17 Leadership commentary
CHAIRMAN’S STATEMENT Dr Sybil Seoka Chairman 3 April 2024 Changes to the Board There were several changes to the composition of the PPS Holdings Trust Board during 2023. Mr P Ranchod retired from the Board at the 8 May 2023 Annual General Meeting and Ms JK Myburgh retired by rotation. Advocate LC Haupt SC and Dr R Perumal were elected to the Board as Independent Non-executive Trustees at the Annual General Meeting. On the PPS Insurance Board, Dr JA van der Merwe’s term of office expired on 8 June 2023 at the PPS Insurance Annual General Meeting. Ms A Gounden resigned with effect from 31 August 2023. Mr CE Backeberg, Mr LM de Villiers and Mr AH de Vries were appointed to the PPS Insurance Board on 1 June, 1 January and 8 June 2023, respectively. Prof WJ Maroun was appointed to the PPS Insurance Board on 1 January 2024. I would like to take this opportunity to thank the Board members who have left PPS for the invaluable contribution they made to the Boards during their tenures. We welcome the new board members and look forward to working with them. A word of thanks In closing, I would like to extend my thanks and that of my fellow trustees to our Group CEO, Izak Smit, who, together with our Group executive team and those of our subsidiaries, continues to lead with purpose and care for our members and their communities. Not only has this team ensured that we always stay true to our values and principles, but that we respond to changing needs and circumstances in many proactive and innovative ways. To our hard-working and dedicated staff, who deliver on our ethos of mutuality every day, and have supported them, we say a BIG THANK YOU. A sincere word of thanks also goes to our members, who trust us with their financial goals and contribute in a committed way to our robust community of professionals. Finally, I would like to express my gratitude for the advice and support of my deputy, Dr Mannie Kruger, the Chairman of the PPS Insurance Company Board, Charles Erasmus, and that of all the PPS trustees, who continue to ensure that the Board is such an enduring example of cooperation, innovation and good governance, and who remain unfailingly committed to the financial security and well-being of the PPS community. I must also thank my family, whose support for me and my work I can always count on. 18 Leadership commentary
19 That’s innovation for the greater good of our members. With the PPS Profit-Share AccountTM, your life cover can grow your life savings. The Booster allocations may vary each year and are declared annually with Profit-Share, based on the profitability of PPS and its subsidiary/affiliates products. PPS reserves the right to discontinue this offering at its own discretion. Leadership commentary
LEADERSHIP COMMENTARY The PPS Holdings Trust Board Front (from left to right) Mr I Kotzé, B Pharm | Adv L C Haupt SC, B Com Law, LLB (Cum Laude), LLD, Admitted as an Advocate of the High Court of South Africa | Dr B R Ntshabele, BVMCh, Certificate in Entrepreneurship, Diploma in Management Studies, MBA | Mr P Ranchod, B Compt (Hons), CA(SA), MBL, H Dip Business Data Processing | Ms D L T Dondur, B Acc (Hons), B Compt, CA(SA), MBA, CD(SA) | Dr R E Ngwenya, BSc, MBBCH, FCS(SA), M Med (Surg), FC (Plast Surg) (SA), M Med (Plast and Reconstr Surgery) | Mr V P Rimbault, BSc Eng (Mech) | Mr S Trikamjee, B Com (Hons), CA(SA) | Dr N H P Khosa, MB ChB, MBA | Dr S N E Seoka, Chairman, B Pharm, PhD, FPS 20 Leadership commentary
Back (from left to right) Dr D P du Plessis, BSc (QS), MBA, DBA, CD(SA) | Prof H E Wainer, B Acc, CA(SA), Registered Auditor | Dr F Mansoor, BDS, MBA | Mr J A B Downie, BSc, MBA, CFP | Dr C M Krüger, Deputy Chairman, MB ChB, M Prax Med, M Pharm Med | Dr R Perumal, MBChB, Master of Public Health (MPH), M Med (Internal Med), M Phil (Pulmonology), D Phil (Medicine), Fellow of the College of Physicians | Dr R Putter, B ChD, MSc (Dental Public Health), Cert Fin Officer, Cert Dir(SA) | Dr A Coetzee, B Med Sci, MB ChB, CAHM, ABCD | Mr C Erasmus, BSc, FIA, FASSA | Mr A H De Vries, B Acc, CA(SA) 21 Leadership commentary
CEO’S MESSAGE TO MEMBERS Overview It is my privilege to present the PPS Integrated Report for 2023, celebrating another year of successfully providing our members with customised financial services solutions and returning value to them in many different ways. The strength and resilience of our mutual model continue to prove itself, and as we face new challenges and opportunities, we are building on them to provide even more significant benefits for our members. Guided by the ethos of mutuality embraced by our founders more than 80 years ago, all premiums paid into our insurance businesses, after the expenses of managing those businesses, are ultimately returned to our members (with investment growth), either through claims, added value or (for members who hold a qualifying life-risk product), through allocations to their PPS Profit-Share Account™. The PPS Investments Family Network provides for the aggregation of individual and family assets, enabling members to enjoy lower fees as the result of a larger, combined asset base. In short, all decisions our Board and executives take are made entirely for the benefit of our members. I can assure you, we as management find much purpose in serving in such a model! In PPS Life Solutions, the most critical factor influencing operational profits is life, sickness and disability claims, which, since the COVID-19 pandemic has abated, have returned to average levels that are now only slightly above our long-term actuarial expectations. There is still a small pandemic-related impact, and given the tough economic backdrop, the propensity to claim on the sickness side has also increased. However, it is pleasing that operating profit has now recovered to more than a billion rand, the pre-COVID-19 level. From an investment perspective, markets across the globe remained volatile throughout the year, reacting to geopolitical events. In South Africa, we have our unique challenges and risks. Economic growth remains very low and political risks high. The unstable power supply exacerbates the situation, impacting investor and business confidence. This impacts the valuation of financial instruments (South African equities and bonds). However, after a flat investment performance in 2022, very much expected after a fantastic 2021, we saw much better returns in 2023. Financial markets were especially strong in the first and last quarters of 2023. Given our As we operationalise our current five-year strategy, our focus will be on expanding and enriching the benefits of mutuality for our members. At the same time, our focus will extend to growth in new market segments and territories. PPS has a unique value proposition to offer its members and our function as custodians of that proposition is to consistently secure and deepen its value. Izak Smit Group Chief Executive Officer “ “ 22 Leadership commentary
huge balance sheet, investment returns are a significant component of the overall profit we can allocate to our members’ PPS Profit-Share Accounts™. Our (non-Life) subsidiaries are also starting to make a meaningful contribution. Our members should be pleased by the returns we generated in 2023. The overall profit that we can allocate to our members’ Profit-Share Accounts™ is one of the strongest ever. Our members will know from past reports that, after such a strong year in the investment markets, I am always quick to add that the long-term average returns matter and not a single year’s performance. It has become a cliché but it remains as true as ever: It is about time in the markets, not timing the markets. At PPS, we have an advantage due to the long-term nature of our members’ Profit-Share assets – they often remain on our books for a generation or more. This enables us to take a long-term investment approach, giving us a unique competitive advantage. More specifically, it allows us to focus on investing in growth assets, enabling us to ride out shortterm market volatility and corrections. A significant part of our members’ Profit-Share portfolio is invested in overseas assets, where the local currency’s weakness boosted returns in 2023. Years such as 2023 assist longer-term average returns. We do not want to miss out on these years. But, like a good personal financial adviser, I must again caution against exuberant future expectations. Financial reporting cut-offs are somewhat artificial snapshots in a continuous cycle and the 2023 year-end was again a good cut-off in terms of financial reporting. That said, the value returned to our members in 2023 remains exceptional. This was delivered through our integrated advisory services, our comprehensive products and services range, the timeous payment of claims, meaningful support in times of need, an expanding range of added values and, for qualifying members, of course, allocations to their PPS Profit-Share Accounts™. From a membership perspective, members with PPS life products in South Africa and Namibia increased from 131 073 at the end of 2022 to 132 934 at the end of 2023. Members with a product across the Group (including Namibia) increased from 157 440 at the end of 2022 to 161 054 at the end of 2023. Many of our professional members nevertheless continued to find their businesses under stress due to constrained economic conditions. As a result, we saw a slight uptick in lapses, from 4.07% in 2022 to 4.70% in 2023. These rates are still very low by any standard and our low attrition contributes much to the business’s profitability. In keeping with our commitment to assisting members throughout their lives and through all of life’s challenges, our advisers – both internal and external – are always on hand to aid our members with advice and solutions that would enable them to manage the difficulties they are facing. From a business development perspective, it is fair to say that 2023 was as difficult as the previous three periods, with our advisers having to work hard to recruit new members and provide cross-solutioning to existing members. After very good new business numbers in 2022 – bucking industry trends at the time – new life business slipped somewhat in 2023. It was influenced to some extent by a channel restructuring, which we believe is very necessary for future growth and cross-solutioning. This has been completed and we look forward to good new business growth in 2024. Strategy and opportunities We remain committed to the seven strategic themes outlined in previous reports, but we have added an eighth: Sustainability. Businesses today cannot afford to ignore sustainability as a theme in their strategy. Integrated reports across companies and industries devote more space every year to this important topic. As an organisation where mutuality stands central and as a business of which one of our three core values is always striving to do the right thing, PPS is able and willing to go much further. It is tough at times for businesses driven by shareholder returns to make the right decisions. At PPS we do not have that type of stakeholder. Our purpose is only focused on our members, assisting them to hedge against life’s catastrophes and adding value to their lives, assisting them to live the lives they want to live in a world worth living in. This purpose gels with the sustainability theme. Companies such as PPS where mutuality is a core focus, can play a unique role. This is particularly true when such a company focuses on serving the professional segment, because ultimately, it is professionals who – through their training and experience – will drive the solutions. The younger generations expect environmental responsibility from the brands that they support. Hence, sustainability will and should become essential to our strategy development. 23 Leadership commentary
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