CEO’S MESSAGE TO MEMBERS In 2023 we also identified the need for a few changes to our organisational structure. This structure is more appropriate for delivering on our objectives, especially our aim of expanding into new markets and territories. There were changes across the structure, but the two most important ones were in the Distribution function and creating a Mutuality division overseeing the total member experience. Performance snapshots PPS Life Solutions PPS Life Solutions oversees our foundational array of offerings, providing long-term life, accidental death, sickness, critical illness and disability insurance for graduate professionals. In 2023, new life business in South Africa experienced a setback with a 12% decline compared to the previous year. This decline should be contextualised by the significant surge in new sales we reported in 2022, setting an exceptional benchmark. Performance was, however, also affected by the constrained operating environment. The annual premium income of new life insurance business written in South Africa and Namibia in 2023 was R262.9 million, down 12% on the R297.3 million written in the previous period. Due to the nature of the products we offer and the market segment we serve, distribution is exclusively through internal and external (independent) advisers (i.e., face-to-face). Around 74% of new business in South Africa in 2023 was written by independent advisers, who remain essential and valued business partners. The other 26% of new business was written by our own team of PPS advisers. Although rising slightly, net attrition rates remained industry-leading by global standards and below expectations. Profit-Share undoubtedly contributes to the low lapses, as does quality member service. Attrition is further alleviated by the unique PPS proposition of covering our members worldwide at no extra premium loadings (as many professionals spend significant periods overseas). We also allow our members to retain their PPS policies upon emigration; the only requirement is to maintain premium payments through a South African bank account. Given the new business and lapse experience, gross life premium revenue in South Africa reached R6.0 billion in 2023, up 8.7% on 2022. Total gross life claims came in at R3.72 billion for 2023, from R3.25 billion in 2022. It was still around 5% higher than our longer-term actuarial expectation, but this difference has reduced significantly from the COVID-19 years. We unpack life claims in a bit more detail on page 31 of this report. Assisting our members in times of need by paying valid claims is our primary focus; profit is a secondary objective. It is, however, uplifting to see profitability returning in the life insurance business. Total operating profit allocated to members’ PPS Profit-Share Accounts™ was R1.2 billion. This is still lower than before the pandemic but we have seen a steady improvement over the past two years. Management expenses continue to be the only cost from the value that is eventually returned to members, either as a claim payment or as ProfitShare. Efficiency ratios are, therefore, important metrics. Management expenses of R1.36 billion were in line with planned expenditures and the targeted efficiency ratio. IT costs (and much of this due to the soft rand/US$ exchange rate) put pressure on expenses, but lower staff costs helped to pull it closer to the expected numbers. PPS Investments PPS Investments is an established asset management business that invests in a diversified range of funds – both locally and offshore – to achieve superior long-term returns for the Group and provide savings, investment and retirement solutions for PPS members. The business more than doubled both assets under management and the number of investors it serves in the previous five-year business cycle, spanning from 2017 to 2022. It aims to do so again over the next five-year cycle that started in 2023. 24 Leadership commentary
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