The performance of our management and staff is measured on a balanced scorecard basis with an equal weighting for both financial and non-financial measures.
The KPIs are categorised under mutuality, financial stability, service and staff, which in turn tie back to our key strategic priorities for the Group.
|OUR KEY KPIS||Unit of measure||2016 PERFORMANCE||2016 GOAL||COMMENTARY|
|FINANCIAL STABILITY||Gross premium income||Rand billions||3.7||3.6||G||Gross premium income (long-term and short-term) exceeded expectations.|
|Total assets*||Rand billions||31.4||32.6||Y||Total asset growth expectation is measured over a three year rolling period. Muted market movements for the year resulted in total assets being slightly behind expectations although a prudent investment policy will ensure sustained growth into the future.|
|Efficiency ratio||%||14.3||15.4||G||Cost control remains an imperative of the Group.|
|New annual premiums||Rand millions||704.0||735.3||Y||New premiums performed below target. The Group is focusing on strengethening its distribution capabilities in 2017.|
|New investment inflows||Rand billions||3.5||4.4||Y||Performance is in line with prior year, but below the internal target.|
|MEMBERSHIP||Number of new members recruited during the year||Individuals||7662||7500||G||New member recruitment exceeded target in 2016.|
|SERVICE||Average number of monthly ombudsman queries||Number of queries||3||< 5||G||PPS strives to treat members fairly, which is reflected in the low number of queries.|
|Customer satisfaction survey results||Rating||98||> 80||G||Customers are generally satisfied with our service. Ratings are based on the level of professionalism as well as effective query resolution.|
|STAFF||Employee satisfaction survey results||%||92||90||G||Employee satisfaction scores remain in excess of target.|
|Training spend as a percentage of payroll||%||3.8||> 4.0||Y||Training spend is slightly behind target. Budgets have been increased for 2017.|
|* Excluding assets in unit trusts for third parties.|
On many fronts 2016 was a challenging year – and even more so for companies in an industry where performance is closely linked to financial markets. The year was shaped by unpredictable big events like Brexit and the US election. On the home front, the potential downgrades by ratings agencies loomed like a sword over the economy. In addition, policy uncertainty worsened an already unstable situation, resulting in dismal economic growth of only 1%.
Against this backdrop, it was generally a difficult year for investment managers. The JSE/FTSE All Share Index returned a paltry 2.6% (with dividends reinvested). Investment returns were further impacted by the rand strengthening by 12.88% against the US dollar. Despite this, PPS delivered a pleasing performance and most of our business goals were achieved. PPS is satisfied with the returns delivered by all our fund managers. However, members should take cognisance of the fact that our fund managers expect returns to remain in single digits for a couple of years.
During the year, new enterprises were launched, notably PPS Short-Term Insurance, the Financial Planning division and PPS Mutual in Australia. The distribution model also saw a complete overhaul.
As these new businesses gain traction, new avenues for profit growth will contribute to members’ PPS Profit-Share Accounts.
The primary advantage for members of PPS remains the profits that accrue to members on retirement through the unique PPS Profit-Share Accounts. Apart from the investment returns, the operating profit is also shared with members. In the year under review, operating profit grew by 17%, driven mainly by three factors: Expenses were strictly managed, claims payments were within budget and the investments in new business were below budget.
PPS is pleased to be able to share over R2.7 billion with members through their PPS Profit-Share Accounts.
During 2016, 978 members retired with a total value in their PPS Profit-Share Accounts of R668.1 million. Individual amounts varied between R50 000 to R3 million, depending on the tenure with PPS and the amount of the premiums paid together with the number of products held.
Membership is still growing strongly. In the year under review, new membership grew by 9% with membership totalling 353 502. Despite the disruption on campuses due the fees must fall campaign, a pleasing number of newly qualified professionals joined the group. 61% of our new members in 2016 were younger than 30 years of age, which ensures a sustainable insurance business.
In the coming year, PPS will focus on introducing products that will add value and projects to enhance the sense of community amongst our members. The member workshops launched during the year have proven to be very popular amongst our members and we will continue to expand the offering.
The distribution model saw an overhaul in 2016. The implementation of a new, innovative distribution model is an exciting development at the group. Various distribution models were carefully evaluated and PPS decided on a model that is cost-effective, allows cross service between the various products and utilises technology.
This required an internal reorganisation, resulting in a leaner management structure and combining of support functions.
The new structure will assist PPS to better serve its members and to meet their high expectations in terms of products and service.
Inflows into the new enterprises were somewhat slow, but indications are that members can look forward to a healthy profit contribution from the new businesses in due course.
PPS Healthcare administers Profmed and Key Health. Key Health proved to be popular with 35 683 members at year-end.
Profmed is a restricted medical scheme for graduate professionals. At December 2016, Profmed provided cover to 31 787 members – an increase of 4.7% from 2015. Profmed and Key Health are well capitalised and claims are being well managed.
PPS Investments saw assets under management grow to R25 billion. Approaching its 10th anniversary in May 2017, quality investment services are provided to over 32 000 individual investors. Retail funds under management increased from R14.8 billion to R17.3 billion on the back of new client inflows of R3.5 billion, slightly ahead of the prior year.
PPS Short-Term Insurance was launched in March 2016 and the uptake has been slower than anticipated. Initially personal lines were introduced, but it was followed by a commercial insurance offering launched in December.
PPS Financial Planning is another division that we are very excited about. The new approach to financial planning is a move away from product sales to the development of financial plans, comprising retirement planning, risk planning, estate planning, budget planning and more. All advice will be product agnostic, financial planners are incentivised to provide financial plans and not to sell products. The fee model has been adjusted since the division was launched and the team of 270 advisers will be combined into one team to offer an integrated service to members.
We are also very excited about the digital channels that will be launched in 2017. This is aimed at the millennials that prefer digital channels to assist their intermediaries with rendering financial advice.
PPS Mutual was launched in Australia in February, after careful viability assessments and based on research that showed Australia to be the most desirable option. Since the launch, some progress has been made and at the end of December a total of 144 financial plans were in force.
The business is supported by the back-office administration based in Johannesburg, with a significant cost saving for the group.
South African members of PPS will benefit from the growth in the Australian business and the royalties paid to the South African business.
Once the Australian business is well established, PPS will carefully consider expansion into other geographies that meet the criteria. PPS will concentrate on countries with a large number of South African expatriots and where the number of qualifying graduate professionals will add critical mass.
The implementation of Solvency Assessment Management (SAM) has been postponed from 1 January to June 2017. At PPS, all the required milestones around the implementation were successfully achieved and the group is ready to comply with the new regulation.
PPS also fully supports the implementation of the Retail Distribution Review (RDR). RDR is being implemented in phases and the new distribution model introduced at PPS complies with the principles set out in the RDR.
Personally, it is a great honour to take over as CEO from Mike Jackson, who has served PPS in an exemplary way for 13 years. The organisation that was built over 75 years, benefited further from Mike’s dedicated and committed leadership. The business he left behind is well positioned for the future with a strong management team and the support of all its board members. As PPS enters a new chapter in its history, the Society will continue to serve its members and stay true to the purpose of being an exclusive organisation for graduate professionals, belonging to its members.
In all likelihood 2017 will be another tough year for the South African economy. Some of the headwinds facing our country have dissipated, but economic growth will remain low, with the IMF and World Bank predicting growth rates of respectively 0.8% and 1.1% for South Africa in 2017. Furthermore, the shadow of a possible credit downgrade is still lingering, undermining the confidence in our investment markets.
However, there are indications that the resources cycle has turned, which is positive for the South African economy.
All that remains for me, is to thank the dedicated board members, especially our chairman, Mr Ebi Moolla, and Mr Charles Erasmus, chairman of PPS Insurance. Their guidance and assistance in the transition period is greatly appreciated. PPS is blessed with a strong board to lead the company into the future.
My appreciation also goes to our staff members for their dedication and commitment that has positioned PPS as the preferred provider of financial services to graduate professionals.
|30 March 2017|
Highlights for 2016
PPS has celebrated its 75th anniversary with an advertising campaign throughout 2016 where we celebrated “the power of professional thinking” by calling for nominations and acknowledging their contributions to society. The campaign was launched on 18 February 2016 at PPS Centurion Square in Centurion at an event where the CEO of the International Cooperative and Mutual Insurance Federation (ICMIF), Shaun Tarbuck, toasted the success of PPS over the 75 years of its existence. The event was attended by representatives from professional associations as well as a strong media contingent.
The 75th anniversary campaign culminated in a dinner that was hosted by the Chairmen of the PPS Holdings Trust and PPS Insurance Company on 27 August 2016. This was also an opportunity to recognise a number of people who contributed to the success of PPS.
The #RareisRewarding advertising campaign was launched in September 2016, and is based on the creative concept that professionals have rare skills and qualifications and can be rewarded for that by joining PPS and qualifying for the PPS Profit-Share Accounts. It has been the most successful campaign in the history of PPS if measured by reference to the number of online qualifying leads. It was also recognised in September 2016 for its creative execution by AdForum, which selects five campaigns internationally every month.
For the first time in the history of PPS, PPS Group Marketing introduced the concept of predictive modelling in PPS, whereby the purchasing behaviour of PPS members are analysed and a predictive model applied to identify other PPS products that these members might be considering.
Digital engagement: www.pps.co.za
2016 was a ground-breaking year for the PPS Group in building the PPS brand and members’ digital engagement with PPS. The new PPS Group website was launched in April 2016, which combines all PPS member offerings into a single website. The new website graphically showcases the unique brand attribute of PPS by way of the circular device which illustrates the fact that PPS is an exclusive organisation which only allows select graduate professionals as members.
A large percentage of our website leads is generated through Google search and related paid digital advertising. With the launch of the new website, our quality score dropped on Google, which was expected. However, our digital marketing campaigns in 2016 have produced the highest number of qualified online leads thanks to the addition of new digital advertising platforms and techniques that we have implemented over the various campaigns.
PPS Group Marketing and our public relations partner achieved a record level of media coverage in 2016. The PPS Graduate Professional Index, whereby PPS members participate in an online survey to identify the socio-political issues that are top of mind to them, also within their particular professions, generated much of the media coverage. That has created a platform for PPS to be presented as a thought-leader within the professional landscape.
SAcsi: South African Customer Satisfaction Index
A specially commissioned survey conducted by research company Consulta to compare PPS Life Insurance against other major industry players using the South African Customer Satisfaction Index (SAcsi) Life Insurance Industry Benchmark, revealed that PPS received the highest Net Promoter Score (NPS) in the life insurance sector in 2016. This score indicates the likelihood of clients to recommend the company to family, friends, colleagues and associates.
The NPS is derived from one question in the survey where respondents are asked to indicate how likely they would be to recommend the company to friends, family or colleagues. Responses are captured using a 0 to 10 point scale, where a 0 indicates a very unlikely outcome and a 10 denotes very high likelihood. PPS’ score of 37.5% ranks well above the industry average of 28.9%.
It remains the vision of PPS to be a thought-leader in the professional niche market that we serve. Meaningful engagements with the PPS membership have not only allowed PPS the opportunity to listen to our members, it has also allowed PPS to create a sense of a community of members, which is one of the manifestations of our mutual business model.
Many of the engagements that took place in 2016 have been by way of interactions with the professional associations which represent the interests of the various professions that are eligible for PPS membership. In addition, PPS has also arranged direct engagements with our members. It is the intention of PPS to have a far greater range of member engagements in 2017 and in the years ahead.
PPS partnered with Portfolio&Co to arrange sessions on 1 October and 26 November 2016 at PPS Indaba Centre in Parktown where members over the age of 50 were addressed on issues that might be relevant to them as professionals at that particular stage of their lives; the concept of a “portfolio life” was explored. These sessions alerted members to the opportunities that might be available to them in the next phase of their working lives, post formal retirement, and how to prepare for this.
Health care event
On 24 November 2016 PPS hosted a session where Professor Alex van den Heever, Chair of Social Security at the WITS School of Governance and others addressed PPS members on “The state of the South African health care system and possible futures”. Dr Mzukisi Grootboom, Chairman of the South African Medical Association (SAMA) also served as a panellist.
During 2016, PPS engaged with 55 professional associations by sponsoring their events, hosting events at PPS premises and other engagements. PPS advertises in a range of professional association publications and is featured on email newsletters and on the websites of 11 associations.
PPS also issued several joint media releases on a range of topics with spokespersons of various professional associations during 2016:
On 27 September 2016 PPS hosted a workshop with the professional association on trustees that are represented on PPS Holdings Trust. This resulted in the creation of a new forum for such engagements, and it was agreed to meet twice yearly to set strategies and gauge the success of PPS member engagements, also via the professional association trustees.
PPS, the home of the graduate professional, is an organisation managed by the members for the members. Recognising our country’s unfortunate past and the current challenges facing it, PPS has always been committed to being a responsible corporate citizen.
PPS has been involved in various extensive corporate social responsibility programmes and projects to which it has committed significant financial and other resources. In 2016 the decision was taken to consolidate these programmes and projects into vehicles that enhance their effectiveness and promote efficiencies, hence the birth of the PPS Foundation (Foundation) and the PPS Training Academy (Academy).
It is envisaged that our members, who recognise the privileges they have, will work with us in making a difference in the lives of the less privileged in our society. Together we will strive to make South Africa an economically attractive country by reducing the glaring skills gap that all of us are aware of. It is for this reason that the Foundation is involved in bursary schemes, among other things, and the Academy with Science, Technology, Engineering and Mathematics (STEM)-initiatives and other further training activities.
We look forward to your involvement with both entities, not only with material and human resources, but also with ideas, suggestions and constructive criticism in order to further establish PPS as a responsible corporate citizen of South Africa.
The year 2016 saw the birth of the PPS Foundation Trust and the PPS Educational Trust – two entities through which the organisation will drive transformation. The mandates of the two trusts are inextricably intertwined as they both seek to improve access to Science, Technology, Engineering and Mathematics (STEM) related professions and build the professional pipeline, especially in the scarce skills disciplines.
The PPS Training Academy, soon to be a registered Further Education and Training (FET) institution, will provide learning and development services to the PPS group as well as to external customers, PPS Foundation beneficiaries and the insurance sector at large.
It has been an exciting and adventurous year for the organisation, the Foundation and Academy teams as well as the project beneficiaries. We made some significant shifts in our approach to CSI and we hope to see the benefits in the medium to long term.
Partnering with Masijabule High School, one of the country’s top performing underprivileged schools in rural KZN that produces some of the best mathematics and science students. We donated a vast book and stationery supply (through the employee volunteerism programme) and pledged bursaries to two of the school’s top Grade 12 learners of 2016 for their first year tertiary studies.
We began exploratory partnership discussions with important players in bridging math and science in impoverished high schools across the country. A key benefit for the PPS Foundation is the ability to make an impact far earlier in the graduate development value chain than we did historically. This stands us in good stead as we begin to establish strong ties with our future PPS alumni.
PPS recognises the business imperative of driving meaningful transformation and effecting measurable social change in the communities in which we operate. The establishment of the PPS Foundation and Educational Trust is a key milestone towards the achievement of our transformation objectives. To realise the intent of the Financial Sector Charter (FSC), these Trusts will focus on driving the Employment Equity, Skills Development, Consumer Education, Enterprise and Supplier Development as well as Socio-Economic Development elements of the Charter across the PPS Group. Once fully operational, we envision a PPS Foundation and PPS Academy that are actively participating in and shaping the socio-economic agenda of the country, and providing a platform for PPS members to contribute financially and of their time, skills and knowledge.
PPS Group Exco adopted the Transformation Philosophy, which sets out the company’s commitment and principles to drive the transformation agenda effectively.
Our Board members and Group Executive subscribe to principles of transformation that:
PPS achieved a Level 3 status in the 2015/2016 reporting cycle, an improvement against the Level 4 rating attained in the previous year. This improvement can be attributed, in part, to:
The draft amended Financial Sector Charter (FSC) codes have introduced more onerous targets with certain elements being prioritised to ensure a more emphatic focus by employers. The elements include ownership, skills development, enterprise and supplier development as well as empowerment financing. Our 2017 plans for B-BBEE are informed by these priorities and those in the business which we need to improve on.
We prioritised Employment Equity (EE) this year and focused on aligning our targets as well as reconstituting our Transformation Forum.
EE targets will be driven by the group executives and we should, by 2018, see a positive shift towards their achievement.
2017 will be an important year of priority implementations such as launching the Consumer Financial Education project on campuses across the country; embedding improved practices in skills development and refining others in procurement. We will develop and implement a pilot Enterprise and Supplier Development (ESD) project aimed initially at our Qualifying Small Enterprises (QSE). All of this will be supported by change management and diversity dialogue across the group.
Our graduate internship programme has grown from strength to strength since its inception in 2012, with the intake growing almost 5 times. It has evolved over the years to include a far more robust graduate engagement programme with intensive classroom and on-the-job training. The business has continued to enjoy the benefits of such a programme as evidenced by the almost 100% absorption rate of the graduates every year. In 2016, the business successfully employed all but two interns.
|Number of Graduates||3||7||7||10||16||25|
The Interns came from universities across the country, such as Fort Hare, UKZN, University of Pretoria and Wits among others, with qualifications ranging from law to economics others:
From L-R: Tshepo Matampi, Amanda Zuma, Lanche Munro, Malebo Molewa, Subashni Gounder, Mpho Moleme, Chantal Moodley, Lidans Mamitwa
PPS Foundation bursaries are awarded to students studying through a recognised South African university or university of technology. The grants, awarded on the basis of financial need and outstanding academic performance, cover tuition and textbooks for the duration of one academic year. This year we began to align more closely to the PPS Foundation Trust mandate of improving access to STEM disciplines, and provided bursaries to students pursuing STEM-related studies.
We advanced bursaries to the value of R2,1 million across such disciplines as commerce, law and science to students from across most of the public universities in South Africa.
This year we also introduced bursaries to first year students as we seek to establish a longer and deeper relationship with students. This is the genesis of our PPS Alumni, a group of beneficiaries with whom we want to establish brand ambassadorship and ultimately PPS membership.
Ironically, the #FeesMustFall movement presented a risk to the bursary programme this year. The disruption to the academic programme coupled with the violent protests on campuses across the country had a negative effect on our ability to engage in on-campus marketing of the programme.
We expect the number of applications to rise given the backlog of the past year.
We shifted our historical focus on pure infrastructure projects in 2016 as we began aligning our university support programme investments more closely to the mandate of the PPS Foundation. Among other criteria, we selected historically disadvantaged institutions, faculty programmes that are aligned to national interests or issues high on the country’s socio-economic agenda, such as water. Our engagements with university administration and faculties will continue in 2017 as we look to establish deeper and more impactful partnerships that alleviate the financial void left by dwindling government funding for public universities.
We spent R1.6 million on the University Support Programme, which included projects such as the Nelson Mandela Metropolitan University’s (NMMU) computer laboratory extension project at its Engineering and Built Environment faculty and the upgrade of the multipurpose teaching facility in the Water Sciences faculty of the North-West University (NWU).
Project investments at universities across the spectrum ranged from R50 000 to R350 000 per project.
Professionals Connect is a graduate outreach portal dedicated to South African students, professional graduates and entry-level employees. It provides a free and user-friendly platform from which to access employment opportunities and information that will equip them in the transition from academia into the workplace. The portal currently provides users with career and industry-related content and jobs. Additionally, it provides information on bursaries, mentorship and entrepreneurial opportunities.
In 2016, the website was upgraded to support its revised service offerings that aim to cater to a larger audience. In 2017, Professionals Connect launched a pilot mentorship programme which will provide registered users with the opportunity to choose from and connect with a pool of mentors who are PPS members, employees and other experienced professionals.
The PPS Academy operates under the auspices of the PPS Educational Trust, whose purpose and mandate is to make a meaningful impact on public education in South Africa by improving access to Science, Technology, Education and Mathematics (STEM) and related professions in order to build the professional pipeline in the country.
2016 was a year of transition and saw the consolidation of various learning and development capabilities across the business to form the foundation of the Academy. Presently the Academy provides technical, behavioural and management development solutions to all PPS staff, financial advisors and graduate interns.
Following the registration of the Educational Trust earlier in 2016, and our recent accreditation of NQF 5 level qualifications by the Insurance Sector Education and Training Authority (INSETA), the PPS Academy will be registered as a Further Education and Training (FET) institution by the end of 2017. It will be poised to provide the business, the general public and the industry with accredited programmes on the scarce and critical skills.
Since its founding in 1941, PPS is the only mutual financial services company in South Africa that has focused exclusively on graduate professionals, providing tailor-made insurance, investment and healthcare solutions to our members.
To be an exclusive organisation of graduate professionals, belonging to its members, which provides exceptional insurance benefits and a range of financial services to members, their families and associates.
We further strive to provide peace of mind, security and consequently wealth for our members during their working lives and in retirement.
At PPS, we believe that what we value internally will drive our behaviour externally. We live by the following values:
The needs of the graduate professional have been central to PPS’ strategic intent for the last 76 years. We have designed our products and servicing models accordingly and believe that the mutual model provides long-term benefits to our members that cannot be matched.
Our strategy therefore focuses on:
Unlike most financial services providers in South Africa, PPS is not listed on the stock exchange and has no external shareholders – instead, PPS operates under the ethos of mutuality and all PPS’ profits are allocated to PPS members with qualifying products on an annual basis by way of allocations to their PPS Profit-Share Accounts.
This means that ALL the profits and investment returns generated by the PPS Group are allocated to its qualifying members.
Mutuality is central to our success. Profits and investment returns are reinvested, with a long-term mindset, on members’ behalf. These funds accumulate in our members’ PPS Profit-Share Accounts, (irrespective of their claims) and vest free of tax at retirement, resignation from PPS or death. This benefit has no rival in South Africa.
The PPS sustainable business model has three cornerstones which underpin the Group strategy.
PPS is not focused on delivering short-term returns to shareholders. PPS is focused on creating and sustaining long-term growth and wealth, recognising that there is an alignment of the interests of policyholders – unique to the insurance industry in South Africa, where some of the profit is distributed to shareholders.
The mutual structure allows our stable management team and the Board to adopt a truly long-term approach to running the business, deploying sustainable long-term strategies, which make the most efficient use of capital, and benefit all the generations of professionals we serve.
PPS members shared in over R2.7 billion of PPS profits and investment returns during the year.
PPS has shared a total of R15.2 billion in profits and investment returns with its members over the last five years, and R22.5 billion over the last 10 years.
Once members retire from their PPS Insurance products, the profits they’ve accumulated over the course of their PPS membership through their PPS Profit-Share Account will vest and become accessible via the Vested PPS Profit-Share Account (which vests at retirement from age 60). Irrespective of whether they had ever claimed or not. This is a truly unique statistic in the South African insurance sector. The Vested PPS Profit-Share Account allows members to keep their PPS Profit-Share Account assets invested for longer to generate further returns and supplement their retirement savings.
PPS Insurance is a registered insurer and is subject to the same governance requirements as a listed insurer. A unique additional layer of governance is the fact that our members and professional associations are represented at the PPS Holding Trust Board level – the ultimate control structure of the Group.
There is no other insurance company in South Africa where policyholders are specifically represented at Board level.