Friday, March 29, 2024

“We aim to launch privatisation in 2021”

Interview with Carlos Duarte, Chairman of the Board of Directors of ENSA

Ricardo David Lopes

Returning to profits in 2020, after a thorough process of financial reorganization, ENSA is currently betting on strengthening the brand and presence and wishes to ensure massification of Health insurance, without forgetting the digital channel. In an interview, the Chairman of the Board of Directors of PCA, Carlos Duarte, takes stock of the first year of implementation of the Strategic Plan 2020-2022 from ENSA and outlines the priorities, including the completion of the first privatisation stage.

After the losses in 2019, largely thanks to the need to make provisions, the company returned to profits in the first half of 2020. How did the year go?

We have implemented a wide range of measures, following a strategic review process, which had an impact on the 2020 financial year. We can provide some examples such as the revision and non-renewal of some service provision agreements, which allowed us to contain expenditure; settlement of AOA 10 billion that was outstanding to the ENSA Pension Fund as of December 31, 2019; negotiation and settlement of the debt to clinical providers, which, at the end of 2019, amounted to AOA 12 billion; the negotiation and settlement of tax contingencies amounting to AOA 20 billion; improving the process of collecting insurance premiums owed and introducing debt settlement agreements; and the closure of some loss-making business segments, such as the medical centre, among many others.

The implementation of these actions had positive results, thus making it possible to adjust the share capital to the level required under the Law and reduce the negative retained earnings.

[N.E. When this interview was conducted ENSA’s 2020 annual accounts had not yet been approved, and its external audit is not yet completed].

Was there a need to set up more provisions of some kind?

The constitution and reinforcement of technical provisions is a recurring practice in the insurance activity, to meet future commitments.

How did they evolve in terms of premiums, particularly as regards the different types of insurance?

We witnessed a 39% increase in premiums compared to 2019, which allowed us to increase and consolidate our market share to 37%, against 35% in the previous year.

The collection rate was 89%, in a year that, due to the Covid-19 pandemic, there was a reduction of around 20 thousand policies, particularly temporary policies (Travel Road Assistance, Goods Transport) and in the car industry by around 9%, in line with the market.

The Health branch grew 25%, Air, 45%, Fires, 86%, and Occupational Accidents, 8%.

Petrochemicals witnessed an increase of 84%, largely due to the exchange rate indexation of the premiums as a result of US dollar-denominated capital, and the remaining products witnessed low and/or negative growth.

What are the most relevant measures of the 2020-2022 Strategic Plan implemented last year?

First, the organic restructuring of the Company and its financial recovery. We reinforced our focus on our core business and started the process of phasing out complementary services that did not generate synergies for ENSA. We also made a huge investment and focus on Human Capital.

And which are the most challenging?

All of them!

Except for the privatization process, what are the priorities in 2021, both internally and as regards new products?

We will keep implementing the Strategic Plan 2020-22, which covers all areas at ENSA and which goes beyond the Company’s preparation for privatisation. For example, we are reconfiguring our facilities in a more contemporary way and that leads to more aggregate and cooperative work between different teams.

We are also establishing new partnerships in the area of Health and for the management of inspections which, in addition to income, should attract very important synergies to our activities in these areas.

There is also a strong commitment to the exploration of the digital channel, which opens up a world that is not new to us but does provide major growth opportunities.

We are working towards massification of health insurance and rethinking our agencies: the aim is to increase and improve the presence of the ENSA brand and products in the many provinces of the country.

The privatization will take place through a public tender by prior qualification, first, and through capital dispersion on the Stock Exchange, on a second stage. Does this mean that the first stage at least might take place this year?

That is our objective and also the expectation of the Government. And the sheer size of a company like ENSA entails naturally some complexity and delays as regards preparing the procedures. But we believe that we are almost ready to launch this first phase and the institutional support we have received from the Ministry of Finance and the Institute for the Management of Assets and State Holdings (IGAPE) has been paramount.

“THE CONSTITUTION AND

REINFORCEMENT OF TECHNICAL
PROVISIONS IS A RECURRING PRACTICE
IN THE INSURANCE ACTIVITY, TO MEET
FUTURE COMMITMENTS.

And the initial public offering?

It will take place on a second stage, the start of which does not depend on a decision by ENSA, but we believe that it is too early to say when it will take place. Before that, it is essential that the first phase goes well, as expected, and that its results are consolidated.

The first phase will not fail to anchor the good results of the second: investors in the capital market will certainly be attracted by investors and good solutions that are achieved at this time.

In total, and each moment in particular, what percentage will be sold?

It is also a matter outside the scope of ENSA’s decision. The Presidential Order that determined the privatization model of the Company states that this is up to the Minister of Finance, who, certainly, and when he deems appropriate, should inform ENSA, the remaining participants and the general market.

What kind of investors, and from which geographies, have shown interest in the privatization of ENSA?

They have transversal characteristics. They are national, international, from the financial sector and from outside it. But we believe that it is too early to talk about this, not least because there were only informal, merely exploratory contacts, and certainly a large part of these contacts did not take place directly with ENSA.

From a regulatory/legislative point of view, what kind of questions have been or could be raised, in theoretical terms, at least by potential investors as which may lead to some changes?

As everyone knows, the new legislation on insurance activity in Angola is in a very advanced approval stage. It will not fail to reconfigure the market in regulatory terms, which, by the way, was already an old aspiration of insurers and other players in this sector.

A relevant aspect raised by the preliminary projects was the need to separate the life and non-life branches into two different insurers. ENSA offers a clear advantage there, given that this requirement does not apply to insurers already under operation under these projects.

And we should also take into account the need to assess the impacts on competition that may be there if ENSA is to be acquired by an insurance group, both from an Angolan perspective, of by a foreign group. I refer in particular to the concentration operations currently being scrutinized by our Competition Regulatory Authority, which may play a fundamental role.

The pandemic changed the routines in all companies. How have you dealt with this problem, namely in terms of telework management?

Since the beginning of the pandemic, ENSA designed its Specific Business Continuity Plan to Respond to a Coronavirus Epidemic Scenario (Covid-19), to guarantee the physical integrity of its workers/partners and the support services to its Customers in all units where it operates.

Since March 2020, we have defined a Contingency Plan aimed at preventing and mitigating the risks associated with the spread of the virus, adding up to the Business Continuity Plans (PCN), in particular, the Pandemic Prevention Plan (PPP), with the priority objective of ensuring the resilience of our services and the right environment for our workers and stakeholders.

These measures were initially assessed daily and reviewed when it proved necessary by a Follow-up Group to monitor the evolution of the epidemic outbreak, following the PPP and the internal governance rules on crisis management (Crisis Management Plan) and has received expert advice on health matters.

This multidisciplinary team ensures the monitoring of all conditions for the management of face to face and non-face to face work and compliance with the safety measures and rules imposed by the state of public calamity.

Did the pandemic lead to an increase in costs with the insured?

In the Health sector, which has a greater impact on our portfolio, we did not witness any increase in costs in the outpatient component, as people continue to avoid hospitals. There is an increase in costs, yes, in hospital admissions, since people go to the hospital only when the disease is aggravated by the fact that it has not been treated in due time. Hence we believe there will be an increase in costs in 2021 as a result of this behaviour.

Will the network continue, assisted by the banking branch and other channels, or are there plans to grow?

We will continue to bet on mediation and partnerships, to increase our capillarity. We will also continue to train new intermediaries.

What is your opinion on digital as a means to of customer relationship and to attracting new business?

ENSA’s digital transformation is integrated into the Strategic Plan, to ensure innovation and efficiency through the application of the right technology and with the right cost/benefit to meet the business needs.

We are aware of the fact that the target audience for insurance is not yet fully digital, but we are paying attention to new trends, to easily adapt to the future.

ENSA is a large property owner across the country, especially in Luanda. Have you performed a comprehensive survey? Are you going to sell assets or set up a fund with these assets?

We are placing our vast and historic property heritage in a new real estate investment fund which will be the focus of a truly specialized management and which will bring about better income prospects.

This measure is there to meet many objectives: from the outset, reinforcement of ENSA’s focus on what is ultimately its fundamental activity: marketing and managing insurance and pension funds

On the other hand, this specialized management, especially regulated by the Capital Market Commission (CMC) will certainly improve the conditions of use of the tenants of these properties, which is also a very important factor for us.

What is the strategy to increase the financial literacy of Angolans, namely, insurance culture?

Financial literacy is an issue that involves several agents, from the State to schools and universities, through supervisory and inspection authorities and, obviously, insurance companies. And we should tackle this problem in this context.

We are doing our job, working together with the sector’s supervisory bodies, with the supervisory bodies, Ministry of Education and Association of Insurers of Angola, among others.

For example, we have educational campaigns to raise awareness of the importance of insurance and to publicize our products. At this moment, ENSA has a radio program, called Viva Seguros, with the aim of permanently informing people about these products.

Insurance literacy also involves, on the other hand, the creation of products for people with limited resources, with adequate communication, thus creating the possibility of greater affinity with insurance through its use.

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