Medellin’s Grupo Sura Wins Fitch Debt Upgrade; Full-Year 2015 Gross Income Jumps 17%

Medellin-based insurance, pension-fund and banking-investor giant Grupo Sura announced February 24 that its full-year 2015 gross income rose 17% year-on-year, to COP8.47 trillion (US$2.6 billion), while net income came-in at COP533 billion (US$165 million).

Despite positive net income in 2015, the company took hits from Colombia’s recently adopted “wealth tax” as well as “the effects of volatility in financial markets,” according to Grupo Sura.

Acquisition deals made during 2015 are “transformative” for the company, according to Grupo Sura president Gonzalo A. Pérez. As a result, Grupo Sura has developed a new operating structure to “assume the new challenges of a [Latin American] regional operation,” according to the company.

Grupo Sura recently inked a deal to acquire insurance giant RSA’s operations in six Latin American countries, with regulatory approval for that deal expected during first-half 2016. The company also acquired the “Seguros Banistmo” insurance company in Panamá

Thanks to the acquisitions, Grupo Sura now has about 15.7 million clients in Colombia, Chile, México, Argentina, Brasil, Uruguay, Panamá, El Salvador and República Dominicana – countries accounting for 71% of all the people in Latin America, according to Sura.

Under the new operating structure, Juan David Escobar becomes the COE of “Seguros SURA Colombia,” while Carlos Andrés Angel will direct the pension-fund operations in Colombia, according to the company.

In Colombia, Grupo Sura’s “Suramericana S.A.” division took a 23.8% share of the national insurance market, making it number-one in size. Net income in the general-insurance market rose to US$12 million, while life-insurance net income rose to US$96 million.

Sura’s workers-compensation insurance division (ARL) in Colombia saw revenues grow 10% year-on-year, while national market-share came-in at 29.7%. As for its health-insurance (EPS) division, this unit now has 2.27 million clients, or 10.1% of the Colombian market.

According to insurance industry analyst Fundación Mapfre, Grupo Sura was already the ninth-biggest insurance company in Latin America at year-end 2014.

Fitch Upgrade

Meanwhile, Wall Street debt rater Fitch Ratings announced February 22 that it upgraded Grupo Sura’s  long-term foreign and local currency Issuer Default Ratings (IDR) to ‘”BBB”‘ from “BBB-” and issued a “ stable” outlook.

 “Sura Asset Management (SUAM) and [Medellin-based banking giant] Bancolombia are the two largest sources of cash flow to the holding company, which are expected to account for 69% of the dividends received by Grupo Sura in 2015,” according to Fitch.

“Both issuers are rated ‘BBB+’ by Fitch. The rating upgrade also reflects the company’s track record of balancing its aggressive growth strategy with an adequate capital structure and its ability to deleverage post acquisitions.

“Grupo Sura’s ratings reflect the average credit quality of its investment portfolio, diversification in the sources of dividends, and track record of increasing dividends received.

“The company’s capacity to maintain strong loan to value (LTV) metrics is incorporated as a key rating factor. The company’s LTV is estimated at 11.3%, resulting from an assets value of around US$7.5 billion and total debt of US$835 million,” according to Fitch.

“SUAM has a business sound profile and generates stable cash flow. It is the largest pension fund manager in Latin America with a presence in six countries and US$113 billion in assets under management. Bancolombia has operations in seven countries in Latin America and is the leading bank in Colombia with a market share of 21.9% by assets and net loans at the end of March 2015,” Fitch added.