Protección 2017 Net Income Rises 34% Year-on-Year

Medellin-based pension-fund administrator Protección announced March 16 that its full-year 2017 net income rose 34% year-on-year, to COP$343 billion (US$120 million).

Protección is one of the largest of the private pension funds in Colombia, and also owns the “AFP Crecer” pension fund in El Salvador.

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 17% year-on-year, to COP$489 billion (US$171 million), with an EBITDA margin of 42%, up 6.48% year-on-year.

Commenting on the positive results, Protección cited “demographic changes that heighten the urgency to save from an earlier age, for a life expectancy that continues to grow.”

While Colombian gross domestic product (GDP) grew by a weak 1.8% last year, key financial markets outperformed, as the S&P 500 stock index soared 22% and Colombia’s “Colcap” stock index gained 12% last year, the company noted.

Protección administers three funds – “obligatory” pensions (contributions from workers and employers); “voluntary” pensions (contributions entirely from individuals) and worker-compensation funds (“cesantias”), collectively covering 6.7 million Colombians. Proteccion’s assets-under-management (AUM) for these three funds now tops COP$91 trillion (US$32 billion).

The “obligatory” sector accounts for the bulk of AUM, at COP$82 trillion (US$28 billion). This fund covers 4.4 million workers and 32,000 current pensioners. Proteccion has a 36% share of the Colombian “obligatory” pension market (measured by AUM) and 29.6% by number of affiliated workers.

The “voluntary” sector assets under Protección management hit COP$7.2 trillion (US$2.5 billion) in 2017, or 42.3% of the entire Colombian “voluntary” pension sector (as measured AOM) and 53.9% by number of persons affiliated, the company added.

Outlook for 2018

Meanwhile, Protección now foresees a relatively positive outlook for 2018, based on assumptions including three more interest-rate hikes by the U.S. Federal Reserve and better GDP growth in Colombia this year.

“We agree with [Colombian government] and International Monetary Fund forecasts indicating [Colombian] GDP growth between 2.8% and 3%” this year, according to Protección.

“As for the [Colombian national] pension system, we are sure the next government will make adjustments [following this spring’s elections],” the company added.

“We have to face the reality of longer life-spans. The portion of adults in the general population will more-than triple by 2050 in Latin America — from 16.5 million today to 55.8 million — in contrast to general population growth of only 20%.

“These factors will force us to act in advance — to develop complementary models for pensions as well as [to improve] public education about savings,” the company added.