Sura 2017 Net Income Falls 13% Year-on-Year on Unfavorable COP/Dollar Rates

Medellin-based multinational insurance and asset-management giant Grupo Sura announced February 27 that its full-year 2017 net profits fell 13% year-on-year – to COP$1.45 trillion (US$493 million) — mainly because of changes in the exchange rate between the U.S. dollar and the Colombian peso (COP).

Excluding currency impacts and non-recurring items, net profit would have risen 7.7% year-on-year, according to the company. Consolidated revenues grew 12% year-on-year, to COP$20.5 trillion (US$6.9 billion), the company added.

Revenue growth is explained by “good dynamics of the subsidiaries Suramericana and Sura Asset Management, in a challenging environment,” according to Sura.

The year 2017 was “marked by lower economic activity in Latin America. This did not stop the growth of all businesses, which accentuated their efforts in efficiency, profitability and consolidation of their operations in insurance, pensions, savings and investment, among other financial services,” according to the company.

The Suramericana insurance group saw revenues jump 20.9% year-on-year, to US$ 4.8 billion, while Sura Asset Management operating income rose 12%, to US$808 million, according to the company.

“On the other hand, the consolidated expenses of Grupo Sura amounted to 14.5% (US$6.3 billion), after incorporating for a full year the integration of the operations acquired into RSA to Suramericana, as well as higher interest expenses on debt and amortizations. associated with that transaction,” according to Sura.

“However, the efficiency indicators improved in the two subsidiaries: operating expenses in Sura Asset Management increased by 6.5%, almost half of the revenues, while in Suramericana they did so at an annual rate of 20.4%, also lower than the variation of total income.

“In this context, the consolidated net profit reached COP$1.45 trillion (US$493 million), a reduction of 13% in relation to 2016, particularly affected by the foreign exchange impact (COP$173.88 billion), the aforementioned interest expenses and other non-recurring expenses. Without these aspects, the net profit of Grupo Sura would have an annual growth of 7.7%, supported by the operating results of the subsidiaries.”

“After a decade of international expansion, financial strengthening and diversification of the origin of our revenues, 2017 was a year to consolidate inorganic growth, emphasize the strategic management of the portfolio to optimize it and obtain greater profitability, as well as enhance the Group’s business in Latin America,” added David Bojanini, president of Grupo Sura.

As for fourth quarter (4Q) results, consolidated revenues totaled COP$5.3 trillion (US$1.799 billion), up 1.3% year-on-year, while 4Q 2017e consolidated net income was COP$357 billion (US$121 million), “with a remarkable growth of 102.5%, driven by a triple effect: lower constitution of reserves in the insurance business, higher yields of the investment portfolios of the subsidiaries and a decrease of 0.9% in the total expenses,” according to the company.

Sura Asset Management saw 2017 operating profit grow 16.9%, recorded in local currencies, and net profit was COP$615 billion (US$208.5 million), similar to 2016 results. The asset management division saw fee income rise 26% in the “voluntary savings” unit and 39% in assets under management.

As for the Suramericana insurance and risk-management division, this unit posted a net profit of COP$506 billion (US$172 million), up 26.1% year-on-year. Written premiums grew 23%, to COP$12 trillion (US$4 billion), while consolidated reserves reached COP$15.26 trillion (US$ 5.11 billion).

For all of 2017, Grupo Sura assets grew 2.8% year-on-year, to COP$69.4 trillion (US$23 billion), while equity attributable to shareholders reached COP$23.8 trillion (US$7.98 billion), up 5.2%, according to the company.