Sura 3Q 2019 Net Income Jumps 35% Year-on-Year

Medellin-based multinational insurance and investment specialist Grupo Sura on November 14 posted a 35% year-on-year jump in third quarter (3Q) 2019 net income, to COP$1.5 trillion (US$438 million).

The biggest contributor to net income (COP$682 billion/US$199 million) in the latest quarter came from the Sura Asset Management (AM) division, which manages a growing basket of profitable pension funds in Central and South America.

Second-biggest net-income contributor was the Suramericana insurance division, at COP$300 billion (US$87.7 million), according to the company.

Corporate-wide operating revenues rose 14.8% year-on-year, to COP$16.2 trillion (US$4.7 billion), while operating expenses hit COP$13.8 trillion (US$4.03 billion), up 13%.

“This produced operating earnings amounting to COP$2.4 trillion (US$701 million), for a growth of 26.3%, thanks to our ongoing efforts to gain greater efficiencies, optimize the profitability of our operations and the positive returns on the investment portfolios,” according to Sura.

“Likewise, fee and commission income continued to show a resilient level of growth (+9.9% in COP or +2.4% in local currencies) due to lower fee and commission rates in certain operations,” the company added.

Meanwhile, the Suramericana insurance division’s written premiums hit COP$9.5 trillion (US$2.78 billion), up 15.1%, while revenues from services rendered came to COP$2.8 trillion (US$818 million), up 23.7% year-on-year.

While Suramericana’s 3Q 2019 net income dipped 24% year-on-year, this fall “does not reflect the positive of its main operations due to the non-comparable impacts that affected the company’s performance,” according to Sura.

“These mainly included the macroeconomic and political situation in Argentina, the current situation of [lagging cost recovery] in the public health sector in Colombia and the VAT [value-added tax] expense incurred with life insurance commissions, also in Colombia.

“The current growth in the number of users of our healthcare services, which also benefits the other healthcare provider companies such as ‘IPS’ and ‘Dinamica,’ accounted for the growth posted in both healthcare revenues and the cost of services rendered.

“The retained claims ratio increased from 54.1% to 54.8%, which was mainly due to the increase in car and mandatory road insurance [SOAT] in the non-life [insurance] segment,” the company added..

As for Sura’s life-insurance segment (including Seguros de Vida Colombia, Asesuisa Vida in El Salvador, Seguros de Vida SURA Chile and Seguros Sura Vida in México), “the merger between the life insurance and workers’ compensation subsidiaries in Colombia took place during the first quarter of this year, with the former now posting the results of their combined operations,” the company noted.

“The life insurance segment shows a growth of 39.3% in written premiums thanks in part to the acquisition of Seguros de Vida SURA S.A. in Mexico in 4Q 2018, which contributed a total of COP$22 billion (US$6.4 million) to the consolidated production figure for this past quarter.

“If we were to exclude the contribution from this recent acquisition, the group life solution would have recorded a growth of 11.2% mainly due to the positive dynamics seen with the affinity channel in Colombia and El Salvador.

“The workers’ compensation solution also showed a growth of 16.2%, with this uptrend in revenues generated by a greater number of affiliates.

“The pension insurance solution also provided a significant amount of growth thanks to new business obtained in El Salvador for the 2019 policy.

“Furthermore, this past quarter marked one year since the capital optimization strategy was first deployed with the healthcare insurance solution in Colombia. This consisted of matching premiums as posted on the income statement with the actual collections of such, for which the corresponding adjustments were made to both reserves and capital requirements to levels consistent with the company’s collection patterns, which in turn had a positive effect on the working capital invested in this solution.

“This new initiative, upon completing its first year of having been introduced, generated a 167.5% increase in written premiums, which in turn implied higher reserves to be set up which leveled off the growth in earned premiums to 27.3%,” according to Sura.