Grupo SURA

Q3/21

GRUPO SURA (BVC: GRUPOSURA and PFGRUPSURA) continues to see an ongoing recovery with its different lines of business with operating revenues now standing at COP 18.2 trillion, that is to say 17.4% higher than the same YTD figure for last year, while posting a net income of COP 1.1 trillion on a YTD basis, COP 445,471 million of which corresponds to Q3 alone.

Highlights (Consolidated Results):

  • Consolidated net income
    COP 445,471 million in net income was obtained for this past third q uarter, for a growth of 192.5%, thereby showing an improvement compared to the same period last year, which was mainly affected by the impacts of the pandemic. Net income on a YTD basis comes to COP 1.1 trillion, for a growth of 181.2%. This continues to be driven by the recovery of the Company's different lines of business, hence the improvement in operating income, as well higher net income figures from its associated companies.
  • Total revenues
    Total revenues came to COP 18.2 trillion on a YTD basis, for a growth of 17.4% compared to the same period last year. It is worthwhile noting that thanks to positive levels of business performance, written premiums posted a growth of 13.8%, trailed by fee and commission income which rose by 15.7%. It is also worth noting the increase in revenues obtained via the equity method given higher net income figures from our associated companies. In Q3, revenues rose by 23.3% for Q3 2021, given growths of 20.5% in written premiums and 15.4% in fee and commission income, with investment income rising by 41.6%.
  • Total costs and expense
    These rose by 15.5% compared to the same period last year and 20.6% for the third quarter alone. This growth is mainly due to the impacts of the pandemic that continued to affect Suramericana, bearing in mind that COVID-related costs and expense total COP 1.5 trillion on a YTD basis and COP 352,427 million for the quarter.
  • Operating earnings
    Operating earnings came to COP 1.9 trillion at the end of Q3 2021, that is to say 37.3% higher than thos e recorded for the same period last year, thereby evidencing a widespread recovery for the different lines of business.
  • Debt
    The Company and its subsidiaries continued to make progress with their debt reduction program, with SURA AM reducing its indebtedness by COP 639,282 million compared to year-end 2020, thanks to having amortized loans in the amount of COP
    505,500 million, COP 185,500 million of which was paid back this past quarter. Grupo SURA's net debt as a holding came to
    COP 4.4 trillion.
  • Taxes
    At the end of Q3 2021 a tax reform was approved in Colombia, where it is worth noting an increase in the corporate income tax rate from 30% to 35% starting in 2022. The company recorded this effect in the Profit and Loss statement, which generated an additional deferred tax provision with an impact on net income that amounts to COP 46,851 million, of which COP 44,103 came from a lower equity method from associates and COP 2,747 million as a higher tax from Grupo SURA and subsidiaries.
  • Stock Buy-Back Program
    Grupo SURA continued in Q3, 2021 to repurchase its own shares, which up till the date of this report totaled COP 50,441 million, 86% of which corresponded to repurchased ordinary shares and the remaining 14% preferred shares. The buy-back program relies on the adoption of mechanisms that guarantee equal treatment for all shareholders and transparency with the market. This initiative shall continue, since it is an efficient capital allocation option that creates added value for both the Company and its shareholders.

Grupo SURA

Q3/21

Summary of our Consolidated Financial Results:

Consolidated income statement

sep-21

sep-20

%Var

Q3-2021

Q3-2020

%Var

Written premiums

15,880,997

13,954,248

13.8%

5,877,425

4,879,186

20.5%

Retained earned premiums

13,154,598

11,609,816

13.3%

4,689,607

3,888,105

20.6%

Fee and commission income

2,406,004

2,079,117

15.7%

836,446

725,027

15.4%

Investment income

1,258,876

1,096,537

14.8%

581,677

410,668

41.6%

Equity method - Revenues from Associates

984,654

337,880

191.4%

336,201

174,519

92.6%

Others

447,842

420,637

6.5%

151,617

149,186

1.6%

Total revenues

18,251,974

15,543,986

17.4%

6,595,548

5,347,506

23.3%

Retained claims

(9,578,061)

(7,593,068)

26.1%

(3,429,894)

(2,685,937)

27.7%

Operating expense

(6,390,760)

(6,186,672)

3.3%

(2,337,926)

(2,075,856)

12.6%

Depreciation and amortization

(398,579)

(391,302)

1.9%

(134,886)

(134,089)

0.6%

Operating expense

(16,367,400)

(14,171,042)

15.5%

(5,902,706)

(4,895,882)

20.6%

Operating earnings

1,884,574

1,372,944

37.3%

692,842

451,624

53.4%

Financial Result

(405,521)

(632,867)

-35.9%

(110,190)

(205,272)

-46.3%

Income tax

(367,337)

(335,428)

9.5%

(138,462)

(99,483)

39.2%

Net income from continuing operations

1,111,716

404,650

174.7%

444,190

146,869

202.4%

Net income

1,117,844

397,578

181.2%

445,471

152,283

192.5%

Earnings - parent company

1,030,575

297,785

246.1%

408,320

128,336

218.2%

Figures stated in COP millions Written premiums include income corresponding to premiums and health care services that were previously recorded as revenues from services rendered.

Summary of results broken down per line of business

Contribution to consolidated net income

sep-21

sep-20

%Var

Q3-2021

Q3-2020

%Var

Suramericana

4,011

302,007

-98.7%

4,761

9,487

-49.8%

SURA AM

524,950

257,190

104.1%

219,837

137,058

60.4%

Net income excluding return from encaje

312,160

135,006

131.2%

179,885

42,254

325.7%

Return from encaje

115,826

85,157

36.0%

39,951

94,804

-57.9%

Fx exchange difference

96,964

37,027

161.9%

61,623

(26,098)

Revenues via equity method: Grupo SURA (holding)

867,558

263,947

228.7%

286,257

111,681

156.3%

Bancolombia

647,078

132,645

387.8%

230,862

68,461

237.2%

Grupo Argos

52,267

(25,542)

16,272

(7,103)

Grupo Nutresa

169,815

165,959

2.3%

39,568

49,953

-20.8%

Other

(1,602)

(9,115)

-82.4%

(445)

370

Other results Grupo SURA (holding)

(278,675)

(425,567)

-34.5%

(65,384)

(105,943)

-38.3%

Fx exchange effect

41,507

(78,312)

16,735

1,496

Administrative expenses

(60,784)

(58,460)

4.0%

(16,150)

(16,242)

-0.6%

Interests

(297,576)

(282,494)

5.3%

(92,877)

(90,295)

2.9%

Other

38,179

(6,301)

26,908

(902)

Net income

1,117,844

397,578

181.2%

445,471

152,283

192.5%

Grupo SURA

Q3/21

Summary of results broken down per line of business

Suramericana

This subsidiary performed well with written premiums accounting for a growth of 14.4% on a YTD basis compared to the same period last year, with the Health Care and Life Insurance segments securing growths of 36.5% and 13.0%, respectively. On the other hand, retained claims rose by 27.9%, mainly due to the effects of the pandemic that, on a YTD basis at the end of September stood at COP 1.5 trillion compared to COP 648,434 million for the same period last year. However, a slight decrease in the spread of COVID compared to previous quarters accounted for an improvement in the Company's earnings, thereby producing a YTD net income of COP 4,011 million, which is very much in line with the results obtained for the quarter, COP 4,761 million. Net income was affected by a provision set up for the line of the Mandatory Health Care (EPS in Spanish) amounting to COP 114,185 million, this relating to the difference time-wise between the moment in which the basket of COVID Services introduced by the Colombian Ministry of Health in order to recognize and defray the shortfall in income caused by caring for COVID patients in 2021 was recognized by Suramericana and the moment when this is actually paid by the Government. The company is working, as it has done in the past, with the national government for the recognition and payment of these resources in order to reverse the provision.

SURA Asset Management

This subsidiary's operating revenues reached COP 2.2 trillion at the end of Q3, 2021, for a growth of 18.3% in pesos and 12.8% in local currency compared to the same period last year. It is worth noting the 15.8% growth in fee and commi ssion income, as well as the improved revenues received via the equity method, mainly from Protección, which reached COP 119,849 million. The Investment Management and Inversiones SURA lines of business continued to score double-digit growths at the end of Q3 this year, both in AUM as well as fee and commission income compared to the same period last year, thereby posting COP 33,405 million in net income. Thanks to all of the this, the Company posted a net income figure of COP 524,950 million at the end of Q3 2021, for a growth of 104.1% compared to the same period last year.

Revenues obtained from associates via the equity method

These produced a growth of 228.7% compared to the YTD figure for the same period last year, adding another COP 867,558 million to Grupo SURA's bottom line, and continuing to show a slight recovery compared to their pre-pandemic performance. This improvement was mainly due to an increase with Bancolombia's net income, along with a sustained growth with Nutresa's bottom line and the recovery seen with that of Grupo Argos. In calculating this item's portion of the Company's consolidated net income figure, we included the results of Grupo Sura's associates, except for Proteccion, which is included in the SURA AM 's net income figure.

Others

This section includes expense relating to Grupo SURA's operations, as a holding company. This item showed a YTD drop of 34.5% compared to the same period last year, which is mainly due to a positive exchange rate effect this year, compared to a loss recorded for the first three quarters last year, given a greater exposure to the Company's USD -denominated debt as well as a greater depreciation of the Colombian peso. On the other hand, interest on the amount of debt held increased by 5.3%, mainly due to rising interest rates. Furthermore, the "Others" account was affected by the increase in valuation in SURA Ventures' portfolio, this amounting to COP 51,920 million mainly due to Money Lion going public as well as the sale of Clover Health which was offset by a higher deferred tax expense of COP 20,300 million due to the exchange difference on financial obligations and hedging operations, as well as the adjustments made with regard to the new tax rate introduced by the 2021 tax reform.

Grupo SURA

Q3/21

Statement of Consolidated Financial Position - Summary of Key Figures

Consolidated statement of financial position

sep-21

dic-20

%Var

Total assets

72,589,419

70,860,134

2.4%

Total liabilities

42,625,368

42,318,409

0.7%

Equity attributable to owners of the parent company

27,376,137

26,004,832

5.3%

Non-controlling interest

2,587,914

2,536,893

2.0%

Total equity

29,964,051

28,541,725

5.0%

Financial Liabilities

Grupo SURA (Holding)

sep-21

dic-20

Var$

Grupo Sura - Bonds

4,208,559

4,995,267

(786,708)

Banks

508,497

572,954

(64,457)

Debt

4,746,364

5,568,221

(821,857)

Derivatives

274,971

172,880

102,091

Preferred dividends

460,017

460,847

(830)

Total financial liabilities

5,481,352

6,201,948

(720,596)

Fair value - hedging derivatives

557,153

343,733

213,420

Cash and cash equivalents

50,901

1,037,952

(987,051)

Net debt

4,413,281

4,359,416

53,865

Note: Debt is affected by the hedging of bond derivatives

SURA AM

sep-21

dic-20

Var$

Bonds

3,288,981

2,923,635

365,346

Banks

1,905

515,395

(513,490)

Debt

3,290,886

3,439,030

(148,144)

Derivatives

0

0

0

Total financial liabilities

3,290,886

3,439,030

(148,144)

Fair value - hedging derivatives

748,394

257,256

491,138

Financial liabilities, net of hedges

2,542,492

3,181,774

(639,282)

Note: Debt is affected by the hedging of bond derivatives

Suramericana

sep-21

dic-20

Var$

Bonds

850,181

846,517

3,664

Banks

344,297

395,185

(50,888)

Suramericana

1,194,478

1,241,702

(47,224)

Derivatives

6,618

3,638

2,980

Total financial liabilities

1,201,096

1,245,340

(44,244)

Suramericana

Q3/21

The Company continues with good commercial dynamics in all segments. Premium growth of

21. 0% in the quarter and efforts to control expenses have allowed the company to mitigate COVID effects.

Highlights (Consolidated Results):

  • Premiums
    Written premiums for Q3 20 21 rose by 21.0%, bringing the YTD growth figure to 14.4%. It is worthwhile noting the good levels of performance obtained for this past quarter with the increase in premiums corresponding to the voluntary insurance business, both in the Life and Property and Casualty segments, thanks to greater economic momentum throughout region, that we have taken advantage of via our different sales channels and which in turn has translated into increased premiums for the health care, life, car, compliance and transportation solutions. On the other hand, our Worker´s Compensation business (ARL) and Mandatory Health Care Subsidiaries (EPS) in Colombia have continued to post important growths in their subscriber bases, with 368 thousand new mandatory health care sign-ups so far in 2021 and 276 thousand for our Worker's Compensation subsidiary. During this past quarter, the revenues corresponding to the Government subsidized basket of COVID services as a means to compensate the PBS (Health Benefit Plan) tariff came to COP 276,458 million, reflecting the higher value paid by our Mandatory Health Care subsidiary for attending patients with COVID or related issues.
  • Claims
    Although COVID claims continue to have a negative impact on the Company's claims rate, during this past third quarter, there was a reduction in the contagion and mortality rates throughout the region, which reduced the consolidated COVID claims by 27.2% compared to the average obtained for the previous four quarters and 48.6% compared to the previous quarter.
    Non-COVID claims rose to 62.4% for the quarter compared to 56.5% for the same period last year, mainly in the mobility solutions, given a return to pre-pandemic claims frequencies, as well as increases in average claims costs due to issues relating to global supply chain failures.
  • Technical Result
    Our technical margin deteriorated for the quarter, and now stands at 6.9%, while for the same period last year it came to 8.2%, thereby reflecting the impact of the increase in non-COVID claims for the mobility solutions, as well as the increase in provisions set up by our Mandatory Health Care subsidiary, in the amount of COP 114,186, which represents the temporary difference between the moment when the amounts corresponding to baskets of COVID -related services are duly recognized and when the Colombian Government actually pays the corresponding account receivable.
  • Administrative Expense
    The expense to written premiums ratio for the quarter came to 11.3% compared to 13.4% for the same quarter last year, this as a result of our expense management strategies to mitigate the effects of the pandemic on our overall results. These strategies are focused on fine-tuning our operating models to achieve savings and efficiencies with our real estate and operating expense, which includes marketing, fees and commissions, travel and other items
  • Investment Income
    Investment income rose by 3.0% for the quarter and dropped by 16.6% on a YTD basis given increases in regional interest rates which in turn affected the market prices of our investment portfolios. The global economic recovery, inflationary pressures and a greater perception of risk in certain Latin American economies led to this increase in interest rates.
  • Net Income | Adjusted ROTE
    At the end of this past quarter, Suramericana reported a bottom line of COP 4,761 million and a ROTE (Return on Tangible Equity) on a rolling 12-month basis of -1.1%. Profitability for this past quarter reflected the impact of the COVID-19 pandemic, which produced increases in the claims rate, as well as lower financial income as a result of the amount of volatility prevailing on the capital markets.

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Grupo de Inversiones Suramericana SA published this content on 12 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 November 2021 23:09:03 UTC.