Fitch Ratings has affirmed Sura Asset Management S.A.'s (SUAM)
Issuer Default Ratings (IDRs) at 'BBB+'. The Rating Outlook is
Stable. Fitch has also affirmed the rating for SUAM Finance BV's
guaranteed bonds at 'BBB+'. A complete list of rating actions
follows at the end of this press release.
KEY RATING DRIVERS
IDRs
SUAM's ratings reflect its strong credit profile based on its
leading regional franchise, consistent performance, strong
operating environment, diversified, stable earnings, sound leverage
and debt service ratios, ample expertise and sound risk management.
Also, the rating incorporates the expansion of the company on a
mostly regulated business in the region and the challenges to
diversify its revenue source from regulated to non-regulated
businesses. While Fitch acknowledges SUAM's importance to its
parent (Grupo de Inversiones Suramericana; rated 'BBB-/ROP' by
Fitch) the potential support from its parent was not considered for
these ratings.
SUAM's credit profile is strong enough to warrant one of the
highest ratings in Colombia; the rating is not considered to be
constrained by the country ceiling as it benefits from a relatively
strong, stable and growing stream of revenues from countries with a
higher country ceiling. Even when the main operating companies are
regulated in their home country, there is still significant
flexibility to transfer resources between entities, while the
business generated within Colombia is relatively small compared to
SUAM's total business volume. Nevertheless, SUAM's ratings could
not conceivably be very far from those of its parent given its
clear corporate identity and the importance of reputation and trust
in the financial services and asset management industries.
Leading Regional Franchise: SURA Asset Management (SUAM) is the
leading mandatory pension fund manager (MPFM) in Latin America with
presence in six countries (including the region's top four MPFM
markets), a 23% market share, a customer base of over 17 million
people and over $114 billion of assets under management (AUM) at
December 2014.
Consistent Performance: SUAM maintained a sound performance
during 2014 based on the stability of its core business and a
continued growth of its voluntary business. While results in
individual countries were generally up, the consolidated net income
declined due to the impact of the conversion to USD. NI would have
grown in excess of 20% at fixed exchange rates. Nevertheless,
profitability remained sound at 2.5% ROAA at December 2014.
Strong Operating Environment: Five out of the six countries
where SUAM operates are investment grade and 83% of its EBITDA is
generated in countries with a country ceiling of A- or better.
Economic growth prospects in most of these countries remain
positive ? albeit slower than in the past decade ? and are coupled
with improved labor markets and raising salaries and per capita
income. Moreover, demographic trends signal the need for individual
savings pension plans and there is political consensus and
stability on MPFMs regulation.
Diversified, Stable Earnings: SUAM's revenues are growing
steadily as contributions are mandatory and fees stable. Additional
products (life insurance, wealth management) provide some
diversification but the bulk of SUAM's revenues stems from the
mandatory business (90% of its EBITDA) and has shown remarkable
stability. In addition, a real-life stress on its business in
Mexico weakened the revenue stream but the company remained
profitable.
Sound Leverage/ Debt Service Ratios: SUAM's debt is concentrated
at the headquarter level, with a comfortable maturity structure,
and is moderate when compared to the entity's EBITDA. Leverage
(debt/EBITDA) and debt service (EBITDA/Interest Expenses) ratios -
adjusted to consider expected dividends only - would remain below
3x and above 6x respectively in 2014-2015; both metrics bode well
compared to similar companies.
Ample Expertise: In spite of being a relatively young company,
SUAM benefits from the long track record and expertise of its
preceding companies as it acquired ING's MPFM business. SUAM made
additional acquisitions and controls the third largest player in
the region's oldest MPFM market (Chile). Fitch believes SUAM's
substantial presence in the most mature market creates a unique
perspective and insight on the industry and its future
development.
Sound Risk Management: SUAM's sound investment policies allow
the company to perform at par or better than its peers. At YE13,
two thirds of the funds managed by SUAM's subsidiaries outperformed
their benchmarks. SUAM's risk management policies as well as its
expertise and regional reach appear adequate to maintain the
company's sound competitive position and moderate, healthy
growth.
SUAM Finance BV Senior Guaranteed Bonds
SUAM Finance BV's senior guaranteed bond issuance maturing on
April 2024 is rated BBB+ as it is guaranteed by Sura Asset
Management S.A., as well as by the holding companies of its
operating subsidiaries.
RATING SENSITIVITIES
IDRs
Sustained Growth, Stable Environment: SUAM's ratings could
benefit from continued growth and sustained performance, amid
stable economic and regulatory environments, coupled with improved
adjusted leverage (less than 2.5x) and debt service ratios (above
8.0x).
Subpar Performance: Should SUAM's performance decline below the
industry average, so as to erode its credit metrics (debt to
adjusted EBITDA above 3.5x or Adjusted EBITDA/interest expense
below 6x), its ratings could be pressured downwards. In addition,
an adverse change in regulation or dismal economic performance in
its key markets could affect its ratings negatively. Finally,
although not Fitch's base case, a severe deterioration of its
parent's credit profile would weigh on its ratings as a contagion
effect cannot be ruled out.
SUAM Finance BV Senior Guaranteed Bonds
SUAM Finance BV's Senior Guaranteed Bonds' rating would move in
line with that of Sura Asset Management.
Fitch has affirmed the following ratings:
SUAM:
--Long-Term Foreign Currency Issuer Default Rating (IDR) at
'BBB+'; Outlook Stable;
--Short-Term Foreign Currency IDR at 'F2';
--Long-Term Local Currency IDR at 'BBB+'; Outlook Stable;
--Short-Term Local Currency IDR at 'F2'.
SUAM Finance BV
--Senior Guaranteed Bonds at 'BBB+'.
Additional informaAdditional information is available at
'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Non-Bank Financial Institutions Rating Criteria' (Mar.
20, 2015)
Applicable Criteria and Related Research:
Global Non-Bank Financial Institutions Rating
Criteriahttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863584
Additional Disclosure
Solicitation
Statushttp://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=982085
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Fitch RatingsPrimary AnalystDiego Alcazar,
+1-212-908-0396DirectorFitch Ratings, Inc.33 Whitehall StreetNew
York, NY 10004orSecondary AnalystAbraham Martinez,
+56-2-2499-3317DirectororCommittee ChairpersonFranklin Santarelli,
+1-212-908-0739Managing DirectororMedia Relations, New
YorkElizabeth Fogerty,
+1-212-908-0526elizabeth.fogerty@fitchratings.com