In December of last year, Fitch Ratings reaffirmed its national-scale financial strength rating of Seguros de Vida SURA México, S.A. de C.V. (Seguros de Vida) at ‘AAA (mex)’. The rating outlook is stable.
The following are Fitch’s remarks on the key rating factors:
The rating of Seguros de Vida SURA is based on the support its main shareholder and controlling group, SURA Asset Management (SURA AM), a holding company that is part of Grupo de Inversiones Suramericana, S.A. (Grupo SURA). The latter has an international-scale rating of ‘BBB’ from Fitch. Therefore, the rating of this life insurance firm, Seguros de Vida SURA, relies on the capacity and willingness of Grupo SURA to support it, if necessary, because the agency considers the Mexican subsidiary as important to the Group.
The losses accrued by the company over the past year in terms of its net earnings strengthened the company’s shareholders’ equity by 56%, or 99 million pesos, although a balance of 22 million pesos remains in that account. Nevertheless, this loss, together with a growth of around 64% in premiums, raised the net leverage indicator from 6.87x in September 2016 to 7.64x in September 2017. Fitch expects these indicators to remain stable due to reserve requirements established in life insurance regulations and to growth of premiums.
The rating agency cited the growth in premiums as the reason for Seguros de Vida SURA’s stronger performance. As of September 2017, the operating index was 95%, down from 104% the year before. In the past four years and since the portfolio purchase, the index had remained above 100% as the firm sought to position itself in the market and absorb the related acquisition costs.
Starting in 2016, however, and in 2017, it has seen a substantial improvement in the stability of its operating and acquisition costs, resulting from the rise in earned retained premiums in the past year, which increased the portfolio by 37%, without raising expenses in the same proportion thanks to a much more diversified commercial strategy.
Seguros de Vida SURA benefits from the strong brand positioning, reputation and presence of SURA AM in Mexico. It also draws heavily on the commercial and operating synergies of SURA AM’s other subsidiaries in the country.
Seguros de Vida SURA’s operations are strategic to complement SURA AM’s product and services offerings in Mexico. This is consistent with that company’s strategy for the country, which is to pursue greater top-line diversification through complementary products such as life insurance. In this sense, the shareholder aims at greater loyalty among current customers through added-value products and services, as well as the profitable attraction of new customers, given the inherent strength of the life insurance business.
About SURA Asset Management Mexico
SURA AM Mexico manages a business portfolio that includes Afore SURA, Pensiones SURA, and SURA Investment Management. As of the close of the third quarter of 2017, it had almost USD30 billion in assets under management, with a little over 2,900 employees and 7.4 million clients.
About SURA Asset Management
SURA Asset Management is a Latin American company with pensions, savings and investment operations in Mexico, Peru, Chile, Colombia, Uruguay and El Salvador. It is an affiliate of Grupo SURA and has three minority shareholders: Grupo Bolívar, Bancolombia and Grupo Wiese. As of September 2017, it had almost USD132 billion in assets under management and 19.1 million clients.
* Clients and AUM include AFP Protección in Colombia and AFP Crecer in El Salvador; although they are not majority owned, SURA AM has a significant stake in these firms.
About GRUPO SURA
Grupo de Inversiones Suramericana (Grupo SURA), the parent company of Grupo Empresarial SURA, is a Latin American firm listed on the Colombian Stock Exchange (BVC) and registered in the ADR-Level I program in the United States. It is also the only Latin American company in the Miscellaneous Financial Services sector group listed in the Dow Jones Sustainability Index, which recognizes companies around the world that have demonstrated best practices in economy, environment and community matters. Grupo SURA has two types of investment: strategic investments, focused on the financial service, insurance, pension, savings and investment sectors; and industrial investments, primarily in processed foods, cement and energy.