Fitch assigns a BBB+ rating to Sura Asset Management

Fitch Ratings said it has assigned a BBB+ issuer-default rating to Colombia-based Sura Asset Management SA.

Fitch said the rating reflects Sura’s strong credit profile based on its leading regional franchise, strong operating environment, ample expertise, diversified, stable earnings, sound leverage and debt service ratios, good operating performance and sound risk management.

Also, the BBB+ Issuer-Default Rating incorporates the expansion of the company on a mostly regulated business in the region and the challenges to expand its revenue source from regulated and non-regulated businesses in the region.

While Sura’s credit profile is strong enough to warrant one of the highest ratings in Colombia, according to Fitch, it 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 towards transfer of resources between entities, while the business generated within Colombia is relatively small compared to the total.

Sura has a leading franchise in the mandatory pension fund business. With presence in six markets, a 23% regional market share, a customer base of over 16 million people and USD 113 billion of assets under management is the only mandatory pension fund manager with presence in the region’s top four markets (Mexico, Chile, Colombia and Peru).

The firm expects to expand its revenue source from its core mandatory pension fund business and where appropriate, enhance the product offering with voluntary savings products in the medium and long term. Regulatory trends towards mandatory pension fund managers in Latin America have been evolving in order to reduce fees and motivate more competition among players, a trend that Fitch expects to continue in the medium to long term.

Moreover, demographic trends signal the need for individual savings pension plans and there is political consensus and stability on the mandatory pension fund managers regulation. 

In spite of being a relatively new company, Sura benefits from the long track record and expertise of its preceding companies. Sura acquired ING’s mandatory pension fund business in the region and made additional acquisitions. Fitch expects that Sura will be able to successfully integrate the recently-acquired entities and conduct a solid and integrated business model, while, such integration may help to cross-pollenize good business practices and products along its network of companies.

The mandatory nature and fee structure of this business (except for Mexico, fees are based on customers’ salaries) create a very steady, stable and growing earnings base. Additional products (life insurance, wealth management) provide some diversification, but 90% of Sura Asset Management’s revenues/EBITDA stem from the mandatory pension business which has shown remarkable stability.